HK Equity Fund: Signs are emerging that stocks within the technology sector are approaching “bubble” levels after shares in Twitter closed out an impressive IPO week significantly higher than its offer price.
“We think there’s evidence to suggest that some investors are repeating the mistakes they made during the run up to the dotcom crash of 2000 in which technology companies that enjoyed valuations that bore little relation to their ability to turn a profit or even generate revenues saw the price of their stocks plunge in a huge rout on the NASDAQ” said an HK Equity Fund analyst.
The firm suggests that investors and those underwriting IPOs are using reckless evaluation methodologies to value technology and social media companies that are either losing money or generating modest profits. One such technique involves equating the number of visits a particular website gets or the number of registrants it has to the potential to generate revenue capable of justifying a high stock price.
“We’re not telling clients that a technology stock crash is imminent – that would be foolish – but we are advising them to avoid following the herd and being caught up in the hyperbole because there are definitely some signs of a bubble building in the sector,” said the HK Equity Fund analyst
HK Equity Fund says it continues to use traditional analysis techniques like price-to-earnings ratios, revenues, assets and liabilities and profits when evaluating companies for potential investment.
About HK Equity Fund
HK Equity Fund established a presence in Hong Kong in 1995. Today their Hong Kong office is their main hub in the Asia-Pacific region. All of HK Equity Fund’s business groups have operations in the city, making this their largest office in the region outside Australia. From Hong Kong they offer corporate finance and advisory, institutional cash equities and research, equity derivatives and structured products, debt financing and funds management, and environmental financial products, futures, metals OTC hedging and fixed income trading services.
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