Are tech stocks worth buying now?

Lately every pundit and expert discussing the market of lat has spoken about the financial companies. There is of course good reason for this but the really smart investors are looking in place that the general populace are not, for the next rally that will inevitably come to pass.

Following that line of reasoning I have written about how I found gold and coal to be solid buys. I also have stated that I think some financials are the best buys in the market. But I have to admit I got caught up in all the emotion and forgot to look at the tech market as well.

Now I realize that back in August I was discussing how technology stocks should not be limited to just companies that are directly tied to a PC or Mac. And my reasoning was sound , since technology is more than a computer and it’s funtioning. But if we were to look at the tech stocks that focus on computers what might be said?

Well there is eBay. This company might be the best buy on the market right now for this sector. Without having stores and storage facitlies overhead costs are always low. Since the purpose of the company is to facilitate trades interest rates are not a primary focus on their ability to do business.

Actually when you think about it, a messed up economy should mean good business for this company. As people worry about keeping jobs, and if they will have to take a pay cut or have reduced hours, the holiday season that is the 4th quarter is coming to bear. And kids love to see gifts on Christmas or Haunakah, because the economy means nothing to them. And parents love to see their kids happy.

So would you rather go out in the cold, spend money on gas (which is still high considering how much crude oil has gone down), and fight crowds to pay top dollar for the latest whiz-bang must have, or might you look for a refurbished version of that same item. Or perhaps a more traditional item? Or a nice gift for you spouse and/or significant other. Especially if that item costs less than in a retail store.

This is why eBay has had increased sale each 4th quarter for years. I really think this will do well as other brick and mortar store have a horrendous quarter.

What else might be interesting? Wll according to Toan Tran, an associate director of research at Morningstar in Chicago

“If you really were a long-term investor, and you really were to buy these stocks, go away for ten years and not look at them, any of the big-cap tech names look cheap now -- Microsoft, Oracle, Apple and Cisco -- they're all trading at extremely cheap valuations.”

Of course valuations are based on business and the rationality of the markets. Neither of which are good now. Still of the big names I would believe that Microsoft is a solid choice.

Microsoft has lots of cash on hand, which eases their need for credit in the near-term. They are a highly diversified company. And they provide a product (though often buggy) that is needed for most people to operate their computers with ease. Being the near monopoly they are has its advantages at times.

I also like Netflix. It’s a simple business model, basically renting movies. It’s a huge industry and the more people can’t spend money outside their home the more they want to be entertained in their home. So there is a stability there, if not a reason to expect increased sales. If jobs are sketchy, and especially if gas prices stay at present levels or go up, people want to be in their homes and save money. Since a trip to and from the movie theater can cost as much as $30 per person, a Netflix movie is a wonderful alternative.

Now these examples are not perfect. The credit crisis and the mortgage bailout will hit them hard like any other company. And the general malaise of the stock market will infect their prices as well. But looking at the long-term they will be fine I think.

These companies and others like them will be able to adjust more rapidly than traditional companies. They have goods and services that people need and/or want no matter how the economy is doing. Their costs are manageable and their structures have survived the internet crash so we have reason to believe that they can survive this.

The big question is when to purchase them, or any stock. That is the hard question. I am an old stockbroker, so I like to buy when the market is in a panic (check), there are big problems on the horizon (check), and after bad news.

The bad news will be 3rd quarter earnings which are about to be released. You can safely bet that the financial will all report painfully bad losses and missed expectations. So will several other major companies that rely on credit for their operations. So another sell-off should be expected. Add to that the likelihood of a President (if Obama is elected) that plans to increase corporate taxes by 10% while the economy is reeling, and the increase in inflation from the sudden federal rate cut today.

Put that all together and I look for the last 2 weeks or so of October through middle of November as a buying period. I expect that the market will pick up a bit in that time, so properly picked companies should establish new floors and trade from there.

All of this does assume that Europe and the rest of the world does not fall into a complete depression. And even a steep recession might alter things a bit. But the basic logic still works.

So do your homework, pay attention, and look where everyone is not looking yet. In every down market there are opportunities – you just have to work at it.