The Fisher Investments On series is designed to provide individual investors, students, and aspiring investment professionals the tools necessary to understand and analyze investment opportunities, primarily for investing in global stocks.
Within the framework of a "top-down" investment method (more on that in Chapter 7), each guide is an easily accessible primer to economic sectors, regions, or other components of the global stock market. While this guide is specifically on Technology, the basic investment methodology is applicable for analyzing any global sector, regardless of the current macroeconomic environment.
Why a top-down method? Vast evidence shows high-level, or "macro," investment decisions are ultimately more important portfolio performance drivers than individual stocks. In other words, before picking stocks, investors can benefit greatly by first deciding if stocks are the best investment relative to other assets (like bonds or cash), and then choosing categories of stocks most likely to perform best on a forward-looking basis.
For example, a Technology sector stock picker in 1998 and 1999 probably saw his picks soar as investors cheered the so-called "New Economy." However, from 2000 to 2002, he probably lost his shirt. Was he just smarter in 1998 and 1999? Did his analysis turn bad somehow? Unlikely. What mattered most were stocks in general, and especially US technology stocks, which did great in the late 1990s and poorly entering the new century. In other words, a top-down perspective on the broader economy was key to navigating markets—stock picking just wasn't as important.
Fisher Investments on Technology will guide you in making top-downinvestment decisions specifically for the Technology sector. It shows how to determine better times to invest in Technology, what Technology industries are likelier to do best, and how individual stocks can benefit in various environments. The global Technology sector is complex, covering many industries and countries with unique characteristics. Using our framework, you will be better-equipped to identify their differences, spot opportunities, and avoid major pitfalls.
This book takes a global approach to Technology investing. Most US investors typically invest the majority of their assets in domestic securities; they forget America is less than half of the world stock market by weight—over 50 percent of investment opportunities are outside our borders. While a larger proportion of the world's Technology weight is based in the US, many companies derive a significant portion of profits overseas. Given the vast market landscape and diverse geographic operations, it's vital to have a global perspective when investing in Technology today.
This guide is designed in three parts. Part I, "Getting Started in Technology," discusses vital sector basics, including the history of major developments in Technology. We'll also discuss sector level drivers that ultimately influence stock prices.
Part II, "Next Steps: Technology Details," walks through the next step of sector analysis. We'll take you through the global Technology sector investment universe and its diverse components. The Technology sector itself presents 3 industry groups, 8 industries, and 16 sub-industries. Various firms are driven by enterprise spending, others by consumers, some by infrastructure build-outs. Many are leveraged to combinations of these, yet others are leveraged to none. We will take you through the eight industries in detail, how they operate, and what drives profitability—to give you the tools to determine which industry will most likely outperform or underperform looking forward.
Part II also details many of the challenges Technology firms face, including historical examples of how these challenges have been met and overcome. Moreover, we'll discuss certain products and manufacturing processes used today, as well as how they're advancing through new and emerging technologies.
Part III, "Thinking Like a Portfolio Manager," delves into a top-down investment methodology and individual security analysis. You'll learn to ask important questions like: What are the most important elements to consider when analyzing semiconductor and PC firms? What are the greatest risks and red flags? This book gives you a five-step process to help differentiate firms so you can identify ones with a greater probability of outperforming. We'll also discuss a few investment strategies to help determine when and how to overweight specific industries within the sector.
Fisher Investments on Technology won't give you a "silver bullet" for picking the right Technology stocks. The fact is the "right" Technology stocks will be different in different times and situations. Instead, this guide provides a framework for understanding the sector and its industries so that you can be dynamic and find information the market hasn't yet priced in. There won't be any stock recommendations, target prices, or even a suggestion whether now is a good time to be invested in the Technology sector. The goal is to provide you with tools to make these decisions for yourself, now and in the future. Ultimately, our aim is to give you the framework for repeated, successful investing. Enjoy.