For most of this decade, high technology has been the investor's magic elevator. You bought high-tech stocks, punched the button, and prices went up. Then last fall, investors found their magic elevator had a "down" button too. The ride has been wild ever since. For a preview of 1998, the Monitor interviewed two tech analysts: Adam Hetnarski, manager of Fidelity Select Technology Fund (800-554-8888; up 7.5 percent for 1997 through Dec. 29), and Storm Boswick, who helps manage the J. & W. Seligman Communications and Information Fund (800-221-2783; up 17.4 percent). Excerpts follow:
Will the wild ride continue in 1998?
Boswick: I think '98 will be very volatile.... [But that] provides you with terrific opportunities if you're there and really paying attention.
Why are technology stocks more volatile than other stocks?
Hetnarski: It's never certain, when things start going bad, how bad they're going to go, whereas with Gillette or Coke you know that ... people are going to continue to buy those things.
What trends do you see in 1998?
Hetnarski: A trend that has me puzzled: why the retail investor hasn't pulled money out. Forget the outlook. Tech stocks are down, the market's down..... [Stocks] still aren't really cheap on a historical absolute basis. At some point in the next year or year and a half, technology will trough. And then valuations will get better.
Boswick: We remain extremely bullish about technology, not only in the US but on a global level. The areas that probably look the best in our minds are the ones that have had the worst second half of '97: semiconductor stocks, semiconductor capital equipment, telecommunications and telecommunication services, and networking. And in software, you are starting to see a lot of lower valuations [good buying opportunities].
Wireless is ... a global opportunity.... We're just scratching the surface.
Will Internet stocks be good buys?
Boswick: The Internet is overvalued.... I think that '98 will see a ... paring back of valuations.
How about Asia's turmoil?
Hetnarski: It's a big deal. For example, [it's 3Com's] fastest-growing market, growing at 50 percent a year. And within a quarter, it went negative! ... Hyundai and Samsung can't sell products within [South Korea] so they'll try to sell them someplace else.
Will Microsoft prosper despite the antitrust probe by the Department of Justice?
Boswick: The DOJ [issue] is certainly real and something to pay attention to. Having said all that, [Microsoft] remains one of the finest companies in the world. It can continue to grow at a terrific rate.... We should all have Bill Gates's problems.
If the first half of '98 looks iffy for technology stocks, should investors pull out?
Boswick: Opportunities like some of the ones we're starting to see come around very, very, very rarely. And the gains are enormous. The risk is NOT being there and missing tremendous opportunities for 1999 and 2000.
Hetnarski: Historically, technology has outperformed the broader indexes, and that's because [the companies] are growing faster. And looking forward, there's nothing that actually changes that. So on a longer-term basis, it is a good place to be.