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Tech Trading: Secrets From The Bubble

Forget the anniversary of the 2009 lows, there’s a much more important anniversary you should know about. And it means everything for traders.

We’re talking about the 10 year anniversary of the collapse of the Nasdaq. Hard as it may be to believe, it’s been an entire decade since the tech heavy Nasdaq hit a record 5,132.52.

Now that might not feel like an event worth celebrating – but we’re not here with noisemakers and hats.

We are, however, here with insights – compiled for you from all corners of the Street. Nuggets of wisdom gathered in the aftermath of the tech bubble. Like they say, you can learn a lot from history.

The Lesson

As a blossoming industry tech stocks were once viewed as ‘different’ – in a class all their own. And investors thought the rules didn’t apply.

That’s a problem,

As a result, the Street wasn’t at all alarmed by the ‘extraordinarily high valuations,’ says Ken Allen, portfolio manager at T. Rowe Price. For example - Microsoft's trailing price-to-earnings ratio topped 70 times in early 2000 while today it is roughly 16 times. At the same time IBM's P/E ratio was more than 30 times in 2000, and now sits at 13.

“That was the norm back then, and I don’t think we’ll ever see it again in our lifetime,” muses veteran trader Gary Kaminksy.

Ten years later, we’ve learned ‘that logic is severely flawed. Tech stocks by and large are pretty comparable to other stocks.

Say all you want about momentum or technicals, but at some point the fundamentals always matter.

Keys to the Kingdom

Price-to-earnings multiples have compressed over the past decade as tech investing has become more "rational," adds TCW analyst Jeffrey Lin in a Reuters interview. "I feel good about tech stocks this decade because we don't have this big valuation headwind like we did 10 years ago," Lin says.

So, where’s the opportunity?

According to Barry Eggers, a founder of venture capital firm Lightspeed Venture Partners, the key to tech success these days is finding idiosyncratic, secular growth stories.

"You want to play the themes that have the most robust outlooks, and then you identify the leaders that have the best opportunity to grow," he said.

What’s the trade?

I think the Nasdaq is now attractively priced, says Gary Kaminksy. I think we may be entering a melt-up in tech.

I’m bullish on Apple , says Canaccord Adams analyst Peter Misek. The iPad could be a big driver and they have some killer aps coming. Also look at RIM, he adds.

Or look at the biotech names on the Nasdaq, counsels Pete Najarian. I’d trade it with the IBB .

In a Reuters interview Eggers suggested looking at Apple as well as VMware and NetApp, as new technologies like smartphones and virtualization disrupt older ones like PCs and servers.




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Trader disclosure: On March 10th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Is Long Oil Futures; Terranova Owns (XLE); Terranova Is Short (XLY); Terranova Owns (GLD) March Puts; Terranova Owns (GOOG), (AAPL), (DELL), (EMC), (MSFT); Terranova Owns (CAL) April Puts; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (BAC) Call Spread; Najarian Owns (C) Calls; Najarian Owns (INTC) Calls; Najarian Owns (YHOO) Calls; Kelly Owns (AMZN) Calls; Cortes Is Short Treasuries; Cortes Is Long Oil; Karabell Owns (AAPL), (C), (CSCO), (JPM), (GOOG); Kinahan Owns (C); Kinahan Holds A Long Position In (WFC)

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (GOK)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLI)

For Brian Kelly
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Yen
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (SDS)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GDXJ)
Kanundrum Capital Is Short British Pound
Kanundrum Capital Is Short Treasuries

For Jared Levy
Peak6 Investments Owns And Has An Options Position In (AAPL)
Peak6 Investments Owns And Has An Options Position In (BAC)
Peak6 Investments Owns And Has An Options Position In (BRK.B)
Peak6 Investments Owns And Has An Options Position In (C)
Peak6 Investments Owns And Has An Options Position In (COP)
Peak6 Investments Owns And Has An Options Position In (CSCO)
Peak6 Investments Is Short And Has An Options Position In (CVX)
Peak6 Investments Owns And Has An Options Position In (GLD)
Peak6 Investments Owns And Has An Options Position In (GS)
Peak6 Investments Is Short And Has An Options Position In (GOOG)
Peak6 Investments Owns And Has An Options Position In (INTC)
Peak6 Investments Is Short And Has An Options Position In (JPM)
Peak6 Investments Is Short And Has An Options Position In (MS)
Peak6 Investments Owns And Has An Options Position In (MSFT)
Peak6 Investments Owns And Has An Options Position In (STX)
Peak6 Investments Owns And Has An Options Position In (TXN)
Peak6 Investments Owns And Has An Options Position In (USO)
Peak6 Investments Is Short And Has An Options Position In (VALE)
Peak6 Investments Is Short And Has An Options Position In (WDC)
Peak6 Investments Owns And Has An Options Position In (WFC)
Peak6 Investments Is Short And Has An Options Position In (WMT)
Peak6 Investments Is Short And Has An Options Position In (XLF)
Peak6 Investments Is Short And Has An Options Position In (XOM)
Peak6 Investments Owns And Has An Options Position In (YHOO)
Peak6 Investments Is Short And Has An Options Position In (QQQQ)

For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (C)

For Anthony Scaramucci
Scaramucci's Fund Has A Long Position In Gold

For Brad Hintz
Hintz Owns Morgan Stanley And Discover
Hintz Owns (CME)
Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own More Than 1% Of Barclays PLC, Credit Suisse Group, (C), (GS), (JPM), (MS), (BAC)
Barclays PLC, (C), Credit Suisse Group, (GS), (JPM), (MS), (BAC) UBS AG Are Or In Past 12 Months Were Clients Of Bernstein (Non-Investment Banking-Securities Related Services), Bernstein Received Compensation
An Affiliate Of Bernstein Received Compensation From Barclays PLC, (C), Credit Suisse Group, (JPM), (GS), (MS), UBS AG (Non-Investment Banking-Securities-Related Services)
Bernstein Or Affiliate Received Investment Banking Compensation From (C) In Past 12 Months
Bernstein Or Affiliate Expects To Receive/Seek Investment Banking Compensation From Barclays PLC, (C), Credit Suisse Group, (GS), (JPM), (MS), (BAC) UBS AG In Next 3 Months


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