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Seven rules for tech investing

The overall stock market may have recovered from the Great Recession, but the tech sector has never fully recovered from the dot-com bust in the early 2000s. Here are seven rules for investing in high-tech companies while avoiding wild speculation:

2. Look for a large, locked-in user base

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    People crowd the aisles during the grand opening of a Microsoft retail store in downtown Portland, Ore., in June. Microsoft Corp. may not be the most exciting stocks, but its products have staying power.
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These companies benefit from substantial recurring revenue from enterprise software or long-term contracts for information-technology services or both, which often cost users a lot to switch out of.

"Think of Microsoft and Oracle," says Mr. Frederick. "They are steady. Corporations are going to continue to use their software."

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