BERLIN -- It would appear as if high-tech electronic-component maker
has tied its caboose to the right train. And it's a runaway train at that.
Since its initial public offering in October, shares of the Munich-based joint venture of German conglomerate
and Japanese giant
Matsushita Electric Industrial
have roared more than 100% as the global mobile telephony boom hits its stride.
Unlike many IPOs, which soar on the first few days of trading and then settle back, Epcos has continued to surge. The shares, which trade as ADRs in the U.S., now change hands just below 85 after debuting in the 30s. The company has a market cap of more than $5.5 billion.
Although the company's fundamentals appear fine, Epcos is another example of the bizarre world of tech stocks, best exemplified by the
Nasdaq Composite Index
. (Although Epcos trades on the
New York Stock Exchange
, its movement is exemplar of the broader tech market.) Over the last year, the Nasdaq has surged about 80%, adding $2 trillion in market capitalization. In the last month alone, the index has leaped more than 20%, smashing record after record as investors pile into stocks that promise to take part in building the next century's evolving information infrastructure.
Nasdaq: Join the discussion on
message boards. Have the fundamentals of Epcos and all the other tech stars changed so dramatically as to suggest they universally deserve these remarkably higher prices? Clearly, these stocks have been driven less by news and analysis than by a pervasive -- and persuasive -- sense that the sector's trend is strongly, perhaps irreversibly, up.
Epcos is a good case in point. Many of the company's clients operate in cyclical industries, increasing its susceptibility to volatility. And Epcos' client base is heavily concentrated on one industry. About 40% of the company's sales are communications-related. Were the telecommunications boom to slow down and Epcos' clients to scale their orders back, the stock could come crashing down just as fast as it has gone up.
For the time being, however, that doesn't look likely to happen. Last week, Epcos reported new orders were up 66% in the fourth quarter as demand increased from clients like Finnish cell-phone maker
So long as the market continues to support dizzyingly fast gains of telecom and mobile-phone shares, investors appear likely to favor Epcos stock the more it ties its fortunes to the industry. In fact, there's a good chance the cell phones being used to place Epcos buy orders are filled with Epcos components.