Every Investors Guide to High-Tech Stocks - Hardcover

Murphy, Michael

Hardcover

ISBN 10: 0767903307 ISBN 13: 9780767903301

Publisher: Broadway, 1998

Synopsis

Updated and revised for the second edition, this national bestseller shows you how investing in high-tech can make you rich--even if you don't understand the technology.

How do you find the next Cisco or Intel? How can you avoid losing your shirt on start-up companies that suddenly fizzle and die? And how can techies and non-techies alike get the edge on Wall Street's booming high-technology sector?

Whether the stock market is enjoying an explosive bull run or retreating in the face of a possible bear market, the world of high-tech has become the most important investment opportunity of our time.  Now, in this revised edition of Every Investor's Guide to High-Tech Stocks and Mutual Funds, Michael Murphy shows that you don't have to be an engineer or research scientist to do well in technology stocks.  From software to communications to biotech, Every Investor's Guide to High-Tech Stocks and Mutual Funds provides refreshingly clear, jargon-free analysis of the eight key technology industries, sharing coveted insider tips and wisdom that will supercharge your portfolio's results.

Every Investor's Guide to High-Tech Stocks and Mutual Funds quickly established itself as the definitive book on high-tech stocks when it was first released in the fall of 1997.  In this fully updated edition, Murphy provides a new chapter on the Internet and the World Wide Web and offers cogent analysis of how high-tech investing has been affected by the economic turmoil in Asia, the rise of the under-$1,000 PC, and the feud between Microsoft and the Justice Department.  Also included are four promising new mutual funds, and a revised and updated list of the Blue Chips of 2010.

Focusing on long-term investment strategies--including the easy-to-use Growth-Flow strategy that has made Murphy's California Technology Stock Letter one of the top-rated investment publications in the world--Murphy answers frequently asked questions and guides readers through the dos and don'ts of putting your money into high tech.

Got the inside scoop on an upstart software company or a great no-load fund that has skyrocketed in the past six months? Murphy shows you how to evaluate opportunities, decipher industry hype, and pick your shots with care.  Unsure if you should heed the experts' warnings about the economy and the oncoming investment slump? Murphy offers sure-fire techniques for knowing when to invest--and when to get out.  Simply trying to fund a comfortable retirement? Murphy examines a variety of stock and mutual fund options and helps you assess which ones best suit your needs.

Whether you're investing in Blue Chip stocks or convertible bonds, this groundbreaking book provides essential information on how to build a technology portfolio, how to calculate the downside risk of any investment, and how to apply Murphy's unique, proven Growth-Flow model to maximize your returns.

With detailed company profiles, stock performance records, and contact information for thirty of the best technology mutual funds, as well as forecasts for the next five years, Every Investor's Guide to High-Tech Stocks and Mutual Funds arms individual investors with everything they need to cash in on the current technology boom and beat the Dow in the stock market's hottest sector.

About this title

About the Author

Michael Murphy is the founder and editor of the California Technology Stock Letter, which was rated the #1 investment newsletter by Forbes in 1996.  He is featured monthly in Worth as an investment expert and is a frequent guest on CNBC and CNN.  He lives in Half Moon Bay, California.

From the Back Cover

Praise for Michael Murphy and the California Technology Stock Letter:

"One of the best in picking and planning high-tech stocks."
--Forbes ASAP

"Michael Murphy is the genuine article: a fundamental analyst who has developed a unique way of using the underlying financials of a company to value its stock."
--Worth

"A near legend in Silicon Valley for his stock-picking prowess."
--Nation's Business

". . . . the man many regard as America's top technology guru."
--Kirk Kazanjian, Wall Street's Picks for 1997

"Technology stocks are great buys certain times of the year. At one part of the year they can be dangerous to hold. Michael Murphy reveals this unique seasonal phenomenon for the first time."
--Yale Hirsch, Stock Trader's Almanac

"Four letters stand out for consistency of results and good performance in relation to risks taken. Notice that three of the four letters on the [1996] Honor Roll--all but Michael Murphy's letter on technology stocks--followed mutual funds rather than stocks."
--Mark Hulbert, Hulbert Financial Digest, Forbes

From the Inside Flap

revised for the second edition, this national bestseller shows you how investing in high-tech can make you rich--even if you don't understand the technology.<br><br>How do you find the next Cisco or Intel? How can you avoid losing your shirt on start-up companies that suddenly fizzle and die? And how can techies and non-techies alike get the edge on Wall Street's booming high-technology sector?<br><br>Whether the stock market is enjoying an explosive bull run or retreating in the face of a possible bear market, the world of high-tech has become the most important investment opportunity of our time. Now, in this revised edition of <b>Every Investor's Guide to High-Tech Stocks and Mutual Funds</b>, Michael Murphy shows that you don't have to be an engineer or research scientist to do well in technology stocks. From software to communications to biotech, <b>Every Investor's Guide to High-Tech Stocks and Mutual Funds</b> provides refreshingly clear, jargon-fre

Excerpt. © Reprinted by permission. All rights reserved.

The Internet is a pervasive force affecting virtually all technology companies, you can tell by the separate "How Will the Internet Affect It?" sections in each of the previous industry chapters.  Investors need to adapt to the new opportunity the Internet provides--and, in some cases, the dangers it poses to high-tech stocks.  But what about investing in Internet stocks themselves?

It is a tribute to how rapidly the Internet is growing that this chapter has been added for the second edition of this book.  Many Internet stocks went public after Netscape's debut in August 1995.  Some, apparently operating in what the industry wryly refers to as "Web-time," already have cycled from promising initial public offering to total collapse and impending bankruptcy as their vision of the Internet industry turned out to be wrong.  Many others have managed to build real, albeit small, revenue bases and are struggling in the Land of the Living Dead, trying to figure out what part of the Internet will pay off next and how they can wrench their businesses from here to there.  A few, like Yahoo and Amazon.com, have seen sensational revenue growth, even if profitability remains small or elusive.

There is no doubt that the Internet will reshape our lives, our economy, and our society in many fundamental ways, rapidly driving down the costs of research, distribution, and communications.  We were the second investment adviser on the World Wide Web (John Westergaard beat us by a few weeks) and we are on the Web every day for work and play.  I have been buying stuff over the Web for more than three years, from books and vitamins to our electric land-speed-record car and a tractor.  I belong to several discussion groups, focusing on topics as diverse as electric vehicles, permaculture, and our local Coastside community.  I get numerous e-mail publications, including Conspiracy Nation ("Jim Jones Paula Jones, Jonesboro High School Murders: What's the Connection?")

In short, I am a believer that great fortunes will be made as we move into this next stage of the Information Economy.  Like any emerging investment opportunity, though, the Internet's potential risks tend to be downplayed while the envisioned rewards become the fodder of weekly news-magazine covers.

By 1998, with the frenzy in certain of these stocks reaching new heights almost daily, it seemed tempting to jump on the bandwagon.  After all, how could so many investors, analysts, brokers, and pundits be wrong? Tulip bulbs and the Nifty Fifty went to the moon, so why not Net plays as well?

Unfortunately, euphoria in an emerging investment area almost always signals a classic blowoff top.  The momentum investing crowd becomes frantic searching for anything that promises to go up in the face of declining growth rates.  Wall Street is happy to comply, fueling the fire with second-rate initial public offerings and promotional stock recommendations that make biotech new issues look like seasoned companies.

This chapter offers a framework for investing in the Internet.  Some pundits would say that "investing" and "Internet" should not appear in the same sentence, but I can give you some value criteria that will screen out at least the most overhyped, hopeless prospects.  (That's "hopeless" from the investor's point of view; a company may do well while its overpriced stock is declining.)

The Internet constitutes a three-part investment opportunity.  The first part--the hardware infrastructure companies--are building out the Net; most of these are profitable, but many sell at rather rich valuations.  These companies were covered in the last chapter.  The second part--the software infrastructure companies--provide Internet access, server software, browsers, firewalls, search engines, directories, Web-site management, and a host of specialty products to create and enhance the Web experience.  The third part--the content companies--offer information, goods, and services over the Internet.  The latter two groups are what most people think of as "Internet stocks."

The software infrastructure companies have some very serious problems.  Many of them are unprofitable, with business models based on unproved propositions like advertising banners as a major source of income.  Others have a "product" that will eventually wind up as a feature of someone else's product.  For example, in five years your word processor probably will have a firewall and maybe a Web browser built right in.

Most of these companies face terrific price pressure because they are competing with every computer-science graduate student in the world who wants to give away great new software free on the Internet, get noticed by the venture capitalists, raise a lot of money, and become the next Marc Andreessen (co-founder of Netscape at the age of 24; multimillionaire at 25).  Even the underlying technologies are not stable; there are many ways to program a search engine, as you can see when you try a few and discover they return totally different answers.  (It is truly written: "Give a man a fish and you feed him for a day; teach him about search engines and he won't bother you for weeks.") Perhaps they should use their own technologies to search for a profitable business model.

In the long run, the real money on the Internet will be made by content companies.  The cost of acquiring a customer is much higher than what a company can charge for basic Internet access and e-mail (due, again, to intense competition), so companies must generate extra revenues by charging those customers for extra services and products.  Because the Internet can reduce so many of the costs of advertising and fulfillment, suppliers of goods and services can operate on much slimmer profit margins.  That is why an online bookseller can discount almost every book in its catalog more than any retail store, or Shopping.com can provide a wider range of merchandise at discounts larger than Wal-Mart's.

The Internet has certain unique attributes that color the investment opportunity.  First, it is an information utility.  Beginning in the United States and Europe, and then spreading around the world, virtually every person, device, household, business, and institution will be able to reach the Internet.  Most will enjoy multiple access options, including telephone, cable, wireless, and even the electric power system.

Like any utility, the Internet will always be available.  The cost of providing bandwidth, whether digital subscriber line (DSL), cable, wireless access, or backbone transportation, is plummeting.  As a consequence, devices can remain attached, instantly ready to reach out or respond to queries.

Connecting to and using the Internet requires the use of Internet Protocol (IP), a defined standard of bits and bytes that is the electronic language of the Net.  With IP as a least common denominator, everything connected to the Internet can count on a minimum level of intercommunication.

Standards like IP drive the development of semiconductors to implement the standard, and, as we saw in Chapter 6, semiconductors advance by lowering costs through higher and higher levels of integration.  With convergence on a few physical interfaces and IP as the primary data and network interface, one or two chips can hold the intelligence to connect a device to the Internet.  That means a huge variety of low-cost Internet access platforms can be created, appealing to a wide range of tastes and technical sophistication.  Moreover, non-Internet devices can inexpensively add the intelligence to connect to the Web, enabling remote control of appliances, heating systems, and the like.

A second attribute of the Internet is high fixed costs but low variable costs. Providing access and transporting information require a large upfront investment in fiber-optic and copper cables, repeaters, line conditioners, computer servers, and networking software.  Once the bandwidth is in place to carry traffic, though, the true incremental costs of carrying the next few bytes of data are virtually nil (just a bit of power to propel the traffic along).

Not only are most Internet costs fixed, but the user's investment to get started is minimal.  Almost any business or individual can establish a presence on the Internet for less than $2,000.  From there, your functionality and "reach" is determined by how much you spend on additional capacity and marketing.

With a mostly fixed-cost model, size matters.  The cost of doing one additional transaction is almost zero, so Internet participants who come up with the right marketing mix should be able to grow substantially.

A third unique and very interesting attribute of the Internet is payment--who pays who for what, and how much.  Consumers will pay monthly Internet access charges, but many will switch service providers to save money and some may be willing to put up with advertising if they can get access free.  To a limited extent, consumers are opting to pay very low subscription fees for just a smattering of sites or so-called "premium channels." The Wall Street Journal provides a tremendous amount of information yet charges only $49 a year for www.wsj.com ($29 for print subscribers).  Silicon Investor runs chat groups on hundreds of stocks, yet asks just $200 for a lifetime membership.  Yahoo, a competitor, provides the same investment chat groups for free.

Consumers are just getting used to the idea of paying small, per-ite...

Edition details

• Publisher: Broadway
• Publication date: 1998
• Language: English
• ISBN 10: 0767903307
• ISBN 13: 9780767903301
• Binding: Hardcover
• Edition number: 2
• Number of pages: 320