First, my apologies to those of you who are not geeks (and just wish you were).
Because… it’s a good time to be a geek. Tech stocks are performing well, and there is no one better to take advantage of this rally than fellow geek investors like you. Even the NASDAQ is back with a vengeance.
There is a lot of talk these days about a new tech stock rally. Below are just a few of the reasons tech stocks are getting so much attention these days.
People love talking about Google, and investors love stocks that go up over 100% in one year. Perhaps more important than that, Google proved that advertising could work online by using all of that personal data they collect about you to deliver better targeted ads. These types of targeted ads based on huge amounts of collected data and algorithms to process that data into “ads I want to see” will be ubiquitous in all advertising soon. For the time being, online ads will have a “targeting advantage” as they have been the first and most obvious place for this technology to be applied.
A Growing Web
More and more people are using the web, and using the web for longer portions of time. Most younger people spend more time online now than watching television. Use of broadband connections continues to rise. The volume of shopping done online goes up every year.
Not only are their more people online, but the internet is better. There is more to do online. In 1999 you could get some news online, watch a video of a dancing baby, and maybe get directions for a road trip. These days more people 18-35 years old (the most advertised-to segment of our population) read their news online than through television or newspapers. I may be an early adopter, but here is just a brief list of the things I do online these days: research for work, talk with friends and family, talk with co-workers, watch “television” shows produced and distributed entirely online, watch reruns of BBC programming, read my news, find directions for driving, find phone numbers, find a pizza place, rent my movies, pay my bills, make my stock trades, and on and on and on.
The adoption of iPods and satellite radio and digital cameras has people using their computers more often. Not only are people shelling out money for all of these toys, but the older generations now have more of a reason to learn how to use computers. Your father might have bought a computer to store digital photos from his new camera. But once he learns how to do that, he’ll be more comfortable about going online to share those photos or read photography forums. In a year or so he may have adopted many of the online activities I list above.
Even non-internet tech companies are due to do well over the next couple years. IT spending is expected to increase as companies start to reinvest all of that extra revenue they’ve gained over the past few years.
We can’t get away from the internet completely here though. Emerging internet technologies have made people more productive at work as well as at home, and companies are ready to spend money on new technologies to maintain a steady increase in productivity. Many of a company’s internal processes have been automated or enhanced by the application of software and technology. Companies have already started automating/enhancing their interactions between office locations, with clients, customers, and suppliers. New technologies that make use of the internet in this vein will go a long way in the business world.
In addition, the PC renewal cycle which started to turn around last year will continue to ramp up over the next couple years. The release of Windows Vista this year will encourage IT departments that have been waiting for the new release to upgrade their workstations.
For the reasons above (and many more), the idea that the “tech” sector is going to do well over the next couple years (or longer) makes sense. On top of that, it seems like every news channel and magazine has daily/weekly reports on “the booming tech industry”. I think a reason for the increased amount of media buzz around this is that some people need a little push to invest in tech after the crash in 2001. But people have largely gotten over those fears, so (probably preaching to the choir here) if you aren’t prepared to invest in tech stocks these days your going to miss out on some juicy action.
And juicy action might lead to another bubble, but I’m hoping that if you are geeky enough (and tune in to InvestorGeeks regularly) you’ll know when things go too far. Which leads me to…
It’s Good to be a Geek
I already said before that people who are knowledgeable about the internet should feel okay putting a larger share of their investments in internet stocks. In general, you’re going to make better decisions than other people investing in the same sector. The same goes for whatever corner of the geek-room you hang out in most. If you are a developer, attack those software companies. If you are a consultant, pick up those good service plays. Just make sure that you do your homework so you really are making better decisions.
As geeks, we should know what’s hot in the tech world today. There was an article in this month’s Business 2.0 about the “Flickr-ization of Yahoo!” But we knew that Flickr was awesome months ago. We all had iPods before they were cool and investors started dumping into Apple. We understand how nanotech and biotech are going to change the world, and will be better suited to picking the winners in these sectors as they come out of the woodwork.
You shouldn’t be willing to gamble with your life savings. But if you do have some “Mad Money” around to speculate with, you wouldn’t do to bad to keep track of the tech news on sites like digg and slashdot, looking for opportunities.
Using your tech knowledge isn’t all about crash and burn investments though. Sure, you can buy into small-cap hype stocks or the next big thing sooner than the masses. But you can also buy into stable companies earlier also, or at times when a company goes out of favor despite how truely geeky and delicious you know that company to be. Playing into the hype will be a good (if risky) way of making money. Seeing through the hype will make you even more.
Knowledge is power, and right now the geeky flavor of knowledge is in high demand.