Barron's interviewed Michael Cahill, portfolio manager of Chilton Investment, on the outlook for tech stocks. Cahill made some interesting points:
- From 2004 to 2006, the Nasdaq has been the single worst performing major index.
- The Nasdaq is up only 23% versus 35% for the S&P 500, 47% for the Russell 2000, 47% for Japan, 60%-range for the European Indexes and over 100% for emerging markets.
- Cahill also points out that tech stocks have had serious multiple compression in addition to a huge accumulation of cash on their balance sheets. When adjusting for cash, tech valuations become even more attractive.
- In 1999, there were 282 tech IPOs; in 2000 there were 205; in 2005 there were 23 and in 2006 there were 26.
Cahill concludes that with the massive share buybacks and the lack of new supply coming to market via IPOs, the supply and demand balance for tech stocks is becoming more and more favorable. Further, Cahill says most of the liquidation of tech shares by mutual funds in the post-tech bubble environment is completed.
The area he particularly likes is broadband wireless. Companies he likes are Anadigics (ANAD) and EchoStar Communications (DISH).
February 5, 2007
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