Four Longs in the Tech Sector

At a glance, it doesn't make sense that tech stocks are getting beaten up more severely than other market groups in this year's sharp downturn. After all, these issues have stronger growth prospects than most of the market, as well as little or no exposure to the derivative instruments causing extreme pain to company balance sheets worldwide.

Additionally, a drawn-out recessionary period is less likely to hurt the tech sector than equities in more economically sensitive groups, like retail or industrial production. But that doesn't seem to matter because these stocks have been pounded mercilessly in this mortgage mess, with many fine babies getting tossed out with the toxic bathwater.

Just look at the horrific performance numbers in the 2007 leadership of the Nasdaq 100 index so far this year: Apple (AAPL Quote) down 40%, Google (GOOG Quote) down 40% and Research In Motion (RIMM Quote) down 17%. Sadly, all these stocks, except for RIMM, are still trading near yearly lows and capable of breaking those levels before starting long-term recoveries.

It's clear that more than fundamentals are at work in the tech stock selloff this year. Forced hedge-fund selling is the most likely culprit, with this fast-money crowd forced to dump winning positions in tech and other growth issues in order to raise capital to cover derivative losses and pay redemptions to investors that are looking to get out. ...