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Most Investors Undervalue Tech Stocks, Analyst Says

Volatility if OK

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Where some people see a risky roller coaster, Michael Murphy spies a bright pot of gold.

The investment luster, says Mr. Murphy, comes from high technology companies, but for investors, lately, high-tech stocks show more tarnish than shine. Big name stocks such as Intel and Compaq, symbols of the personal-computer revolution, have tumbled as outlooks dim.

But if some investors are having second thoughts, Murphy, publisher of a newsletter on high-tech stocks, is not.

You'll be sorry, he says, if you don't pay attention to high-tech.

Sure, the short-run bumps rattle.

Intel fell victim to a price squeeze: the growing popularity of cheap computers versus the premium price charged for its standard-setting chips.

And excess inventory prompted Compaq to warn of lower earnings.

But "is there any slowdown in end-user demand? There really is not," says Murphy, editor of the the California Technology Stock Letter in Half Moon Bay, Calif.

Buy both stocks, he says, for their solid long-term outlook.

Contrary to appearances, falling product prices are the essence of a technology's success, he contends. As prices fall, more people can buy cellular phones, surf the Internet, and put computers in their family rooms.

"Most people - including investment professionals - are woefully underinvested in the greatest opportunity of our generation," Murphy writes in his new book, "Every Investor's Guide to High-Tech Stocks and Mutual Funds" (Broadway Books, $27.50).

Technology already makes up 15 percent of the US economy - and that share will hit 40 percent within a decade, assuming high-tech sales keep growing by 20 percent a year.

For the US economy, that means more exports and high-skill jobs.

For investors, it means big profits.

Murphy's rule of thumb: Subtract your age from 100, and the result is the percentage of your assets to invest in what he calls "the New Economy."

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