Feb 08, 2013
Technology was ground zero of the 2001 recession. It also took a big hit in 2008 but it was housing & financials that were the central problems in 2008. In 2013, at first blush Tech once again has an ominous feeling to it:
Tech is 20.8% of S&P 500 estimated EPS and the largest component -- so this is obviously important. Here is the present breakdown of the current ~$111.00 S&P 500 estimate:
And here are the largest market cap companies within the tech sector:
This situation is not much like 2001-2002, many components of tech are doing quite well (QCOM, ORCL, V etc..). Apple took a big hit in earnings but its hard to imagine a scenario where it melts down from here like Cisco and others did back in 2001. Cisco rode the telecom bubble up and then crashed. Apples customer base isn't in crash mode so from that perspective it is not at all comparable. Companies like Microsoft & IBM are very large net income contributors and have stable businesses and in no way can you say they have benefit from any type of telecom/internet bubble in recent years.
As we scan this list, it is remarkable how balanced it seems. Indeed, a company like Hewlett-Packard is only 3.0% of the technology SECTOR net income and far less than that in terms of overall S&P 500 earnings. But that doesn't mean something unforseen can't develop which sinks a lot of these companies earnings -- and we should continue to monitor where problems develop and how likely that could be to cause problems in overall economy.
Note that if you look at a equal-weighted version of Tech (RYT), rather than an AAPL weighted version -- it is a much different look.
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