CW on RM: Big-Cap Tech Is Back

Big-Cap Tech Is Back
09/26/2006 9:18 AM

The market snapped back from the red yesterday morning to rally into the close with some big gains. And those gains once again were led by tech, as they have been since the market bottomed (at least in the intermediate term) in late July. Even the semiconductors reversed and ripped higher, closing up 2% on the day.

The rally from the July bottoms has been broad and strong, with the Nasdaq up more than 10% from its lows. And, despite being written off more times than an oil man's Enron investment on his tax return, the biggest leader in the market has been big-cap tech.

Yes, big-cap tech has been in full-on bull mode. Oracle now up more than 40% on the year. Microsoft is up more than 20% from its recent lows. Cisco is up nearly 30% since it reported its most recent quarterly results. So much for big-cap tech's exaggerated rumors of death.

To be sure, the whole group is not exploding higher. Intel has crawled back from its lowest points of the year, but it's still bumbling along just about 10% above its recent bottom. Dell, of exploding-computer and failed-MP3-player fame, is also about 10% above its summer lows.

Even recent qualifiers for "big-cap tech" status, Apple and Google have bounced strongly from recent lows. Apple has been really smoking from the mid-$50s to the mid-$70s since summer, with a 30%-plus rally.

With the retail and bank indices each up single digits from their summer lows and with energy and commodities in free fall, big-cap tech is back. "Is" is the operative word in that sentence, because if Microsoft's Vista spurs any meaningful upgrade cycle in PCs, if Intel's new chips rock at a low temperature, and if Cisco keeps enjoying the fruits of accelerating enterprise tech spending -- well, multiples can continue to expand and estimates can go higher. And that would provide a double-whammy to fuel these stocks further.

I won't chase these names right now, but I continue to hold Microsoft as my biggest position, and I'm holding my more recent addition of Cisco steady, too.

P.S. Speaking of Enron, can you imagine how big and powerful that firm would probably be if it had managed to hide the corruption long enough to enjoy the huge energy boom? That's a scary thought. Or perhaps a beautiful thought, because they did get busted and justice was served.