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How To Buy Technology Stocks
by Michael Gianturco
How To Buy Technology Stocks by Michael Gianturco was originally published as The Market That Beats The Market because technology as an investment sector has significantly ourperformed the broader stock market.
Gianturco recommends that all of your long-term growth portfolio be invested in technology stocks and that you might reasonably expect to achieve an 18% long-term return on your investment.
How To Buy Technology Stocks starts with an excellent discussion of the success of Compaq Computer and why the company was successful. Contrary to popular misconception many successful technology companies are not technologically innovative. In fact, Gianturco argues that often being innovative confers little benefit to a technology company. Similarly, he writes that you don't need to know two wits about DNA or computers to invest in medical companies and computer-related companies.
The goal is not to build the best product. The best product seldom leads to huge returns. The goal is to find a company that will be able to maintain a limited monopoly. A company that will have a network supporting the growth and profitability of the company.
The chapter about the importance of networks (as information exchanges, distribution systems for goods, etc.) for wealth building is an especially brilliantly written chapter. Gianturco makes many historical parallels to show how the concept of a network is often the deciding factor between strength and power or failure and struggle.
The network chapter alone makes this book well worth purchasing. Not only investors in technology stocks will benefit from reading Gianturco's interpretation of the importance of networks. If you desire to build a technology company or already run a technology company, Gianturco's understanding of success via controlling a network will probably get you to think along different lines with regard to building and growing your company.
How To Buy Technology Stocks recommends holding about 16 carefully selected technology stocks. Gianturco points out that conventional valuation measures mean little when evaluating technology stocks. He tells us buying companies below book value makes little sense because we are no longer in an industrial age. We are in a technology-driven age where ideas and intellectual capital drive the economy and which create huge wealth.
Finally, How To Buy Technology Stocks says that, with technology investing, you look for the big winners. The stocks like Cisco, Microsoft, Compaq, and Dell Computer. Companies which will dominate their market and go up many times (maybe even hundreds of times their values). These stocks will provide for the explosive growth of an intelligently chosen technology portfolio. Many technology stocks will fail to do well. In this regard investing based solely upon value criteria is a flawed strategy, if value is the only consideration given to your investments.
For those who don't want to buy individual stocks, Gianturco also briefly discusses technology investing via mutual funds. And, a chapter is devoted entirely to investing in Internet companies.
Overall, we really like How To Buy Technology Stocks and the investment philosophy it espouses. Despite the fun in looking for the next monopoly, high-technology company that will yield incredible investment returns, we think only a portion of any investor's portfolio should be invested in high technology. Gianturco suggests, maybe, 20% of your stock portfolio should be invested in technology stocks (he qualifies this by individual risk tolerance and other factors). The other 80% he suggests should be conservatively invested paying attention to value. High-yielding utility stocks offer a good balance to your technology stocks.
If you are investing in individual technology stocks, you should give How To Buy Technology Stocks a read.