TCS Daily

How to Invest in Tech Stocks

By James K. Glassman - April 24, 2000 12:00 AM

If you're like many investors, you may be considering diving into tech stocks now that the NASDAQ has suffered a large decline. Your instincts may tell you that it's a buying opportunity. Many of the best-known tech names are selling well below their highs. But how do you choose which ones to buy?

If you don't have a Ph.D. in electrical engineering, it can be difficult to evaluate their prospects. Do you really know what a Cisco router does, and how it compares to a product from Lucent? Does Applied Materials, which makes the machines that make computer chips, have a particular edge over KLA-Tencor? Or, in a slightly more mainstream example, does Windows 2000 pose a serious threat to Sun Microsystems?

Well, if you know you want to invest in great American tech companies, but you're not really sure which ones are the greatest, you might consider investing in a large basket of such stocks. Ideally, you would of course invest in a mutual fund that mirrors the performance of the Glassman Technology Top 30. Unfortunately, as far as we know no investment firm has yet had the good sense to create one.

The next best thing might be to invest in the Nasdaq 100, consisting of the largest 100 companies by market value in the NASDAQ stock market. It's now available as its own publicly traded security with the ticker symbol QQQ. You get almost all the biggest names in tech both information technology and biotech in one investment vehicle, and it has another nice feature.

While you might think of the NASDAQ as the home of money-losing dot-coms, most of the established firms in the NASDAQ 100 are making money. In fact, 82 of the 100 reported profits in their most recent annual reports. So the individual shares may not be cheap, but almost all of these companies have proven business plans and are growing very quickly. And some of them are hugely profitable, like Microsoft, Intel, Cisco, Sun and Oracle, to name a few.

In buying the NASDAQ 100, you get a small piece of the most popular site on the web, Yahoo, plus Dell, eBay and the big biotechs Amgen, Biogen, Chiron and Medimmune. You also get a few terrific non-techs like Starbucks and Bed Bath & Beyond, and even one old-economy value stock in Paccar, the truck manufacturer.

But most of all, you'll be investing in most of America's major high-tech firms. So you can relax, focus on the rest of your life and forget trying to figure out who makes the best wave division multiplexer.

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