Technology stocks are more than computers

A friend of mine recently asked me what was a good tech stock to purchase. As the discussion went forward I realized 2 things. One that they had no idea what a tech stock was, and second that tech stocks today encompass more companies than say 20 years ago.

The average person will think of a tech stock as just a computer company. And that is accurate. But it is limited. Right now computers include companies like car companies, oil drillers, wind energy, cell phones, even washers and dryers. So what might be a more accurate view of technology stocks?

The most accurate answer would be that it’s new innovations on technology. It’s not just computers, but how they are used, or how new things are crated and used.

Look at clean and renewable energy companies. There is the development of high density, long charge, rechargeable batteries. Solar energy has new developments in solar cells, and better transfer of electricity. Biomass turns garbage into a fuel source. Not to exclude the potentials still to be learned about oil shale, or ethanol derived from wood and grass.

That’s just one source, and it’s popular. Considering the numerous people that believe in ‘global warming’ (which I do not) and those that wish to clean up the earth, this is a sector that will not be going away. In fact we can be sure that more funding will be funneled into this arena no matter who wins the Presidential election.

[But if Democrats win it can be a real big area. Considering that Speaker Nancy Pelosi is making money from her investments in Clean Energy Fuels Corp., T Boone Pickens' company, you can count on the sector gaining a lot.]

But that is just one area.

Water purification, needed on a global and consumer level, is another concept. Cars are advancing technology as the hybrid cars are now being developed and improved. Pure electric cars are receiving a lot of research money as well. And what about service stations to fix and fuel these cars.

Or what about the engineering and construction companies that build the various plants and components needed. Or the ones that might be building newer, safer, nuclear and coal energy plants.

My point is this. The concept of technology stocks is not limited to just the latest version of modem, or processing chip that a computer maker comes out with. In fact computers need not be involved, or the primary component, of a technology company.

The big thing to keep in mind when buying any technology stock is the following

• Is the technology needed en masse


• Will funding come from private or government sources


• Is the technology building upon an existing product or service, or is it a new innovation that has to develop a market


• Does the technology have applications in other industries beyond the one it was made for


• Is the technology user friendly

Based on those answers you can weed out many different ideas and get a bit closer to what you believe is a good investment for you. Of course other factors are always important to keep in mind. Like the economy, competition, potential profitability, political environment, retail or institutional end use, executive management, size, and proof of concept.

Obviously I like some of the new technology in the energy sector. It covers several of my criteria. But that does not mean this is the only option out there. Do your homework and you may have a pleasant reward over time.

Remember that investing in technology stocks is like any other investment. Proper planning, time and management are critical to a positive return. Looking for a homerun usually winds up in taking on more risk than you really want and often does not provide a reward.