Nowhere to Go but Down?
The fortunes of the biggest technology stocks.
The Wall Street Journal had a frightening graphic following the news of Steve Ballmer's exit from Microsoft (MSFT). Frightening, that is, from the perspective of anybody invested in the nation's largest technology companies. The five biggest tech stocks as of January 2000 bombed. Only International Business Machines (IBM) managed to retain its share value--just barely. The other four have each dropped at least 50% in price.
Which got me wondering: Is long-term failure the inevitable result when investing in the biggest technology companies? Perhaps the nature of technology product cycles is that when a company leads its industry, the best future hope it can have is to hold its competitors at bay and tread water. More likely, it will lose ground altogether, as its outdated products are replaced by those of a newcomer that isn't burdened by legacy issues.
John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.