Advertisement
Investing

No Bubble for Tech Stocks

Microsoft is a deal, but some social media firms will go bust.

With Web-based startups flooding the market of initial public offerings and stocks of a few social-media companies reaching sky-high valuations, many investors may be experiencing a bit of déjà vu. But David Eiswert, manager of the T. Rowe Price Global Technology Fund (symbol PRGTX), says this is not a repeat of the dot-com bubble of the late 1990s. The following is an excerpt of our recent conversation with him.

Advertisement - Article continues below

KIPLINGER: Is there another tech-stock bubble on Wall Street?

EISWERT: No. Tech stocks could be due for a pullback, but if that happens, I’ll be buying. There are big opportunities for growth, thanks to new demand from developing nations, new trends in mobile and cloud computing, and the accelerating pace at which people are purchasing and using these new technologies. Tech companies are also sitting on the most cash held by any market sector, ever. Adjusting for these factors, tech stocks are cheap—especially large-company tech stocks.

What about social media stocks? Do you see a bubble there? There will be some huge winners in social media, and other stocks will go to zero. The stocks look expensive based on their prices relative to company earnings, but some are more expensive than they look and some are cheaper, based on long-term prospects. We think LinkedIn (symbol LNKD) will be a winner. The company has 150 million users and a potential global market. Users could double in the next two to three years. How hard is it to imagine that every college student and working person will have a LinkedIn account?

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

Are there other good social media bets now? Which ones would you avoid? Angie’s List (ANGI), the consumer-review Web site, is attractive. The company has a great local-commerce database that it’s just starting to make money on. Groupon (GRPN) is riskier (see 6 Stocks to Sell Now). It’s not clear what the company’s competitive advantage will be and how much of the local-commerce market it can capture. Because its future is more uncertain, the stock is less attractive.

What are some of your other favorite tech com­panies now? Microsoft (MSFT) is cheap, and Windows 8, due out later this year, is a chance for the company to find new growth in the mobile-device market. We like Juniper Networks (JNPR), which lowers the cost of Internet traffic for AT&T and other telecom networks, and we like Informatica (INFA) and Tibco (TIBX), both of which enhance the flow of data, allowing investors to cash in on the explosion of information.

Follow Jennifer on Twitter or become her fan on Facebook.

ORDER NOW: Buy Kiplinger’s Mutual Funds 2012 special issue for in-depth guidance on the only investments you need.

Advertisement
Advertisement

Most Popular

7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020
Turning 60 in 2020? Expect Lower Social Security Benefits
Coronavirus and Your Money

Turning 60 in 2020? Expect Lower Social Security Benefits

When you file for Social Security, the amount you receive may be lower.
July 30, 2020
How a Second Stimulus Check Could Differ from Your First One
Tax Breaks

How a Second Stimulus Check Could Differ from Your First One

The HEROES Act, which was passed by the House in May, would authorize a second round of stimulus checks. While the new payments would be similar to th…
July 22, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
6 EV Stocks Every Investor Should Know
tech stocks

6 EV Stocks Every Investor Should Know

Investors have only a few pure-play EV stocks to choose from, but they should all be familiar with these electric-vehicle companies.
August 5, 2020
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
August 2, 2020
Stock Market Today 7/31/20: Big Tech Roars, Everyone Else Snores
Markets

Stock Market Today 7/31/20: Big Tech Roars, Everyone Else Snores

Blowout earnings from Apple (AAPL), Amazon.com (AMZN) and Facebook (FB) led another charge by the Nasdaq on Friday.
July 31, 2020