Simple Lessons Learned from the last 5 years in Technology

Here are some simple lessons that investors in technology stocks have learned over the last 5 years. I believe that these lessons are so obvious and I am surprised that I just don't see them spelled out clearly so I am doing it here. Now, I don't know if the cycle is reaching its end, but I am sticking to these principles.

First, buy the clear winners.

You will always dramatically outperform in technology if you buy the clear winners at any point in the cycle, and don't bet on some second-place company trying to reform itself to be a competitor. 

This is true across the board:

Google over Yahoo!

Rimm over Palm

Nokia over Motorola

EMC over NetApp

Cisco over anyone in telecom equipment

Amazon over anyone selling anything on the internet

Apple over anyone period

Of course, there are examples where this strategy has failed.  For example, Dell looked like a clear winner 3 years ago and became a loser to HP.  The strategy also breaks down when you try to apply it to software.  Microsoft for example has not outperformed its competitors. Nevertheless, you would probably do better in these stocks that to invest in some little tech stock written up somewhere that nobody has ever heard of.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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