The economy will always have its booms and busts–and the same goes for financial markets. But the advance of technological innovation is constant. That’s Richard Shaw’s core belief, a principle that guides his research into technology and telecommunications investments as senior vice president and equities analyst at Bessemer Trust in New York City.
Shaw began his career in the mid-1990s, just as investors were pumping a lot of hot air (and money) into the dot-com bubble. More than a decade later, some investors are still shy when it comes to buying shares in technology companies. However, Shaw says, “Going forward, the tech sector will have better growth, stronger balance sheets to do major acquisitions, and better strategic focus than many other industries.â€ Shaw talked to Black Enterprise about companies that are positioned to prosper in the Internet’s latest voice, data, and video revolution.
What tactics should investors employ in 2010? Does a long-term, buy-and-hold philosophy still work?
Yes, but investors have to be aware. There will be selective areas in the markets where you’ll be able to have greater-than-average growth. We’re in an environment where stock picking will be more and more important. I completely believe in the buy-and-hold strategy. Having the right asset allocation and diversifying your portfolio are key.
What’s the overall philosophy that guides your investment decisions?
The philosophy here is a “normalized framework.â€ We’re looking at gross and or operating margins to see if companies are over-earning or under-earning when weighed against their historical margins. If margins are off, we ask whether it’s because of a competitive issue, because of recession, or something beyond the company’s control. The kinds of themes I like to look for are companies that are secular growers; cyclical companies [whose revenues tend to increase when economies are on the upswing]; companies that will see improvements in business due to internal restructuring, or government regulation; and those that have internal businesses that are worth more as spin outs or are being unlocked for value. I look at the company’s competitive positioning and their strategy. That’s the framework of how I go about looking at stocks.