Tech stocks got whipped around like a roller coaster gone wild this week, but investors may be in for a much smoother ride with some outside help beginning next week.
Two events that tend to drive tech stocks up are set to get under way in November. The first is the American Electronics Association's annual financial conference, which will be followed by the high-tech hype of Comdex.
"It gives people a chance to stop focusing on the problems of 1997 and lets them focus on the possibilities of 1998," said Michael Murphy, editor of the California Technology Stock Letter. He added that AEA and Comdex help people focus on the next year and the new products it will bring.
AEA's conference, held between November 2 and 6, draws upwards of 3,500 technology analysts to meet with representatives from 300 tech companies. And just two weeks later, between November 17 and 21, the glitz and hype of Comdex hits, with companies rolling out their legions of new products.
Investors are bombarded with companies trotting out new products, and that affects stock prices, Murphy said. He added that the smaller, lesser-known public companies are the ones that tend to benefit the most from Comdex, a phenomenon reflected in their stock prices.
"The big companies are there and they are the ones attracting huge numbers of people, but that gives the little guys a change to get a lot of exposure," Murphy said.
Other analysts, however, are wary of the marketing frenzy at Comdex, and maintain that the hype does not breed rational stock movement.
Lou Mazzucchelli, an analyst with Gerard Klauer Mattison, said that while some stocks get a bump out of the Comdex roar, it doesn't mean that there has been a fundamental change or increase in revenue that would merit a stock price increase. "You need to take it with a grain of a salt," Mazzucchelli said.
He added, however, that some cases out of AEA and Comdex do warrant a rising stock price. If companies can go beyond the hype of touting a great product and demonstrate there are orders already lined up, the fundamentals of the company will be bolstered, he said.
"More than looking for stock deals, Comdex is very useful to get the macro picture or detect a trend. Then you can adjust the revenue model," Mazzucchelli said. "It is just important to look beyond the wow and the hype."
Murphy offered another perspective: "If you get too rational about it, you'll miss the stocks that move."
Last year, the technology-laden Nasdaq rose as high as 2.9 percent in October before ending the month flat at 1221.51. But in the following month, when the AEA and Comdex kicked in, November closed up 5 percent, at 1292.61.
Analysts said the rise that tends to come in November usually continues through February.
"That is when investors start to worry if the company can execute. Did they get the product out the door? Did they get the price that they wanted?" Murphy said. "When people start to worry about March earnings, that is when the stock will stall and that happens in mid to late February."