Watch Tech...

Written by Nathan White, CFA

One of the areas in the market that looks attractive right now is the Tech sector. In the fourth quarter of 2008 the Tech sector was down 26%, which was about 3.4% worse than the S&P 500. Recently as many sectors and broad indexes have broken their November lows the Tech sector has not reached new lows and is showing good relative strength.

This sector has a good record of leading the market during rallies and is an area that we monitor for clues as to when the market might turn. Many bear market studies show that defensive sectors perform well before a market bottom is reached and the higher beta sectors, such as Technology, perform best after a bottom.

Does the Tech out-performance signal that we've hit a bottom? In the short-term it is too hard to tell, but since Tech usually leads on the upside and downside it is interesting to see it holding up as many sectors have continued to break down. The forward PE of the sector is 13.4 -- a number not seen since before the late 90's tech boom. We currently hold a position in the sector and like the signs it is showing that indicate a good rally could be near.

Stay tuned...

 

 

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