Just Another Manic Market
Editor's Note: This column marks the debut of The Signal and The Noise, an attempt to direct investors to meaningful information in tech stocks amid all forms of noise -- whether it be public relations ploys, shaky accounting, bad management or silly conventional wisdom.
There was a quiet but telling moment earlier this month when two of the investment banks that had led the underwriting of Baidu.com's
That's right. This is a stock that has lost half its value since going public not even two months ago. Even at such a hefty discount, Goldman Sachs and Piper Jaffray were warning investors to stay clear.
Neither worried about Baidu's future. It was a question of valuation: Both felt the stock price -- currently around $77 -- would begin to approach reality around $45. Goldman analyst Anthony Noto pegged Baidu's implied value at or below the $27 offering price.And that sums up the market for technology stocks in 2005, or rather the market's split personality. You have some people -- to their credit, Goldman's and Piper's analysts among them -- who are trying to adhere to the hard lessons of the recent crash in the Nasdaq, which is still 59% down from its March 2000 peak. Then there's the camp of investors who, if they remember the tech crash, do little more than pay lip service to its lessons. A few short years after lifetime fortunes were wiped away by speculative trading, it's mind-boggling to think that someone wouldn't think twice before paying $153.98 after Baidu's IPO. Tech mania is on its way back. Sure, the speculation is contained in a few isolated pockets, and there remain bargains in the tech sector for investors willing to do their homework. And tech companies keep surprising with new innovations, which may give careful investors genuine opportunities. But it also gives careless investors false hope that the spectacular returns promised in the 1990s may finally be here. Much of the press is still in the 2003 mentality that investors are once-bitten, twice-shy about tech stocks, as they were in stories commemorating the five-year peak of the Nasdaq last March. The San Jose Mercury News, for example, declared, "investors remain deeply skeptical of tech stocks" and quoted a strategist that it would take another 10 years for tech stocks to reach the old highs.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV