Can I enjoy safe techs?

By THIS IS MONEY
Updated:

 

I would like to invest in a technology company even though the sector is in decline. Can you pick me out the best of a bad bunch? I have £10,000 to invest. RC, Newcastle.

Richard Banfield, senior analyst at Barclays stockbrokers, says: The technology sector remains volatile with FTSE 100 companies such as ARM, Marconi and CMG significantly below their respective 12 month highs.

Despite some recent rallies, weakness remains: in the week ending 6 April, 2001 these companies fell 22.2%, 4.4% and 28.2% respectively. While it is reasonable to have some exposure to the sector we would not encourage investors to put all their available funds into technology stocks and certainly not into one individual technology company.

Generally, we suggest having no more than say 5% of your equity-based investment in one company - although this can vary depending on your investment objectives, attitude to risk and total funds available.

ARM has recently announced results, which were ahead of expectations and Marconi has given a trading update which has reassured the market. On the other hand CMG, a leading provider of software for text messaging, was adversely affected by concerns about a fall in text messaging in the UK in February.

Sentiment is likely to be driven by the US technology index, NASDAQ and more generally the effectiveness of the Federal Reserve in avoiding a recession in the US by timely cuts in interest rates. We may see further profits warnings in the US and the UK before the picture starts to improve, so while the better quality technology shares should offer long-term growth attractions, there appears no immediate rush to 'take the plunge'.

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