Investors still wince when they talk about the crash of technology shares seven years ago. It was a time of nausea and repulsion. And despite the rather biblical seven years of famine, it turned out the market was neither able to forgive nor forget. Until now, that is.
Listed tech companies in SA have been telling us for about three years that they have come back from the dead, but only now is anyone (and by that I mean anyone with real cash) listening.
The market is, of course, a whore. It goes wherever the going is good and to whomever is paying the best. And right now the market is terrified. Resource stocks have run further and faster than anyone imagined, but most of the money wasn`t backing the resource play. The bulk of the asset managers, the figurative whores who are managing our pension fund monies, have been solidly backing financial and industrial stocks and those are the stocks that have been woefully underperforming.
So the money managers` heads have been spinning, trying to catch a glimpse of a new opportunity because if resources have had their run, they`ve got to think quick and smart in order to make a return on their (our) cash at all this year.
And like suddenly feeling a pulse on a patient everyone thought was dead, there has been a small "beep" coming from the tech patient`s heart rate monitor.
If you look at the indices across the JSE this year, in amid the red, you`ll see that the technology and telecoms indices are showing a small positive result for the year to date. It`s no triumphant comeback, but it`s something.
And like suddenly feeling a pulse on a patient everyone thought was dead, there has been a small "beep" coming from the tech patient's heart rate monitor.
Ren'ee Bonorchis, editor at large, Business Day
There are two strong selling points for tech shares right now. First off - their cycles are not inextricably linked to the vagaries of higher interest rates, higher oil prices and higher food prices. Secondly, thanks to many years of making big investors turn green and rush for the toilet, a number of them are undervalued. In other words, their share prices do not necessarily reflect the value of the underlying business.
So tech and telecoms are in with a chance. But rather than a return to the days when Dimension Data and Datatec straddled the IT world like giants, investors will be looking for returns to come from the medium and small cap stocks. There are a plethora of newly listed stocks to choose from as well as some hangers on from the glory days.
Companies with price earnings ratios below 10 (which would suggest they are not expensive in relation to the rest of the market) and with a decent dividend yield would include AdaptIT, Datacentrix, EOH, Mustek and UCS. For those who don`t care about dividends there are more choices, but let`s not be foolhardy here. This sector isn`t flying so you may as well hedge your bets by getting in a dividend or two.
In the telecoms space, the only company sitting on a price earnings ratio below 10 is Telkom and given that company`s inability to make decisions right now, many wouldn`t touch it with a barge pole. MTN is the market`s favourite but for those looking for value, Altech`s price is good and its dividend yield is the best in the industry. For those wanting a bit of blue sky, Blue Label Telecoms is expensive on a price earnings ratio of 29.2 and as yet there is no dividend, but this company, from what I can tell, is going places and might prove to be a great buy.
That`s just local scene. One money manager was telling me that his global funds were looking for exposure to tech and telecoms stocks in the US. And that makes sense because then you don`t have to worry about the weakening rand that makes it more expensive for local companies to import the equipment they need.
But for most of us, who don`t play the Nasdaq, local remains lekker and there is every chance that a worldwide shift towards tech will lift our stocks along with the rest.
If the seven years of feasting starts now (and let`s face it - we`d be happy with just three or four good years), then now is the time to leap. Supposedly we`re older and wiser and won`t be mesmerised by tech stocks in the way we once were. In reality, markets have a horribly short memory and we seem fated to make the same mistakes over and over again. But for those brave enough to get in before the lemming run begins, it looks like there are still some prime seats left at the main table.
* Ren'ee Bonorchis is Business Day`s editor at large.
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