T-Net 20 High Tech Stock Index Update by Michael Volker
The T-Net20 index closed at 4962.31 at the end of January having crossed over the 5000 mark earlier in the month. This means that a $1000 investment in January, 1998 in B.C.'s top 20 technology companies has produced a gain of 400%. In the past two months alone, the index has almost doubled in value.
There are now six companies headquartered in B.C. which have joined the billion dollar club! Technology stocks are getting a lot of attention from the investor community and B.C. stocks are no exception. Why are these companies suddenly so valuable? Will the bubble burst? Are the P/E multiples justified?
Yahoo is worth more than Boeing. Sierra Wirelessis worth almost twice as much as BC Gas even though BC Gas's bottom line of $81 million is more than twice that of Sierra Wireless' top line. Have investors gone crazy?
No, the markets have not gone mad. A distinguishing characteristic of a high technology company is its double-digit performance in two respects: margins and growth. For a "typical" technology company reporting profits in excess of 20% of sales and an annual sales growth greater than 50%, a P/E ratio today of 100 or more should not be surprising. It only takes a 40% growth to quintuple sales in 5 years. Indeed, corporate revenues in the top 20 group are showing such growth.
Presently, the technology sector contributes slightly more than 3% to the Province's GDP. I predict that by 2005, this will be closer to 10%.And that may be conservative. One has to remember that although the companies contributing to the value in the technology sector are not, by world standards, either mature or large - yet!
healthy performance of our tech sector as demonstrated by the T-Net 20
index, is a vote of confidence by the investing public in this burgeoning
sector of our economy.