Keep Eye on Tech Stocks for Future Growth
It is not news that the technology sector of stocks is a prime candidate for future growth. This sector of the stocks has been the darling and the devil of investors in the stock market for years and technology stocks will not change their role in the future.
For investors in the stock market, tech stocks continue to hold out promise for the big payoff and sometimes tech stocks come through. However, the path of destruction tech stocks often leave behind is wide and long.
This is the second part of a series on where investors in the stock market should look for future winners. The first part looked at the healthcare sector.
When many investors think of tech stocks, they focus on initial public offerings (IPOs), which command a lot of media attention. If you are a big spender with a major investment bank, you may get a shot at a near-ground floor price on the latest tech IPO, but for most of us the price has already been bid up before we get a shot.
During the tech boom of the late 1990s, a study of IPOs found that after an initial leap in share price (sometimes a spectacular leap), many of the stocks settled back near the initial offering price within six months. This means virtually everyone who bought and held an IPO on the first day paid way too much for the stock. As we know, many of the dot.com boom stocks had very short lives.
In the tech sector, it is often the companies that provide solutions that are the best long-term choices. We would all like to buy the next Apple or Microsoft or the latest social media platform, but a less risky route is to look at companies that will fill a real and lasting need.
For example, thanks to the booming use of smartphones and other portable devices, the amount of data flowing over cell phone networks is growing faster than the providers can keep up with.
We have seen this problem before. Years ago, DSL service was the replacement for slow dial-up Internet connections. But DSL had its own challenges: copper wire was limited in the amount of data it could handle along with voice data; you had to be close to a provider's network hub; and so on.
Because consumers and businesses demanded it, several solutions were found. This is the type of need and solution you should look for in a company. There are many opportunities (not just data networks) for tech companies to solve.
We are awash in data from thousands of different sources, however it will do us no good unless there is a way to store, process and analyze this data. The growing popularity of "cloud" computing where users store data in "server farms" and buy computing power as they need it is opening up possibilities for even more innovation.
If your business generates huge amounts of data, you can rent time on super computers to help you process and analyze the data and turn it into actionable information for a very affordable fee.
Investors can run complex stock research or analysis from their smartphones. Doctors can see real time test results, even if the data was processed thousands of miles away. Companies can roll out marketing campaigns that respond to different market conditions at different locations in real time.
The healthcare and technology find common ground in the collecting, processing, analyzing, distributing and securing the tremendous amount of data associated with medicine. From input devices such as tablets and smartphones, to electronic healthcare records, to computer-assisted diagnosis, technology and healthcare seek solutions.
Picking winners in the stock market is not easy, however companies that provide answers to problems for consumers and/or businesses, are a good place to start.
Technology and healthcare are sure to continue as growth sectors and provide fertile ground for companies that focus on long-term solutions rather than the next "big thing."
For investors in the stock market, tech stocks continue to hold out promise for the big payoff and sometimes tech stocks come through. However, the path of destruction tech stocks often leave behind is wide and long.
This is the second part of a series on where investors in the stock market should look for future winners. The first part looked at the healthcare sector.
When many investors think of tech stocks, they focus on initial public offerings (IPOs), which command a lot of media attention. If you are a big spender with a major investment bank, you may get a shot at a near-ground floor price on the latest tech IPO, but for most of us the price has already been bid up before we get a shot.
During the tech boom of the late 1990s, a study of IPOs found that after an initial leap in share price (sometimes a spectacular leap), many of the stocks settled back near the initial offering price within six months. This means virtually everyone who bought and held an IPO on the first day paid way too much for the stock. As we know, many of the dot.com boom stocks had very short lives.
In the tech sector, it is often the companies that provide solutions that are the best long-term choices. We would all like to buy the next Apple or Microsoft or the latest social media platform, but a less risky route is to look at companies that will fill a real and lasting need.
For example, thanks to the booming use of smartphones and other portable devices, the amount of data flowing over cell phone networks is growing faster than the providers can keep up with.
We have seen this problem before. Years ago, DSL service was the replacement for slow dial-up Internet connections. But DSL had its own challenges: copper wire was limited in the amount of data it could handle along with voice data; you had to be close to a provider's network hub; and so on.
Because consumers and businesses demanded it, several solutions were found. This is the type of need and solution you should look for in a company. There are many opportunities (not just data networks) for tech companies to solve.
We are awash in data from thousands of different sources, however it will do us no good unless there is a way to store, process and analyze this data. The growing popularity of "cloud" computing where users store data in "server farms" and buy computing power as they need it is opening up possibilities for even more innovation.
If your business generates huge amounts of data, you can rent time on super computers to help you process and analyze the data and turn it into actionable information for a very affordable fee.
Investors can run complex stock research or analysis from their smartphones. Doctors can see real time test results, even if the data was processed thousands of miles away. Companies can roll out marketing campaigns that respond to different market conditions at different locations in real time.
The healthcare and technology find common ground in the collecting, processing, analyzing, distributing and securing the tremendous amount of data associated with medicine. From input devices such as tablets and smartphones, to electronic healthcare records, to computer-assisted diagnosis, technology and healthcare seek solutions.
Conclusion
Picking winners in the stock market is not easy, however companies that provide answers to problems for consumers and/or businesses, are a good place to start.
Technology and healthcare are sure to continue as growth sectors and provide fertile ground for companies that focus on long-term solutions rather than the next "big thing."
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