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Investors have certainly experienced some tough times in technology stocks over the years. After the post-Y2K technology bubble burst in 2000, tech shares were the hardest hit during a three-year long bear market.
Back on their feet again in the mid-2000s, tech stocks get hit hard once again — along with nearly every other asset class — during the financial crisis from 2007 to 2009. In fact, the Nasdaq 100 Index, home to the largest and most successful technology stocks including Microsoft, Amazon and Apple, has returned a grand total of just 10.9 percent since January 1, 2000, equal to an average annual gain of just 0.7 per year (and that includes reinvested dividends).
In other words, 14 long years with very little upside! Some investors might see this as the curse of technology … but I see it as a blessing in disguise.
You see, all markets move in cycles. It’s a principle called mean-reversion, which is just a fancy financial term for a simple parable taught in Sunday school class: The last shall be first, and the first last.
Some market cycles are extremely long; after all, it takes awhile for what goes around to come around again, and back into favor with investors. Commodities and emerging markets are both prime examples of markets with long cycles. And so are technology stocks.
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| The wonderful thing about technology as an investment is this: There is always a new app coming down the line. |
That’s because technology is a constant battle of creative destruction. New technologies emerge, are rapidly adopted, and finally go mainstream. Competition heats up until the sector gets crowded with too many players, then profits fall and the cycle turns. Whatever happened to all those PC makers that struck it rich in the 1980s? Many of these stocks are long gone.
But the wonderful thing about technology as an investment is this: There is always a new app coming down the line. New products and services that we simply can’t live without (literally in the case of biotechnology) are constantly being invented, spurring a brand new cycle of technology innovation. It happens over and over again just like clockwork.
The latest bullish technology cycle is just getting underway now, and fortunes are already being made. It’s all about the mobile internet and smartphone technology. Recently, my colleague Jon Markman has been writing about the newest opportunities in technology today. His advice in a nutshell is this: You ain’t seen nothing yet!
It’s a fact that dozens of technology stocks, most you’ve probably never heard of before, are already posting huge gains. As Jon points out, “the products and services available now are absolutely astounding.” New, up-and-coming tech firms are empowering people the world over and this “incredibly rich outpouring of innovation is making this time, right here, right now, the most amazing time ever to be an investor.”
In fact, several stocks that Jon has personally recommended in the past year are already well on their way to creating new technology fortunes for investors.
For example, ExamWorks (EXAM) is helping modernize the health care industry by streamlining the paperwork and reporting for patients, doctors and health insurers alike. Jon recommended the stock in July 2013 at just $13.52 per share. EXAM is up 163.8 percent since then … in just over six months.
And Tableau Software (DATA), which only just had its initial public stock offering (IPO) in May 2013. This young tech stock is well-positioned in the fast-growing field of data visualization. Jon waited for the IPO hype to die-down, according to his disciplined research, before recommending DATA last October; and the shares are up 50.5 percent since then.
As Jon says, “this is truly the best time to be an investor in technology stocks that I have seen in my 35-year career.” Could ExamWorks or Tableau Software become the next Cerner or Microsoft? Jon believes we can do even better than that!
Good investing,
Mike Burnick
P.S. Want to talk tech stocks? Here’s your chance to ask our newest Money and Markets editor, Jon Markman, anything you like about technology stocks: Simply click this link to jump over to the Money and Markets blog. He’ll check in during the day and give you his best answers to your questions.
Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.