The world of technology stocks moves so quickly

Over the years we have seen some phenomenal technology stocks such as Google, Amazon, Netflix, etc. In the early days, Amazon was written off as a nonentity but today it is valued in the hundreds of billions of dollars and expected to secure more than 50% of online sales in the short to medium term. However, the world of technology moves so quickly and while not all shares will perform as well as those mentioned above, there may well be some interesting short-term plays.

First to market

In business there is a general consensus that it is not always the first to market which will be the most successful. Perhaps one of the prime examples of this theory is MySpace and Facebook. Those who follow the world of social media will be well aware that MySpace changed hands for some phenomenal figures back in the day. It was to all intents and purposes the precursor to Facebook which, despite its recent difficulties, is one of the largest companies in the world. MySpace, well the company has since changed hands for but a fraction of its value at the top of the cycle and is now a nonentity in the world of social media.

The world of technology stocks moves so quickly
The world of technology stocks moves so quickly

Watch out for competition

The situation regarding the likes of Google is a little different because while Yahoo was for many years the most recognised search engine, Google took search engines to a different level. Yahoo sat back waiting for natural growth while Google expanded, devoured all competition before it and eventually overtook Yahoo and also left Microsoft in its wake. The reality is that Google was a whole different ballgame to its competitors, it was aggressive, invested heavily in new technology and while the company made mistakes on the acquisition front, like pharmaceutical companies, Google “buried it’s dead at night”.

Knowing when to sell

While Yahoo is still around, it is safe to say that the value of the search engine is but a fraction of the value of Google and it has significantly underperformed. Mergers, much need but late investment and various managerial changes have failed to deliver anywhere near the expected results. So, when looking at technology companies there is certainly a time to buy but there may also be a time to sell if the company is facing intense competition.

A recent example is the social media company Snapchat which floated on the US stock market in a blaze of glory, nearly doubling from the initial float price up to $30 before the shares collapsed. While there has been a partial recovery the shares are still valued in the midteens as recognition that the likes of Facebook, who failed to buy the company pre-flotation, are prepared to invest billions of dollars to create their own similar service and basically cannibalise Snapchat’s customer base. As it happens, Facebook has lost the confidence of many customers and shareholders of late which again highlights the very volatile nature of the technology market.

A profit is a profit

The only guaranteed share price is the one staring at you now from your computer screen. Even with the best will in the world it is impossible to predict with any certainty what the price will be tomorrow let alone six months, one year or two years down the line. So, if you are lucky enough to invest in a technology company before the big rise and you have a chance to lock in a good profit, never be afraid to do so. You may kick yourself if the shares may go significantly higher but the recent story of Facebook shows how the mighty can still fall and no company is beyond the wrath of investors and customers.

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