Old Tech Could Be the Next Big Thing

I received a great question from a reader regarding Monday's column about the rotation away from high-beta tech names. Is it possible, he asked, that money could also rotate into lower-beta tech names such as IBM (IBM)? One look at IBM's chart, and the answer is obvious. IBM exploded to a six-month high yesterday, sparking a wave of interest in the old-school tech giant.

Perhaps I should have been more careful about how I characterized the current shift in the market. It's not necessarily a rotation out of tech. It's more of a movement away from stocks (mostly tech) that are unsupported by their valuations. IBM has a forward price-to-earnings ratio of about 10, while Amazon.com (AMZN) sports a forward P/E of close to 600. Sure, Amazon has amazing potential going forward, but the charts are telling us that IBM is the better stock to own right now. These two stocks diverged wildly about two weeks ago. On this chart, I'd be a buyer of IBM (green) on pullbacks and a seller of Amazon (red) on rallies....314 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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