After a rocky 2011, tech stocks have gotten a nice bounce so far this year.
The Nasdaq 100 index is up about 7% so far, well above the 4.6% rise in the Standard & Poor's 500 index.
Strong earnings last week from Intel Corp. (Nasdaq: INTC), Microsoft Corp. (Nasdaq: MSFT) and International Business Machines Corp. (NYSE: IBM) have drawn still more attention to tech stocks.
But while tech stocks may look tempting right now, knowing which tech stocks to avoid will prevent a lot of pain to your portfolio in 2012.
So here are five tech stocks you should avoid, at least for now.
RIMM is off nearly 73% over the past year, while Apple shares have gained 25%. And just yesterday (Monday) its co-CEOs, Jim BalsillieandMike Lazaridis, stepped down. Investors were not encouraged when new CEO Thorsten Heins said he doesn't believe drastic changes are needed.
Research in Motion does have a clean balance sheet, so turnaround investors may want to take a plunge. But as a high-tech play, the company looks to tread water at best in 2012.
One more red flag: RIMM has estimated 2012 sales and earnings below consensus forecasts.
H-P also suffers from a self-inflicted wound. Former CEO Leo Apotheker last year announced Hewlett-Packard would exit the PC market altogether, one of the main reasons he was ousted. But the damage remains. H-P's large enterprise clients - companies with several hundred to several thousand users - need to know H-P is in it for the long haul. Otherwise, they'll just buy cheaper PCs and hire a service company instead of relying on H-P's support.
The company still generates a ton of cash flow and has decent returns on equity. But it has $30 billion in debt compared with just $8 billion in cash. By comparison, Google has about $35 billion in net cash. Over the past year, H-P stock has fallen more than 40%.
Portals like Yahoo never regained their traction. The movement in recent years to social media, where Yahoo remains a laggard, has made matters worse. Carol Bartz of Autodesk Inc. (Nasdaq: ADSK) fame came in as CEO and quickly flamed out. And last week we learned co-founder Jerry Yang has left the board. It's a revolving door at the top, which definitely makes Yahoo! a tech stock to avoid.
Also, NASA had to delay plans for space taxis until 2017. Over the long haul, Orbital looks like it should bounce back as the United States and other governments launch more satellites and robotic vehicles. Moreover, private entrepreneurs will step up commercial space travel over the next few years. But for 2012, Orbital is basically dead money.
The Groupon IPO opened at $20 a share and shot up by more than 50% to $31. It then fell below the offer price but has come back to break even. The company continues to lose money and will likely do so for the rest of this year. True, Groupon has plenty of cash in the back and no debt, but you can find much better tech companies out there with stronger cash flow and solid earnings. For 2012, Groupon is a tech stock to avoid.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.