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The tech touter

By Nikki Mandow

Tuesday 1st February 2005

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At the end of the deepest and longest bear market in 60 years; at a time when tech stocks have been about as desirable as Attila the Hun, Denis Trotman is unwavering.

"Look around you" is his mantra. Which cellphone do you see everywhere? Buy Nokia. Which technology drives the memory card in your digital camera and looks like becoming the world standard (like VHS did in the war with Betamax)? Buy SanDisk. How many people do you know hooked on online auctions? Buy Ebay.

"Many journalists have done investors a disservice by knocking technology stocks," Trotman says. "Technology is still the only place to be."

His results prove it. In calendar year 2003, Trotman's portfolio of 31 stocks had an average share price gain of 95.8% - $1,000 invested in each stock on January 1 would have given you a portfolio worth $60,687 at year's end. The highest climber in his list is Rambus, a US company with a chip-to-chip interface that makes computers run faster. Rambus' share price rose 357% during 2003. Only one of Trotman's 31 picks lost money.

Of course, if you had done the same exercise in 2001 you would have quite a different result. But Trotman isn't in tech stocks for the short term. Imagine an investor who'd bought IBM shares the first time they saw a punchcard, he muses wistfully. It took companies like Microsoft and Intel 25 years to go from being new entrants to huge companies, he says, but investors who didn't lose faith made millions of dollars in the process.

Trotman has learnt in the decade he's been specialising in tech stocks to be a lot more selective, but his rules haven't changed.

Rule 1: Buy monopolies - or at least dominant sector leaders. Trotman loves Microsoft because so many customers - from governments to PC users - are locked in. He likes Ebay because the company dominates online auctions globally. Trotman keeps a few blue chip monopolies in his portfolio (Microsoft, Cisco, Intel, Dell), but the real skill, he says, is trying to pick future monopolies.

Rule 2: Look at the technologies in your own house, or what your early-adopter friends are buying. Look at the problems technology manufacturers are facing, and buy companies with cool products to solve them. California-based Insignia makes a technology that fixes viruses in 2.5G and 3G phones by wireless. Gemstar-TV Guide International produces an interactive TV programme guide. Gemstar software is now incorporated into television sets produced by the dozen largest TV manufacturers worldwide.

Rule 3: Ignore the share price. "Don't bail out of technology investment just because it stops being fashionable. Innovation isn't going to stop just because there's a bear market."

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