Tech Outlook & US Dollar Misconceptions

By Yaser Anwar, CSC of Equity Investment Ideas

• Given the substantial increase in tech valuations over the last several months, the question is how long the rally will last?
• I believe strong year end spending will continue (think: Apple, Cisco) boosting the valuation run through December and into early January as most fund managers who are lagging (this year especially) in their returns will be "window dressing" their portfolios.
• When we move into Jan. I expect we will witness a slowdown as institutions take a little profits. So look to see a correction, which will be healthy, as we move into the seasonally slow first Q.
• I believe tech spending trends are increasingly moving toward the back half of the year, and that the slight drop off in demand from the 4th Q into the first is getting more pronounced.
• Lately everybody just loves Akamai Tech. & F5 Networks, which has lead them to trade at high multiples of revenue and earnings. But then again they are well positioned and have high growth rates, benefiting of this online video and new media boom.

• Investors seem to think that growth abroad and a weaker dollar will benefit U.S. corporate earnings, as overseas sales translate into more dollars alongside faster growth in Europe and Asia.
• In my view business fundamentals are more important than dollar woes. For example- When investing in Big Pharma we need to understand that pricing pressure on branded prescription drugs (read: WMT’s wager and CVS/WAG), loss of patent protection, and the failure of new products (read: Pfizer’s recent woes) count far more than international sales exposure.
• Still don’t believe me? In the 90s despite the semiconductor companies strong sales exposure outside the US a strong dollar did not keep the chip stocks from soaring. When all is said and done- its about industry trends- understand them and you will benefit handsomely.

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