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Summer blues for technologies or „Sell in May and go away“... well, not really

Summer blues for technologies or „Sell in May and go away“... well, not really

29.05.2007 16:36
Autor: Roman Koděra, Patria Finance

May is slowly approaching its final days and there are not more and more investors, who would like to stick to saying„Sell in May and go away“ in technology sector. At least according to share indices this old cliché might not fulfil.

So are they going to sell shares in June and enjoy sunny Mexico?
Probably not, according to number of investment managers and analysts who recently gave their view on future development of technology shares.

Although technology stocks are most probably going to follow their usual pattern of weak performance from May till September, on the other hand it is less probable that they are going to repeat dramatic sell-off from last year, when NASDAQ Index slumped by 12.87% during the period from 8 May to 18 June.

„In the next three months, Fed is going to stay neutral in interest rates development, but afterwards they are going to rise and not decline which is not very comfortable for investments“, according to Marc Klee, American Fund Advisors analyst, as inflation is „the biggest fear“.

Bearish fears of interest rates hike are not that strong in order to be transformed into high interest in opening of short positions on NYSE. In case investors are expecting stock value decline, they are going to use stock borrowing and sell them „on short“.

Critical point for bullish trend in technology sector is supply and demand for shares themselves and combination of buy-back programmes, mergers and acquisitions which helps to maintain supply on lower lever than demand. In addition, there is no turning point in sight.

Another analyst, Tony Ursillo, is not ruling out correction, but he also says that technology shares are still attractive in price.

Which is why, when asked which shares we should buy, analysts prefer those with strong cash-flow. Major corporations, like Intel and Oracle with high cash-flow yield per share, offer lower risk compared with 4.8% yield of 10-year bond.

Expectations are low while valuations are on a reasonable level. Microsoft shares were recently in a spotlight of investors so much, that even hedge fund legend, George Soros, bought its shares. This could be an important milestone for software producer number one.

His “Vista way” could end up with one of the big internet players like Google, Yahoo or eBay, and just confirm recent speculations.

Finally, there is one idea which cannot be ignored: If everybody is positive and bears surrender together with short-term bulls that open up short positions, which, on the other hand join the sell side of technology shares, then it is the right time to sell...and maybe everything else.

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