Technology stocks: Time to party like it's 1999?
It all went terribly wrong last time, but technology stocks are soaring again. Emma Dunkley has some words of caution
Sunday 20 May 2012
Related articles
Technology investment is back with a bang. Facebook's float is just the latest in what is a lengthening line of exciting companies coming to market at what seem huge valuations. Investors, it seems, are being asked to party like it's 1999 all over again, back when everything technology glittered.
But could this just be another bubble, a case of history repeating itself? "If anyone tells you it is different this time, run a mile," says Gavin Haynes at the investment specialists Whitechurch Securities. "There will be winners and losers in the new technological revolution, which is being driven by social media and cloud computing."
But funds in the sector have in the main a terrible record over the long term. "The problems for tech specific funds are identifying the businesses and the technology that will succeed and then ensuring that they don't over-pay," says Peter Fitzgerald at Aviva Investors.
Tech funds have never really recovered from the disaster at the start of the millennium, says Mr Fitzgerald. "The capital loss was simply too great following the tech bust. Investors who put their money in at the end of December 1999 will still be showing large losses, in some cases up to 70 per cent."
There are still major issues dogging the tech sector that should make you wary. "Technology is such a fast-changing environment there is scope for business models to become obsolete," says Rob Morgan at Hargreaves Lansdown. "Apple's tablets and other mobile devices cannibalising the sales of desktop PCs and laptops is one example. Nokia's rise and fall is also a good example of a global leader losing its way."
And warning signs that there may be danger ahead include hype and over-priced stocks. "Certainly we have seen recent floats suffer," says Adrian Lowcock at Bestinvest. "Groupon is an example. Although Facebook will likely break many records at float, for most retail investors I would stick to a more diversified approach."
If you don't want to go down the tech-focused fund route, there are other ways you can access this theme, depending on how much risk you want to take with your money. "You could go to one extreme and decide to hold a handful of tech companies like Apple, Microsoft and Google," says Darius McDermott at Chelsea Financial Services.
Although this means you have spread your money less and so are taking more risk, you could potentially see higher returns. "You could also go for an exchange-trade fund (ETF), which tracks a particular index, for example the Nasdaq," says Mr McDermott.
If you want to play it safer and spread your money, then you could consider a US equity fund. "The US is still the home for many tech companies, particularly their intellectual capital, so the choice is good," says Mr McDermott. "The AXA Framlington American fund, for example, has a third of its investments in the technology sector at the moment."
But there is another good reason to look at US funds and the tech sector, in terms of dividend pay-outs, especially at a time when the UK is disappointing on this front. "Historically, dividends have been seen as a bad thing for US tech, as it was believed a company paying them was admitting it could no longer grow," says Mr McDermott. "But that attitude is changing, particularly with Apple announcing recently it would pay a dividend."
But dividends are still at low levels. Of the 71 large US tech companies, 37 pay a dividend of, on average, 1.07 per cent, says Mr McDermott. Apple, for example, offers around 1.8 per cent and Microsoft is nearer 2.4 per cent.
But technology stocks could very well be the new income sector of choice, says Brian Dennehy at Dennehy Weller. More tech firms are paying out dividends than at any time since January 2000, with six companies initiating pay-outs this year. He says technology stocks' dividends are also expected to increase by as much as 48 per cent this year, and tech funds could be paying out more dividends than any other type of fund by 2013.
"This has not passed income fund managers by," says Mr Dennehy. For example, the JPM Global Equity Income fund now holds approximately 9 per cent of assets in technology, because of the potential for strong future dividend growth. "So the message is that the technology sector is certainly one to watch," he adds.
So even if the crashed funds of the tech crisis have left scars, the new revolution is providing some opportunities as well as the chance to build your income. But don't necessarily rush to the latest fad, because tomorrow's iPad could soon be yesterday's PC.
Emma Dunkley is a reporter at citywire.co.uk
- 1 'He was lucky he didn't die' - George Michael fell out of speeding car onto M1 motorway, according to eye witness
- 2 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 3 After woman sells virginity for $780,000, here are the results of our prostitution survey
- 4 Far-right French historian, 78-year-old Dominique Venner, commits suicide in Notre Dame in protest against gay marriage
- 5 'It was just like the movie Twister': Man survives Oklahoma tornado by taking refuge in horse stall
Get your summer started with British Military Fitness
BMF is the UK’s biggest and best loved outdoor fitness classes
Visit York
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.
Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
iJobs Money & Business
Programme Change Manager
£850 - £1000 per day: Orgtel: Programme Change Manager - Banking - London - £8...
Operations Analyst
£180 - £230 per day: Orgtel: Operations Analyst - Leading Bank in the City of ...
Finance Business Analyst - Banking - £500pd
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
Senior Finance Project Manager
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
Day In a Page
Tetbury, Gloucestershire
Stoke Newington, N16
Wapping, E1W
Norwich, Norfolk, NR12
Bassett Road, North Kensington, W10
South Gloucestershire, GL12,
Greenwich, SE10
Maida Vale, W9
Waltham Abbey, Essex EN9
Clapham, SW4
Torquay, Devon TQ1
Canonbury, N1
Canterbury, CT1
Haywards Heath, RH16
Wandsworth, SW8
Peckham, SE15
Southend-on-Sea, SS1
Battersea, SW11
Woodbridge, Suffolk IP13
Stratford, E15
Keswick, Norwich NR4
Stamford Brook, London W12
Claverton Down, Bath BA2
Gasthorpe, IP22
Battersea, SW11
Brockley, SE4
Cambridge, CB1
Oxford, OX4
Near Tatworth, Somerset TA20
Hoxton Wharf, London N1
Axminster, Devon
Shepherds Bush, W12
Chingford, E4
Tonbridge, Kent, TN10
Fulham, SW6
Sydenham, SE20
Acton, London W3
Aylesbury, Bucks HP19
Hackney, London E8
Wimbledon, SW19
Chiswick Park, London W4
St Erth Praze, Cornwall TR27
Queen's Park, London NW6
Norton Sub Hamdon, Somerset TA14
Ladbroke, NW10
Bethnal Green, London E2
Norwich Road, Ipswich, IP1
Battersea, SW11
Lower Ufford, Suffolk IP13
Whitechapel, E1
Tetbury, Gloucestershire
A four-bedroom house with stone-walled gardens. £438,000
Stoke Newington, N16
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
Wapping, E1W
One-bedroom flat close to the City and St Katharine’s Dock. £314,995
Norwich, Norfolk, NR12
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
Bassett Road, North Kensington, W10
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
South Gloucestershire, GL12,
Four-bedroom detached period cottage in Wotton-Under-Edge. £625,000
Greenwich, SE10
A four-bedroom three-storey Victorian home with a south facing garden. £849,950
Maida Vale, W9
A two-bedroom ground-floor apartment which opens onto attractive gardens. £375,000
Waltham Abbey, Essex EN9
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
Clapham, SW4
A three-bedroom flat within a quiet communal courtyard in Clapham Old Town. £665,000
Torquay, Devon TQ1
A five-bedroom home plus a separate flat above Torquay Harbour. £640,000
Canonbury, N1
A new-build two-bedroom house with a roof terrace in a gated mews. £550,000
Canterbury, CT1
Three-bedroom house with a private garden and conservatory. £355,000
Haywards Heath, RH16
A new two-bedroom flat located in central Haywards Heath. £200,000
Wandsworth, SW8
Three-bedroom early-Victorian terraced house. £635,000
Peckham, SE15
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Southend-on-Sea, SS1
Four-bedroom semi-detached house within walking distance of the sea. £299,995
Battersea, SW11
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
Woodbridge, Suffolk IP13
A four-bedroom Georgian gatehouse with a self-contained annexe. £525,000.
Stratford, E15
A one-bedroom flat close to Stratford station and Westfield. £250,000.
Keswick, Norwich NR4
A three-bedroom semi-detached cottage in the village of Keswick. £335,000.
Stamford Brook, London W12
A four-bedroom house with a decked garden and a roof terrace. £775,000.
Claverton Down, Bath BA2
A contemporary four-bedroom house close to Bath University. £760,000.
Gasthorpe, IP22
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
Battersea, SW11
Two-bedroom flat close to Battersea Park. £415,000
Brockley, SE4
A three-bedroom flat with two reception rooms and a private garden. £359,950
Cambridge, CB1
A new one-bedroom flat in the city centre of Cambridge. £270,000.
Oxford, OX4
A two-bedroom terrace house with a garden near Radley station. £192,500.
Near Tatworth, Somerset TA20
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
Hoxton Wharf, London N1
A two-bedroom fifth-floor flat overlooking Regent's Canal. £470,000
Axminster, Devon
A three-bedroom Devon Longhouse overlooking the Blackdown Hills. £475,000.
Shepherds Bush, W12
A three-bedroom semi-detached house with a roof terrace and garage. £750,000
Chingford, E4
A brand new four-bedroom house with a family-sized rear garden. £375,000
Tonbridge, Kent, TN10
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
Fulham, SW6
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000
Sydenham, SE20
A three-bedroom terraced home with modern interiors and a rear garden. £399,950
Acton, London W3
A split-level flat with three bedrooms close to North Acton Tube station. £375,000
Aylesbury, Bucks HP19
A lakeside one-bedroom flat in Whinchat with stunning views. £125,000.
Hackney, London E8
A one-bedroom flat with an open-plan reception/kitchen and private balcony. £315,000.
Wimbledon, SW19
A three-bedroom mid-terraced home with a rear garden. £700,000
Chiswick Park, London W4
A bright two-bedroom garden flat between South Acton and Chiswick Park. £499,950.
St Erth Praze, Cornwall TR27
A listed four-bedroom farmhouse with stables, set in four acres. £500,000.
Queen's Park, London NW6
A three-storey family home with four bedrooms and an extended kitchen/diner. £995,000.
Norton Sub Hamdon, Somerset TA14
A three-bedroom Hamstone cottage in the rolling Somerset countryside. £430,000.
Ladbroke, NW10
Two-bedroom garden flat located between Ladbroke Grove and Queen’s Park. £495,000
Bethnal Green, London E2
A one-bedroom flat with a separate kitchen/diner and balcony. £285,000.
Norwich Road, Ipswich, IP1
An Edwardian house with four bedrooms and a large rear garden. £299,950.
Battersea, SW11
A luxury one-bedroom apartment on the first floor of a converted Victorian house. £425,000.
Lower Ufford, Suffolk IP13
A bright and spacious three-bedroom house near Woodbridge. £585,000.
Whitechapel, E1
A three-bedroom luxury flat, minutes from Brick Lane. £650,000.
Why clubs are keen to take a stand
In the end the fans decided Tony Pulis had made a pig's ear of the job at Stoke City





Comments