(By Richard Holway 6.00pm 26th Apr 09) As you will have read both in HotViews, every month this year and, if you are a subscriber (and if not, why not?) in our recently published IndustryViews Quoted Sector, UK technology stocks have been stars in 2009 so far. Against a backdrop of a 6.3% fall in the FTSE100, the TechMark is up 7.7% and the FTSE SCS index is up a pretty massive 21%. Indeed it was up another 4% last week.
The same is happening Stateside with a 7.4% rise in NASDAQ this year. Indeed NASDAQ finished its 7th straight week of gains. Kitan Stacey explored the reasons for this in the FT on 25th Apr 09 - Technology comes to the rescue.
The article makes the points we have made several times before. Firstly that the post dot.com bust actually gave tech companies prior experience of a severe downturn. Indeed, unlike some Governments I can name, many tech companies hoarded cash for the ‘rainy day’. They didn’t squander it on dividends or a lot of M&A. Now is a great time to be debt free with loads of cash.
On top of that, we have a whole generation who thinks that tech is a necessity – not a luxury. Anyway, gadgets are a very cheap alternative to going out!
Our own view (indeed the evidence of the last 20+ years) expressed in IndustryViews is that Tech stocks and the FTSE100 behave in tandem. If that is the case again, then tech stocks might need some adjustment. This would more likely come from a general equities rally, which merely catches up with tech, than in a tech crash.
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