Page One

The problem for those small, high-tech investors with battered portfolios is whether in ruing the past, they will overlook the rewards of the future and the chance to get even. 

It’s an old, old story: Burned by what happened, they’ll vow never to allow a repeat performance, apply salve to their wounds, settle for less and abandon stocks, and maybe mutual funds too. 

It’s smart of them to learn from the past, since the past always has lessons for the future, no matter how hard people try to ignore them. And one of the lessons is that that technology is inherently volatile. 

In other words, technology stocks might come back before the small investor’s wounded psyche recovers. 

A study just released by J.P. Morgan Securities traces the ups and downs of its technology index for the past 15 years, a portrait of which looks like a wild range of mountains with jagged peaks and deep valleys. 

A 37.5 percent, 18-week correction that began on June 4, 1990, for example, was followed by a 106.3 percent recovery that began on October 11, 1990 and lasted for 71 weeks. It goes on like that, 131/2 ups and downs in all. 

The biggest change came in 1998, when an 11-week, 31 percent correction was followed by a 74-week, 416 percent recovery. Frightening losses, spectacular gains, some within a few-week period. 

And, as you guessed, the latest correction of all, the current one for which no sharp recovery has yet been observed, accounts for the up-down pattern to be left with a dangling 1/2. It still awaits a recovery, and quite possibly a bottom. 

Among the lessons of the past, it seems, is that it is in the nature of the animal to be inconsistent, forever on the verge of a breakthrough, real of claimed, and just as often suffering a breakdown instead. 

Nobody, of course, really knows what’s coming next, but you can read in the voluminous literature of Wall Street that many of those advisers who misguided you are itching now to begin the recovery on their terms. 

The past suggests it will come on its own terms, not Wall Street’s. But, without naming when, even some of the conservative and highly responsible market observers are convinced it will arrive. 

Jaye Morency and Vinnie Muscolino of David L. Babson & Co. write in its staff letter that they’re convinced the collapse of prices has produced bargains for investors willing to wait out the uncertainty. 

So where are the opportunities, they ask? 

The basic strategy, they contend, is to capitalize on the return to centralized computing. With hundreds of millions of hand-held electronic devices now in use and more coming, mobile computing needs to be fully connected to centralized hardware in an upgraded communications network. 

The technology sectors best positioned to exploit this need, they say, are software, enterprise hardware, data storage, communications infrastructure and specialized semiconductors. 

The best of the companies within these areas, in their view, are those with global franchises and successful long-term research and development commitments. 

All this leaves the small investor with a lot of work to do, but it also resurrects one of the clearest messages of the correction, that being to do your homework – just as would before buying a refrigerator. 

You’re on your own; have no doubt about it. Just remember that the idea is to buy low and sell high. 

John Cunniff is a business analyst for The Associated Press