MARKET COMMENT
Tech Investors Could Recoup Losses By 2022

By Maynard Paton (TMFMayn)
October 2, 2001

Carburton Street, London – Patience. In the world of investing, it certainly is a virtue. And troubled tech stock investors are going to require more than most. If your portfolio is brimming with members of the "90% club", then it might be a good decade or two before all your losses are eliminated.

Over the long term, the UK stock market has gained an average of around 12% a year. It's a performance that certainly puts recent tech stock losses into context.

The table below highlights ten former tech stock favourites. Supposing each share rises 12% per annum, there's a fair few years to wait before investors getting in at the top return to breakeven. (It may be academic in most cases, but the calculations exclude potential dividend income.)

Company             Share Price   Percentage    Years to
                   High     Now      Fall       breakeven
                    (p)     (p)      (%)              

ARM Holdings       1002     234      76.7          12 
Baltimore Tech.    1375      17      98.8          38
Cable & Wireless   1562     270      82.7          15
Colt Telecom       4073      73      98.2          35
Durlacher           441       3      99.3          44
Gameplay           1080       2      99.8          58
Izodia             4068      27      99.4          44
Lastminute.com      488      20      95.9          28
Marconi            1250      16      98.7          38
Vodafone            399     150      62.4           8

Of course, not all tech investors bought at the very top. However, even if they invested at 50% of those peak prices, the time to breakeven is still alarming. 

For instance, those buying Cable & Wireless (LSE: CW.) at 781p now require over 9 years of 12% share price growth just to get back to square one. Using the same 12% annual growth figure, those investors who bought Marconi (LSE: MONI) at 625p will have to wait 32 years to see a profit. And unfortunate investors in Gameplay (LSE: GAM) will still need 51 years of 12% share price growth just to get back to half of their shares' 1080p peak.

However, it's unlikely individual tech shares will grow at the 12% annual average. Most will continue heading towards zero, although a selected few should do very well over the long-term. Overall, a basket of fallen tech stocks isn't likely to significantly outperform the stock market average in the future. Assuming a "diversified" tech portfolio is down 90% at the moment, 12% annual growth will see all losses fully recouped by 2022.

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