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:

6. Understand the business model

Albert Gea/Reuters/File
A man walks past a Qualcomm advertising logo at the Mobile World Congress at Barcelona in February 2013.

Does the high-tech firm you're considering make its money selling products, parts, or consulting services? Manufacturers of disk drives and standard memory chips are commodity producers; having the lowest costs is the most important factor. Amazon, by contrast, is willing to slash the price of its Kindle so it can sell e-books, movies, and games. Chipmaker Qualcomm licenses its intellectual property to other manufacturers, but retains its intellectual property.

Each model makes money differently. A lot of recent merger and acquisition activity has focused on acquiring patent portfolios: Google bought Motorola Mobility for its cellphone patents to defend Android, notes Frederick.

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About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

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We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

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