According to analyst Steven DeSanctis, the head of US small-cap strategy at Bank of America Merrill Lynch Global Research in New York, it may be a good time to invest in small-cap technology companies.
Due to cheap valuations and conservative earnings estimates, small-cap tech companies are now more attractive investments, especially after being handicapped by recent worries over the lagging economy.
According to DeSanctis small-cap companies are expanding so that they can provide additional services and products. In the hi-tech sector those new services include storage delivery, software, and other computer-related tasks which can more often be delivered over the internet ‘cloud.’ DeSantis says that this reality is helping to increase sales, while the valuations and estimates for earnings in 2012 remain modest.
DeSanctis added that cash-heavy balance sheets make up about 20 percent of the market capitalization of the small-cap tech companies, putting them in an excellent position to or “pretty good” growth, especially compared to last year’s “laggard performance.” The large amount of on-hand cash attracts investors because the cash can be used to pay dividends, make acquisitions or repurchase stock, says DeSanctis.
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