High Tech Stocks: Risk, Reward
More Americans than ever are investing in the stock market. Whether you're in it for a quick buck or the long haul, picking stocks has become a national pastime.
In Eye on the Street, Brian Finnerty lets The Early Show in on the stocks that traders are talking about.
Many investors are riding high on the growth of several Internet stocks, but putting money in high-tech stocks can be risky.
The definition of tech stocks has changed over the years. In 1900, it referred to car manufacturers. In 1980, it was computer makers like IBM, Hewlett-Packard and Apple.
Today, it's anything from semiconductor chip makers like Intel to online or software companies such as America Online or Microsoft.
The Nasdaq composite index, which is dominated by technology stocks, has reached record highs on eight out of the last nine days. And for the year, as of today, Nov. 11, the Nasdaq composite is plus 44 percent from Jan. 1, as opposed to the Dow Jones Industrial Average, up 15 percent.
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The big difference shows investors' current appetite for technology stocks.
There are more than 75 publicly traded Internet companies alone. In the tech sector the following are some hot stocks to watch.
Microsoft (MTSF): In February, Microsoft plans to launch Windows 2000. It's a whole new product that brings Microsoft into a new market. And if the government breaks up the company, well, look what happened to AT&T. Investors made a fortune on the regional baby Bells.
Proxim Inc. (PROX): This is a wireless local area network company. It enables information to come into the home. And this is important as more and more people start working from home.
US Internetworking Inc. (USIX): It's an application service provider. It sells packet software applications to businesses over the Internet.
IBM (IBM): This is a good time to buy IBM stock, since it had a big drop last month after indications that demand for mainframes was down. It may be a onetime drop, so by the second quarter of next year, IBM is predicted to be off to the races.
High tech, however, means high risk. The sector is not recommended for investors who are faint at heart. They should make value-oriented decisions and look for long-term investments.
And, it is very important for investors to do their homework. If you can't figure out what a company does, don't buy the stock. But at the same time, you don't have to be an engineer or a chemist to buy a biotech stock.
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