The investment landscape started to change rapidly in the late 90’s and whilst I had had a very good run in Blacks Leisure, JJB, MSB International, and Severfield Reeve as the prices started to fall back I took my profits and also booked slight loss on Harvey Nichols: all stocks that had been identified via Jim Slater’s methods. In those relatively early days, I would only be running around 6 to 8 stocks in my portfolio. It’s a crazy feeling because at the time I was beating myself up for having made only a 60% profit on this basket of shares. I thought to myself “if I had been smarter and sold at the top my gains would have been way over 100% for no more than 18 months of investment. Thankfully, I don’t think that way anymore and can live very comfortably with myself in the knowledge that I will probably never be able to purchase at the bottom and sell at the top. However, I did take quite some more years investing before I could leave my remorse of not selling closer to the top behind me.
I now had a fair amount of cash sitting in my PEP/ISA and only a couple of stocks including DCS which I kept holding as Jim Slater kept writing so enthusiastically about it. I then started thinking of those Fibernet shares that Gordon our electrical contractor, had been mentioning and decided that it was time to try something else and take a much closer look at IT shares. I had some good knowledge of IT companies as my own company had outsourced the provision of all IT services to a third party, our IT partner, on an amazingly expensive contract; I really could not believe the costs we were paying and all because our own in-house IT expertise was allegedly not up to the job.
At this time, I was also attending meeting after meeting with our IT outsource company as they preached their version of the Y2K commercial opportunity, apologies, I mean the millennium bug. We were all doomed to perish when the clock struck midnight on 31st December 1999 unless our consultant IT partners determined each piece of IT kit was safe. I started to get the feeling that IT service companies were very lucrative investment opportunities.
Yes, the technology world was rapidly impacting on the stock markets: respectability and excitement could easily be demonstrated by a company if it had the magical .com after it’s name or business plan. Within no time at all Technology and internet stocks had become the new Klondike Gold Rush
Once it became clear to investors and speculators that the internet had created a wholly new and untapped international market, IPOs of internet companies started to follow each other in rapid succession. It seemed to me that the business plan of some of these companies was based on little more than just an idea on the back of a fag packet with a flashy vision and obligatory mission statement. The excitement over the commercial possibilities of the internet was so big that every idea which sounded viable could fairly easily receive millions of pounds worth of funding. The basic principles of investment theory with regard to understanding when a business would turn a profit if ever, were ignored in many cases, as investors were afraid to miss out on the next big hit. They were willing to invest large sums in these companies many of which had more of an idea rather than a feasible plan. The survival of most of these companies depended on the rapid expansion of its customer base, which in most cases meant huge initial losses. Try as I did at the time, I just could not get a “must have” feeling about pure internet play stocks and never invested in one as such.
However, I became very much in tune with any form of technology business that seemed, at least to me, to have a tangible product to offer: IT consultancy, outsourcing of IT services, procurement, software developers etc. I became totally hooked; you could say I was an IT junkie. During the late 90’s conventional wisdom went out of the window; who wants to invest in a company that actually makes something; paying dividends is boring. Good old reliable Mickey Clark on the BBC’s Wake Up to Money used bemoan the markets “who wants to but smoke-stack companies, you know the ones who make something and pay a dividend”?
“Let’s not miss”
Paul Kavanagh’s very readable column in the Sunday Times started to heavily feature plausible technology stocks: Sunday mornings had become very interesting. Many such investment articles in almost all publications caught the IT mood of the time as the technology bubble formed. As I said, I was far from immune to this technology fever and my portfolio had just about abandoned the previous Zulu style principles and climbed aboard for the tech ride. My portfolio now became fully invested in a whole range of technology stocks: Anite, Comino, Dataflex, Diagonal, Financial Objectives, Kewill, Logica, London Bridge Software, MMT Computing, Merant, NSB Retail Systems, Plasmon, Royal Blue, Redstone, Staffware & Triad. What was that dinosaur term of diversification all about? I had become a complete technology junkie, not a very relaxed junkie but nevertheless a junkie.
The world had become just unreal; a couple of months could go by and a stock could be up 50% or 100% and in some cases rise almost in a logarithmic fashion. The rate of price rise of these technology stocks was phenomenal: I bought Kewill for just over £3 in June 1999 and eight months later it had risen to over £28 “wow, my stocks were going through the roof”.
Footnote: there is just so much to say about this .COM/IT boom that the blog has been divided into parts a) & b) to offer a comfortable length of text: Part 3b to follow.
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