Time to Nibble on Tech - Barron's

Barron's Eric Savitz contends the time to nibble on downtrodden tech shares is now, provided you have a long-term outlook and can stomach potential gut-wrenching gyrations in the meantime.

• Oracle (ORCL) fell short last week, but will stay afloat because of its "huge base of recurring maintenance revenue... more overseas revenue than many other enterprise-software companies... it should benefit as IT departments move to reduce the number of vendors they do business with."
• Google (GOOG) has been bashed as consecutive monthly comScore data show shockingly weak paid clickthrough growth. Even so, conservative look-forward estimates of 2009 growth (25%) mean shares, at 25x 2009 earnings, trade for one-times its growth rate.

Friedman Billings Ramsey tech analyst Mehdi Hosseini turned bullish on the sector last week. He thinks most of the bad news has already been priced in. While some may be inclined to wait, he warns that being late to the upcoming party may mean missing much of the upside:

Should a bad tape prevent us from making a contrarian call? No, and a matter of fact, based on historic trends, our coverage universe has provided some of the best returns after accumulating [the stocks] when a majority of investors hated the space.

Cowen tech analyst Arnie Berman concurs:

Once the broad market and the global-growth context become more favorable, technology stocks will be in green-flag territory. In fact, we think tech is likely to enter a period of sustained market leadership, potentially for several years to come.

Hosseini likes: FORM, TER, ASML, KLAC.

Berman likes: GOOG, AAPL, QCOM.

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Something to bear in mind (no pun intended): JDS Uniphase (JDSU) fell from a peak of $1,172 to $314 in Jan. 2001. It still dropped another 96% after that. Cisco (CSCO) fell from a peak of $80 to $33 by Jan. 2001 -- it still had another 73% to go. With Sun (JAVA), it was 90% more, and with Oracle (ORCL), a mere 69%.

Then again, Savitz argued convincingly a couple weeks ago that there is little case for comparison between the dot-com bubble and today.

Comments

[Desperate.:]

blah blah blah... now's the bottom, buy buy buy... blah blah blah... now's the bottom, buy buy buy... blah blah blah... now's the bottom, buy buy buy... blah blah blah... now's the bottom, buy buy buy...

2008 Mar 30 07:49 PM

[Dr. Duru:]

Nice. And this buy the bottom call comes on the heels of another bearish Barron's article knocking GOOG to $350...

2008 Mar 30 10:01 PM

[mrtaxx:]

Eric Saitz was totally negative on Apple approximately a month or so ago, he bashed Apple several times with his opinion based on other opinions mostly and not any or many concrete actual facts. Then one day, in someones comment to one of his articles, someone listed Eric's home address. Since then I have noticed Eric is not as negative, especially on Apple. This reminds me somewhat of a comment Charlie Gasparino made on CNBC about 2 years ago. Gasparino said something to the effect that Goldman Sacks tells their clients to buy a stock and at the same time Goldman is selling the stock and he couldn't understand why those clients still stayed with Goldman. Gasparino realized what he said and quickly changed the subject. Gasparino who had been on CNBC alot, suddenly did not appear on CNBC that much. But don't take my word for it, as Warner Wolf used to say, "lets go to the tape."

2008 Mar 30 11:41 PM

[Ames Tiedeman:]

GOOG, a buy now? No way! This massive growth story is over...for now.

2008 Mar 31 03:36 PM