Cashing in on TECH STOCKS

They may have tremendous potential, but how do you tell the difference between a sure thing and a pipe dream?

a “buy” or “strong buy” by 22 of the 27 Wall Street analysts who follow the company.
Semiconductors
Leader: Intel (nyse: intc)Semiconductor makers had a rough 1997 and first half of 1998. First, Asia’s economic malady hit. Then, there was talk that cheap PCs would hurt revenues.

By the year’s end, though, demand for computers started percolating.
That was very good news, indeed, for Intel, the company that rules the silicon wafer roost with a 90% plus market share. Long-term prospects look good, too. Estimates are that semiconductor revenues should hit $220 billion a year by 2001, up from $137 billion in 1997. That has Wall Street convinced that Intel should average annual earnings growth of 20% for the next five years. Of the 35 analysts who cover the company, 26 have rated it a “buy” or “strong buy.”
Computer Hardware
Leaders: Dell (nyse: dell); Compaq (nyse: cpq) PCs are perhaps the most visible component of the technology revolution, but the sector has been a sore spot for investors. There have been concerns that demand in Asia had shrunk and that low-cost desktops were sawing away at industry revenues.

Manns says the sector will continue to be promising in the long run. For one, PC demand has firmed up and pricing seems relatively stable. Meanwhile, industry leaders Dell and Compaq have been busy expanding their reach into new areas such as servers, computers that act as the backbone of in-house office networks. Currently 20 of 30 Wall Street analysts who follow Dell rate it a “buy” or “strong buy.” They expect the company to grow earnings at a rate of 30% a year over the next half decade. Compaq is rated a “strong buy” or “buy” by 20 of 34 analysts who cover it on Wall Street. It is projected to grow earnings an average of 19% per year over the next five years.

So, if you are like Audray McMillian and see technology stocks as a larger part of your portfolio, consult your financial planner, conduct the research and, if you are not the adventurous sort, stick with established firms. That will keep you from short-circuiting your long-term investment strategy.

Still overwhelmed?
Tech funds might be your best bet.

Maybe tech stocks still give you the jitters. If you don’t have the time to research every last Internet stock on earth or want to own slices of different technology companies, whether they’re monoliths or up-and-coming dynamos, consider buying technology sector funds.

Technology sector funds function like other stock mutual funds. They provide you with a professional money manager who invests in a range of different tech companies. Like other sector funds, these vehicles limit their holdings to a few industries, including computer hardware, software, networking, Internet and communications equipment firms.

You should still be on guard, though. Tech funds are confined to a narrow-and volatile-market and don’t benefit from the cushion from other sectors. That means when computer and Internet shares are red hot, tech funds will very likely be on fire. And when shares fall, your tech fund is likely

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