Picking Through the TMT Sector

Is there anything worthwhile in this battered group?

Christopher J. Traulsen, CFA 14 May, 2007 | 11:45AM
Of all economic sectors one can invest in, technology is perhaps the riskiest. Broadly speaking, the sector is characterised by extremely short product cycles, the routine emergence of disruptive technologies, cut-throat competition, and immense pricing pressure across many subsectors. Moreover, tech shares tend to attract “hot money” that chases performance on the way up and exits at the earliest sign of trouble, as well as hedge funds seeking to profit from the sector’s volatility. Both exaggerate the response of share prices to shifts in underlying business fundamentals.

From the investor’s point of view, the area should be treated as

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About Author

Christopher J. Traulsen, CFA

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.

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