If you had invested $1,000 in semiconductors, you would have lost $840 in the last recession (2000 through 2002). Mobile telecoms would have made $910 disappear. And telecom companies (which encompass both mobile and fixed-line) would have stripped you of $920.
But avoiding tech stocks this time around would be a classic case of learning the wrong lesson.
In 2000, techs were at all-time highs. Their prices were absurdly expensive. The dot-com crash brought down the entire sector, deservedly or not.
It’s different now. The tech stock index, Nasdaq, has made much less progress than the Dow or S&P 500 in making up lost ground since 2002. And tech stocks are no longer so expensive. Yet, I’d understand if you were nervous about rushing into this sector, so I have a suggestion for you: Look at telecom and semiconductor stocks from overseas instead of the U.S.
My favorite telecom stock, France Telecom (FTE), is exceeding analysts’ expectations and had a great year in 2007. My semiconductor favorite is from Taiwan – Taiwan Semiconductor Manufacturing (TSM). And both companies give generous dividends. These are the safest tech plays with the most upside – even with a recession bearing down on us.[Ed. Note: ETR’s Investment Director, Andrew Gordon, is the editor of INCOME, a monthly financial advisory service that uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]