Tech Got Tired
Recent headlines coming out of the street were somewhat reminiscent of 1999 and 2000. This week was dominated by tech, tech….and tech. Each day brought more stories of selling in the technology sector. If I only looked at the headlines I might have thought that it was 1999 and that we were in the midst of the dot com crash. We have all recently heard of one large tech company buying another small tech company for “x billions.” The recent headlines have been filled with stories of yet another small biotech company that was purchased because they had some new technology. When the streets are full of cash sometimes things get out of whack. This week the price action felt like a rebalancing was occurring. This need for a sell-off in technology didn’t occur over night. As far back as October 2013 the numbers were showing that small cap stocks (the home of most young technology companies) as measured by the Russell 2000 were starting to look like they had gotten ahead of themselves from a P/E perspective. As we pushed through to the end of the year large cap stocks, while performing very nicely, trailed small cap stocks in terms of total return. As the new-year started the wave of IPOs (Initial Public Offerings) of small companies continued to grow. But the post IPO trading in the market place hasn’t shown the same advancement in share prices as we were seeing in 2013. Sign after sign that Tech was getting tired.