After an abysmal last 12 months, 2002 will be a transition year for emerging technology stocks, acco...
After an abysmal last 12 months, 2002 will be a transition year for emerging technology stocks, according to Michael Saunders, a member of the investment committee at Amerindo Investment Advisers.
Saunders, who runs the Amerindo Internet Fund investment trust, says that while 2003 should be an excellent year, 2002 will be a time of rallies and market corrections.
He says: 'We have just had a rally in emerging technology stocks in the US and while we see 2003 being a very good year, we have to get through 2002 first. While indicators look good, we have to be wary of any more false dawns.'
At launch in March 2000, the Amerindo trust had assets of £400m, while on 22 January 2002 the figure stood at £112.6m, reflecting just how far technology stocks and indices had fallen. Between 2000 and 2001, the fund had three consecutive quarters, in which its assets fell by at least 50%, due to the burst in the tech bubble.
On 22 January 2002, the trust stood at a discount to NAV of -35.6% and, over 12 months to the same date, its share price had fallen 73.6%.
Saunders says: 'As the trust invests in mid to late-stage private companies, there is a lot of scepticism about what the portfolio is actually worth.'
He also says the Amerindo trust launched with the rationale that the internet was going to be a major driver of change in how business is carried out, and two years on he believes that theory has already been proved correct.
Saunders says there are certain businesses that work well on the internet. For example, 40% of all tickets sold in the US last year, were purchased via the internet.
He also predicts the internet will become even more important going forward due to the ongoing integration of computers and communications. It has already got to the stage, he says, where one can no longer be run without the other.
Robert Mitchell, director of the Aim equities team at Friends Ivory & Sime, says there are still some very good internet businesses but there is now a sifting process going on to find the decent businesses that will go on and do well, so increasing shareholder value.
Mitchell says that just before Christmas, Friends Ivory & Sime invested in OnlineTravel, a company that provided the infrastructure behind 40 different travel websites,.
The company, he says, realised early that the internet was a growing medium for travel and the stock has been performing well lately.
He is much less sanguine in regards to pure dot.com ventures not backed by a strong, existing brand name. 'We are struggling to find many dot.coms that have worked well,' he says.
'The few that have are many of the so-called old economy stocks that have tagged onto the dot.coms, like Tesco, for example.
'Business-to-business e-commerce has not happened because people are reluctant to change their business habits. It will eventually happen but it will take a while. Early stage technology companies are finding it difficult because they have got the products but there is no market to sell them to.'
Internet changing how businesses operate.
2003 set to be good year for emerging tech.
Ticket sales work well on the internet.
2002 to be transitional for emerging technology.
Few dot.coms have worked well.
People reluctant to change business habits.
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