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Is it 2003 all over again? Don't look now, but the tech-heavy Nasdaq 100 index is up 25.53% year to date. And both Google (GOOG) and IBM reported stronger than expected earnings after the close tonight, although GOOG is currently trading down while IBM is up. As shown in the chart below, the index just took out its early June highs today after trading up sharply all week long.

Looking at individual stocks in the index, Seagate Technology (STX) is up the most in 2009 with a gain of 147.18%, and it's followed closely by Baidu (BIDU) at 146.96%. Sun Micro (JAVA) is up 140%, followed by EXPE (102.91%), MRVL (96.85%), and LINTA (88.46%). The blue-chip tech names have seen huge gains this year as well. Research in Motion (RIMM) is up 78%, Apple (AAPL) is up 73%, Amazon.com (AMZN) is up 67%, and Google is up 43.7%.

While tech got killed along with the overall market in 2008, its gains so far in 2009 have been extraordinary. Optimism on the sector seems to be getting overly bullish as well, however, so buyers should be careful and not get too overconfident.

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This article has 8 comments:

  •  
    Maybe, even with today's recessionary challenges tech offers the path of least resistance. Certainly it ticks more boxes than banks, airlines, consumer stock and possibly energy firms.

    (INFY) Infosys is a good example. Profits up 17% on more US firms outsourcing support to Infosys offices in India.

    Which leads me to conclude that what is good for the sector and Nasdaq, is not necessarily good for Main St.

    Also, the headline 25% gain looks great but the sector was oversold in March so it's probably still at most at fair value. Not expensive, though a short term pull back is possible on the RSI.
    Jul 17 03:56 AM | Link | Reply
  •  
    Time for some QID's
    Jul 17 05:18 AM | Link | Reply
  •  
    Compare the P/Es and forward P/Es, we're not really in an overbought position. Agree that it has been a steep climb out of the pit.
    Jul 17 08:02 AM | Link | Reply
  •  
    China has to buy our tech as theirs isn't up to snuff yet.
    PEs aren't too bad... I'm hoping for a sell off to buy on dips for sure
    Jul 17 08:47 AM | Link | Reply
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    I love platitudes such as "Buyers should be careful". There never is a time where investors in anything can allow themselves to be careless. No matter what you do and when you do it, you always accept the one or other risk, even if you just buy CDs (then your risk is to be left in the dust when inflation comes or stocks recover greatly).
    Jul 17 09:15 AM | Link | Reply
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    With the proviso that all stocks go down in a big reversal, the tech sector is the one area where I feel more comfortable being long. Even if we do not pull out of this recession any time soon, and I do not believe that we will, businesses will still need the tools to do business, and essentially that's what tech stocks offer. The personal side can be good too, but continuing businesses are obliged to carry on regardless. And where tech can help cut costs and make for greater efficiency, then that's also an area that will keep going in any circumstances.

    I've already said I like cloud computing for a big growth area, and generally the right tech stocks can still give good returns. You can always buy on the dips and sell on the bounces, too.
    Jul 17 12:48 PM | Link | Reply
  •  
    Tech is still where it's at.
    Jul 17 12:56 PM | Link | Reply
  •  
    Of the names mentioned driving the Nasdaq 100, several appear overvalued and sensitive to an economy that has yet to prove its resiliency.

    Expedia in particular strikes me as having significant risk. While we made a case for owning the stock late last year - albeit a bit early (zachstocks.com/2008/12.../) the stock is closely tied to consumer spending which is still not seeing significant recovery. With unemployment high and businesses cutting expenses, this stock could quickly see both earnings and multiple contract which would be devastating for the longs.

    On a similar note, China's Ctrip.com could face a similar fate. (zachstocks.com/2009/06.../) - The stock is sitting at a level that has proven to be resistance (near $47.50) and is valued at about 40 times this year's estimates. It would take a lot of growth to justify this price.

    Opportunities to short or buy puts on NASDAQ names certainly look attractive in today's market.
    Jul 17 03:00 PM | Link | Reply