NEW YORK-Hugh Johnson’s official title is chief investment officer of First Albany Corp., Albany, N.Y., an investment bank and brokerage firm that specializes in high-technology stocks. In that capacity, “I’m in charge of agonizing at our firm; I’m always worried,” he said.
At least through year end, however, Johnson said he isn’t concerned generally about the prospects for and performance of technology stocks despite recent fluctuations in the market.
“There are reasons, at first blush, to be positive about what’s going on in the economy and the financial markets,” Johnson said at a First Albany presentation last week titled, “Whither Goest the High-Tech Market? Is There Gold among the Schlock?” For one thing, the 19-month-old bull market is still a baby by historical standards. Furthermore, the Federal Reserve Board hasn’t seen enough inflationary pressure to justify a hike in short-term interest rates; nor has there been any indication of “negative liquidity,” that is, insufficient capital available to drive the economy and financial markets.
In fact, 1996 will break the record set in 1993 when 604 initial public offerings totaling nearly $31 billion went to market, said Ken Mabbs, director of corporate finance. The $1 billion IPO by Lucent Technologies Inc. earlier this year broke the size record for a single such offering. “IPO’s have been winners overall; 59 percent of those priced this year so far are up over their original price, (compared with) 61 percent in (all of) 1995,” Mabbs said.
On the other side of the equation, he added, “Fifty (IPO) deals were yanked this year; a lot of that is what we call `crap’ in the trade.”
On the buy side, Mabbs said, money is pouring into mutual funds, which have added $142 billion to their equities portfolios to date, a third of it in aggressive growth stocks, compared with $128 billion total for all of last year. Additionally, there is a large backlog of about $9 billion worth of IPOs pending in registration, comprising about 200 deals, at least half of them technology companies, he said.
“If we’re heading into a bad year, profits are not acting that way; the sectors doing well are not the type to do well in bad markets-basic materials, consumer goods, industrials and technology,” Johnson said. “That doesn’t mean we shouldn’t become worried about profits in 1997, but it’s too soon to become bearish.”
Another good sign of growth ahead for technology stocks is that companies in the bellwether areas of semiconductors and computer software have performed quite well on the exchanges during the past five weeks.
Within the technology sector today, however, Johnson added he sees, “some tiering going on” in terms of month-to-month earnings posted by individual companies large and small. Monthly earnings reports, far more than company size, are “an extremely important” indicator for stock pickers, he said.
