IT stocks took a beating during the recent global recession, as investors put their money into shares that were seen as more robust.
However, there are good investment picks on the markets for people who do their research on a company-by-company basis.
The global markets were hard hit by the global recession that resulted in several casualties, including US banking giant Lehman Brothers, at the end of 2008. The US and parts of Europe are still battling with job losses and high sovereign debt levels.
Irnest Kaplan, MD of Kaplan Equity Analysts, says there are opportunities to buy low-valued IT stocks, but investors must do their homework. He points out that shares with smaller market capitalisations, such as many in the IT sector, fell out of favour during the global economic crisis.
Good value
Kaplan says the value of IT shares is lower in general than many on the JSE's all share index, which has recently broken through the 30 000 mark. He explains that this is not because of any specific reason weighing on IT, but rather because smaller companies were seen as less robust during the economic crisis.
Retail stocks, conversely, are in the mid 20s range.
However, IT stocks could take up to a year before valuations start swinging upwards, says Kaplan. He says a shift could also happen within a few months, and is hard to predict. “That's what makes it exciting.”
In addition, although government spending has eased off recently, which Datacentrix pointed to in its recent results, this trend must reverse, says Kaplan. However, it is difficult to predict when this could happen.
Some investors are also concerned that telecoms companies are encroaching into the IT space by building data centres and offering cloud computing services, says Kaplan. This could weigh on IT stocks, he says.
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