Boston — High-tech stocks can also be high-risk stocks, especially when they are new issues for one of the many companies just going public. Some issuing stock haven't even begun earning money yet because they have no product - just ideas.
Underwriting these enterprises - that is, buying their stock and then selling it to the public - can be a risky business, too.
This is the specialty of Evans Llewellyn Securities Inc., a small brokerage firm in Bellevue, Wash., next door to Seattle's ''high-tech strip.''
Having started only in 1980, the company is still trying to establish a solid reputation, partly by hiring a public relations firm to present its story to the news media. Whatever, the firm has grown. Last year it sold new stock worth $5 million, twice the amount it raised the year before.
In high-tech, how do you tell the good apples from the bad ones?
''You can't,'' said Andrew Evans in an interview here, but there are many things that can be studied to reduce the risk, he added.
For instance, ''Management is first and last,'' Mr. Evans says about the budding firms he considers underwriting. ''They have to have a strong board, one that's prepared to work hard.'' The Evans Llewellyn chairman pointed out the importance of ''an outside, tough board,'' not one full of the founder's friends.
And the product. It sounds logical to set a criterion that there has to be a market for the product, but Ann Llewellyn, the wife of Andrew Evans, says many companies ''haven't figured out the price, distribution, or market for the product.'' Ms. Llewellyn, a co-founder of the securities firm, explains that start-up firms define their markets too broadly, and that they have little idea of how to distribute their product.
Another thing to watch for is companies that aren't visionary enough - ones that can't see how their next generation of product will fit in with their present one, Mr. Evans says. He uses the example of the Apple III computer, which can't operate with Apple II software and is, in his opinion, a dinosaur product.
The market is getting crowded with IBM look-alikes and portable computers, Evans says. ''The shake-out is just beginning'' in portables. The high-growth, high-potential areas singled out by the company are in biotechnology and software.
''Biotechnology is so complex, it will take time for it to mature to the point where it is clear who are the winners and who are not,'' Ms. Llewellyn explains. Still, bio-tech stocks are high-priced now, ''because the market is willing to pay high premiums for growth.'' Diagnostic test kits for the medical field will be especially good revenue earners, she says.
Software ''for everything'' is still growing tremendously. Evans predicts it will grow from a $1 billion industry to a $20 billion one in the next 10 years. Easy-to-use software hasn't been invented yet, he explains, and robotics software will be a big market, too.
Many high-tech stocks have been riding with the bull market, but the firm sees a correction in the market coming.
''The correction will come when people aren't expecting it,'' Mr. Evans says, and his wife adds that that time will be soon. ''It will be a fairly sharp correction and quick, then it will bounce back up. I don't see it as the end of the bull market, though,'' she adds. Almost all high-tech stocks will go down in the correction, the couple say.
The firm, which has 47 employees, is a member of the National Association of Securities Dealers. Before starting their company together, Mr. Evans traded securities at Foster & Marshall, which has since been bought by Shearson/American Express, and his wife was an account executive at E. F. Hutton.