Zigzagging Technology Stocks Will Resume Long-Term Climb New Highs Predicted For Many Stocks By Early ‘96

Technology stocks have been zigzagging for two months, but investors who hang on for the ride will reap substantially more gains - probably even before year’s end.

That was the view last week from most money managers attending Montgomery Securities’ annual investment conference at the Ritz-Carlton hotel in San Francisco. Many technology stocks will reach new highs by the first quarter of 1996, several contend, and the late-summer correction may be nearly over.

“I am as bullish as I have ever been about technology stocks,” says Harry Lange, Fidelity Investments chief technology analyst and manager of the Fidelity Select Technology Fund.

“The long-term fundamentals for many technology issues are outstanding,” adds Joel Oppenheim, an executive at Brown Capital Management, a Baltimore pension fund firm with more than $1 billion under management.

Lange, Oppenheimer and other technology stock watchers say the high-tech stock correction is a healthy development and a good foundation for higher prices.

Technology stocks will continue to rise, they say, propelled by soaring worldwide demand for high-powered personal computers and by the explosive growth of the Internet and computer networking.

Not all money managers, of course, are upbeat. Nicolas Neve, who helps manage $3 billion in stocks for Banque de Luxembourg, worries about sky-high valuations of technology kingpins like Microsoft and HewlettPackard, and what he perceives as a paucity of skepticism.

“I hear only good news,” he says. “When that’s the case, the next development is usually bad news.”

Theoretically, technology issues are facing their stiffest test of the year.

The rising dollar is threatening technology export sales for the first time in more than a year. And while capacity constraints are a problem, construction of new semiconductor plants could ease the situation sooner than expected. Most ominously, third-quarter earnings must compare favorably against unusually strong earnings in the third quarter of 1994, when an unexpected surge in world-wide demand overwhelmed the impact of Europe’s traditional summertime slowdown.

But these fears are overblown.

Few economists expect the dollar, hamstrung by the nation’s budget and trade deficits, to rise materially higher. Most of the semiconductor factories won’t open until late 1996 or 1997. And while quarterly earnings comparisons will be relatively difficult, stock prices have already adjusted, pushed down by financial disappointments at Oracle Systems and Apple Computer and by management-guided earnings revisions for Intel, IBM, Compaq Computer and other companies.

“The odds are good that the technology rally can continue at least another three or four years,” says Glen Fogle, co-portfolio manager of Twentieth Century Vista Fund.

Meanwhile, a market rebound powered by multi-million sales of Microsoft Windows 95 appears to be around the corner for the industry.

“Investors look ahead,” says Fidelity’s Lange. “As soon as they stop worrying about third-quarter earnings, technology stocks will start soaring again.”