MARKET COMMENT
Tech Stocks: It's Never Too Late To Sell

By Maynard Paton (TMFMayn)
August 28, 2001

Carburton Street, London -- Have you lost out on tech stocks, but are still doggedly hanging on to the shares in the belief they'll "come good"? If so, then you need to concentrate on the company's fundamentals. Don't fall into the trap of just using your purchase price, and not the underlying company's performance, as the basis for holding on. Just because you may be down 90%-plus on certain shares doesn't mean it's too late to sell them. Indeed, the shares may lose another 90% in the future. Remember, share prices can fall all the way to zero.

What's really important is where the company stands now. Ask yourself how the company has changed since your investment. For sure, investor optimism may have evaporated. But has demand for the company's products disappeared too? Have notable new competitors appeared? Have profits turned into losses? Is the company's survival at risk?

While you may have overpaid in the past, a substantial change in the company and its industry can still make the shares overvalued today -- even after a hefty share price plunge.

Take a lesson from Polaroid (NYSE: PRD). Back in early seventies, the US firm was revered by investors. It was one of the "tech stocks" of the time and the group's revolutionary instant cameras sent the company's stock soaring. However, the company changed. Problems with its own products and increasing competition saw Polaroid's valuation collapse. As this chart clearly shows, those buying in during the heady days of 1972 are still about 80% under water nearly thirty years later.

In short, don't remain in denial with your tech stocks. Don't keep your head in the sand purely for the sake of not accepting a loss. Instead, re-evaluate the original attractions to the company. If they remain intact, then hold on. If they don't, face up to your mistake. As always with investment, you don't have to make it back the way you lost it.

More: Denial -- Your Worst Enemy