Tech Stock "Wreck" Towed Away For Easy Buying?


Call it Turnaround Tuesday: under-bought, over-sold, bottom-fishing, bargain-hunting. Whatever it is, it seems rally-time is finally hitting tech stocks. How long it will last is anyone's guess, but looking at the wacky whiplash these stocks have suffered over the past week, today's action is welcome indeed for anyone long in tech.

I suspect what's happening today revolves around a concept so foreign to tech investors: Buying shares based on valuation. These tech stars have been on a hockey-stick ascent (up and to the right!) for the better part of a year. But last week, the meltdown hit the sector hard. Over the past week, Apple's lost 8%, Cisco down 14%, Yahoo off 18%, Oracle down 11%, Google 7%. But look at what's happening today: Apple's erased those losses, adding 10% today; Cisco has re-captured 2%; Yahoo, Oracle and Google are each up 4%.


And look at VMWare . The high-flying virtualization software company that enjoyed the best IPO since Google's earlier this year, got clobbered this past week. And following Oracle's news yesterday that the company would start encroaching on VMWare's technology turf, the company got hit hard yesterday; but today, it's recovering just about all those losses. It's up 9%.

Research in Motion should also be on the decline, following news today that Apple is sniffing around China as the newest market for its iPhone. Remember that RIM enjoyed that nice pop when it announced a deal to enter the Chinese market, so you'd think that news of a possible new competitor for Blackberry there would be bad for RIM shares. Nope. RIM shares are recovering as well.

And that's a good indication that these shares are under-bought. Investors so perplexed by a spate of perceived bad news (even though last week's forecast from Cisco wasn't nearly as bad as some analysts surmised) are shaking it all off and buying anyway. That's because, as I've been saying, the fundamentals of these companies haven't changed. Their outlooks haven't changed. And broad-based sell-offs for no reason other than everyone else seems to be selling off, presents real opportunities for the careful investor.

That's not to say we won't see choppiness through the end of the year. But that's what makes a market! Do some research. Look for the deals. It appears some investors are already slapping down some cash for them.

Questions? Comments?