This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Then: Buy Nifty 50; Today: Buy Tech

NEW YORK ( TheStreet) -- If you are old enough, you may remember something called the Nifty Fifty, which during the 1950s and 1960s were touted as solid-performing stocks you could buy and hold forever.

It turns out that "forever" lasted until 1972, when a 10-year bear market took over. Until then they had a good run.

Looking over the list, what strikes me is how well the Nifty Fifty mirrored the U.S. economy at the time. Lots of manufacturing, retailing, energy development and beer. There are some interesting entries too. S.S. Kresge. Really? Simplicity Patterns? Yes, that Simplicity Patterns, which sold sewing pattern guides. Eastman (ahem) Kodak.

*(If you count you will see there are only 49 stocks on this list. A good deal of research did not produce an alternative list. I did learn, however, there was not universal agreement on exactly which stocks constituted the Nifty Fifty.)

The Nifty Fifty was rooted in the notion that strong, reliable and growing companies existed at the heart of the economy. Today, that means technology.

Clearly, there were more Simplicity patterns in households in 1965 than semiconductors. But today quite the opposite is true.

The numbers prove at once where the profits are being made in today's economy and why buying technology now is "prudent," a word in the nomenclature of Wall Street that means reasonable and not unduly risky.

First, the prudence. According to a year-end report I requested and received from Standard & Poor's, the forward price earnings ratio of the S&P Technology sector stands at 12.2x (where x stands for times earnings), compared to a 15-year average of 23.8x. For those of you who believe that forward estimates are too aggressive, the trailing price earnings ratio (based on what these companies have already earned) is 14.6x, compared to a 15-year average of 26.7x.

Further, many tech companies have bullet-proof balance sheets. There's Apple (AAPL - Get Report), which is expected to have as much as $200 billion in cash and equivalents on its balance sheet by the end of 2013. Venerable IBM (IBM - Get Report) has over $70 billion in retained earnings and nearly $13 billion in cash on hand. A lesser-known and smaller technology company, Cognizant Technology Solutions (CTSH - Get Report), which provides IT consulting and outsourcing services, has no debt and over $2 billion in cash and equivalents on hand (though it does not yet pay a dividend).
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ADBE $93.70 -1.30%
AAPL $95.22 1.70%
CSCO $26.84 -2.00%
CTSH $57.64 -1.30%
IBM $143.78 -1.00%


Chart of I:DJI
DOW 17,769.77 -121.39 -0.68%
S&P 500 2,066.57 -14.86 -0.71%
NASDAQ 4,784.8210 -32.7730 -0.68%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs