One of the interesting things about performing an online search for forecasts of a technology stock market bottom is the number of results linking to analysts who predicted it would happen more than a year ago.
For some, April 2001 was assuredly the worst point. Others maintained that once the technology-laden Nasdaq Composite Index fell to half its year-2000 peak value of 5,133, that would be the bottom. Unfortunately, it hit that point in December 2000, and hasn't reversed course.
The nice thing about forecasting is that by the time the prediction turns out to be wrong, most people have already forgotten it was ever made. (Much like a soggy commuter hailing a taxi in the rain has better things to think of than the failure of the TV news to predict the downpour.)
Over the past few months, technology stocks have stubbornly defied all prognostications of hitting a bottom. When things look low lately, it usually means they have still lower to go. This is evidenced by the Nasdaq itself, which has lost more than three-fourths of its value in the last 26 months.
For the few optimists still investing in technology stocks, the only silver lining seems to be that prices have gotten cheap enough to pass for bargains -- for those with guts of steel, that is.
"This is one of the best buying opportunities we’ve seen in the past two decades, based on our valuation methodology," said Robert Straus, assistant portfolio manager at Icon Information Technology Fund (ICTEX).
So far the ICON methodology -- which searches for undervalued companies that are leaders in their respective industry -- hasn't played out so well. The fund is down about 36 percent for the year, which is actually better than average for technology mutual funds ranked by Morningstar.
But Straus takes encouragement from the fact that a few holdings are doing well, such as Take-Two Interactive Software (TTWO), a gaming company that is up about 12 percent this year. He's generally bullish on the gaming software industry, which he sees as one of the better-performing tech industry niches.
Although they are few and far between, a handful of technology stocks have actually done spectacularly well this year. FirstWave Technologies, which develops customer service software, is up more than 800 percent this year. The company ranks first on the list of top-performing tech stocks according to Morningstar, although it's still down substantially from its bubble-era peak.
Other big gainers include discount Internet provider United Online (UNTD), business software developer Par Technology (PTC) and computing appliance firm Neoware Systems (NWRE). Most tech firms that are ahead for the year, however, are still trading well below highs reached in 1999 and 2000.
Still, these days even posing an incremental gain for the year is heady achievement. The situation is the direct opposite of what happened in the boom years, when a tech stock that didn't rise was a rarity.
Investors' queasiness, fueled by lackluster earnings, accounting scandals and terrorist threats, has dragged the general market for technology stocks as low as it's been in five years.
Nonetheless, the jury is still out on what qualifies as cheap for individual stocks. Sun Microsystems (SUNW) might've looked cheap a month ago, when it was trading for around $5 a share. It closed Friday at $3.78. AOL Time Warner (AOL) might've seemed a bargain a few months ago at just under $20. It closed Friday at $10.90. And the list goes on.
Banc of America Securities' analyst Thomas McManus summed it up in a research note Friday, concluding that "fear retains its advantage over greed" as outflows from stock mutual funds continue to dwarf new contributions.
But while investor sentiment remains "overwhelmingly negative," McManus saw opportunities for buyers with long-term investing goals to buck the trend and seek out bargains.
They will, however, have to be courageous enough to let greed outweigh fear.
