The Secrets of Investing in Technology Stocks. 2nd ed.

Sarah Robertson is the editor of the Canadian Book Review Annual.

Business journalist Edward Trapunski presents an overview of the
technology business and guidelines for investing in technology stocks.
His goal is not to evaluate specific companies, but rather to “give
[investors] the tools [they] need to anticipate and react to change in
the sector in order to pick the right stocks for the particular
moment.” The book is divided into two parts. Part 1 covers the nuts
and bolts of investing: brokers and analysts, business cycles,
investment styles, mergers and acquisitions, buying and selling, mutual
funds, investment clubs, and much more. Part 2 comprises profiles of the
nine main technology segments: semiconductors and microprocessors,
computers and hardware, software, telecommunications, wireless
communications, networking, the Internet, entertainment and media, and
biotechnology. There are a few paragraphs on Nortel and scattered
references to other Canadian companies such as Telus and Research In
Motion, but the emphasis is on U.S. companies that trade on the Nasdaq.
Although Trapunski refers to the onset of the tech wreck in his preface,
the main text predates the worst of the carnage. Sharper proofreading
would have caught, among other errors, the various misspellings of
Qualcomm (e.g., “Quallcom,” “Quallcomm”).

Trapunski offers some useful tips and information but thoroughly
underestimates the risks associated with technology stocks. He applauds
the “innovation by acquisition” strategy Cisco and other technology
companies followed when the tech bubble was inflating, but fails to
consider the long-term risks. (Nortel’s $19.4-billion loss in the
second quarter of 2001 is as good a testament as any to the perils of
growth at any cost.) Even worse, he does not provide would-be investors
with the tools they need to assess a company’s balance sheet; there
are no references to—much less any discussion of—debt/equity ratios,
goodwill, stock options, or accounting practices in these pages.
Finally, the massive inventory buildup in telecommunications and other
tech sectors puts paid to the author’s claim that “technology
remains relatively immune to business cycles.” An all-important
investment secret Trapunski studiously ignores is the importance of due
diligence: as recent history has so painfully shown, investors who fail
to practise it are setting themselves up for financial ruin.