your favor. Benjamin Franklin called compound interest one of thegreatest inventions ever: Let the money that earns interest earn more interest. Forexample, suppose you had a choice between being given a lump sum of $500,000 ora salary of one cent a day that doubles every day for a month. Figure it out. Whichone would you choose? (Use 31 days in a month.)Never chase a stock. If you have your eye on a stock and it begins to movewithout you, and you sit back and wait for the pullback that never comes, forgetabout it. Buying after a good run up in price is a good way to lose money.
IDENTIFYING OVERALL TRENDS IN THE MARKETIdentifying the general trend in the market is an important factor every investor needsto determine before committing any capital to an investment. It’s not enough just toreview the prices of some stocks you’re interested in. You have to take a look at thebig picture and determine the bullish or bearish nature of the market as a whole.Market trends have life spans marked by a beginning, midlife, and an end. A person can read the business section in the paper for a week and get a good idea ofwhether the market is in a bullish trend or a bearish one. But determining where it isalong this continuum is even more critical. Committing fresh capital into a lofty
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market (the kind we saw in the first few months of 2000) could spell trouble. Likewise, entering into a late-stage bear market (buying too early) could be frustratingas stocks keep trying to hit bottom.Being correct in trend identification can overcome incorrect decisions concerning purchases of inferior stocks. Why? Two of my favorite trading sayings speak tothis issue: “Don’t confuse a bull market for brains” and “A rising tide lifts allboats.” These two sayings are a good way of explaining that, when the bull is running overall in individual sectors, most stocks do well and it’s relatively easy topick a winning stock.So how do you spot a trend? Start by watching the market averages, also knownas stock indexes. CNNfn front page lists these in an easy-to-read format (cnnfn.cnn.com/markets/us_markets.html). Some of the most important ones to watch arelisted in the market spreadsheet in Figure 4.3.The best-known indicator of market direction is the Dow Jones Industrial Average. Its daily fluctuations are covered, albeit briefly, on virtually every news channel and financial web site. But in reality it represents only 30 companies—a narrowslice of the broad market. However, since it has been used to gauge market performance for so long, it still carries a lot of weight.The term broad market is a nebulous term that addresses all stocks traded onevery exchange. The S&P 500 ($SPX) tracks the movement of 500 companiesthought to best exemplify the U.S. economy. The Nasdaq Composite ($COMPQ)measures the market value of all the domestic and foreign common stocks listed onthe Nasdaq exchange, while the NYSE Composite ($NYA) measures the New YorkStock Exchange’s performance. Each index supplies vital information as to thenature of each day’s trading action. By monitoring them, you can get a feel for thebroad market’s performance.
NOW WHAT?The next six chapters go much deeper into the available tools that help you to findyour way in the market. I can’t tell you what will work best for you, because everyone needs to find a system that works best for their lifestyle. The stock market is sovast that it requires a variety of measurements to gauge its temperament as well asDirectionUpDownUpUpUpDownUpDownFigure 4.3
Market
Level
Change Last Update
Dow Jones Industrial Average ($INDU) 10,964.44 97.43Nasdaq Composite ($COMPQ)3,852.65 –10.34S&P 500 ($SPX)1,481.842.52Russell 2000 ($RUT)510.160.29NYSE Composite ($NYA)665.441.92Dow Transports ($DJT)2,887.41–6.80Dow Utilities ($DJU)356.762.72AMEX Composite ($XAX)913.87–1.59Market Average Spreadsheet (August 8, 2000)
8/8 15:408/8 15:398/8 15:398/8 15:408/8 15:408/8 15:408/8 15:408/8 15:40
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direction. It’s important to look at a variety of things to get a sense of or feel for themarket. I’d be the first one to admit that I often get confused by what the market istelling me. But one cliché has served me well: “It’s better to be out of the marketwishing you were in it, than to be in the market, wishing you were out!” To help youget your bearings, the following sections describe some of the indicators I use whenlooking for profitable situations in the market.In or out, it’s wise to keep an eye on the trends. Sometimes I think thatthe market is governed with clichés, but they’re so true much of time.Here’s another good one: “The trend is your friend until the trend ends.”
MARKET ACTIONSince three out of four stocks follow the general trend of the market, assessing overall market action on a day-to-day basis is an important piece of the investment puzzle. Bull and bear markets can be determined by doing everything from watchinggovernment reports to gauging specific stocks in leading sectors. Technical analysiscan also be of enormous help (see Chapter 9) in determining general market trendswhile sentiment analysis (see Chapter 10) is a good indicator not only of currenttrends, but of possible turning points as well. (Investor’s Business Daily is a greatplace to review current sentiment conditions.) Figure 4.4 reveals the general characteristics of bear and bull markets.Remember that fear and greed become overdone at market extremes,leading to major movement up or down, high volatility, and heavy volume.
MOVING AVERAGESOne of the most basic methods of determining a stock’s performance is to review aprice chart. Prices are plotted each day along with volume to create a visual picture ofthe stock’s movement. But price action is just the beginning of the story. A moving average—probably the best known, and most versatile, technical indicator—is an important visual tool used to track price changes using various time lengths. To calculatea 50-day moving average (50-DMA), simply take the last 50 days’ closing prices oneither a stock or an index, add them up, and divide by 50. Then each day the oldestprice is dropped and newest price added, which changes the average. Each day’s average is then plotted, connecting the dots, to form a line that extends day-to-day.Moving average: A moving average is a technical analysis tool used for judginga market’s current trend. By using a simple mathematical procedure to smoothor eliminate the fluctuations in data, moving averages assist in determiningwhen to buy and sell.
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Bull Market
Bear Market
Bar graph of daily prices are above200-day moving average.
Bar graph of daily prices are below200-day moving average.
Interest rates are steady or declining.
Interest rates are increasing.
Unemployment numbers are increasing.
Unemployment numbers are dropping.
Inflation is steady or dropping.
Inflation is on the rise.
Earnings reports show increasescompared to last year, same quarter.
Earnings are declining when comparedto previous year.
Advance/decline line is consistentlypositive (more winners than losers).
Advance/decline line is negative (morelosers than winners).
Market closes at the high for the day.
Market sells off toward the close, or atthe lows for the day.
Strong volume on up days, and ralliesfor several days in a row.Trend line is clearly positive.Pessimism is still clearly evident(fear still exists).
Figure 4.4
Weak volume on up days; rallies fail dueto increased selling pressure intostrength. Big volume on down days.Trend line is clearly negative.Optimism is still clearly evident (greedstill exists).
Characteristics of Bull and Bear Markets
Technicians (people who employ technical analysis exclusively to monitor themarkets) track moving averages carefully. Individual traders, professionals, and institutional investors primarily use the 50- and 200-DMA as a method of timing buysand sells, as well as locating key support levels. A major signal to buy or sell occurswhen a shorter average crosses a longer one (see Figure 4.5). When a crossover occurs, it’s a strong signal that the trend has shifted. If you have a computer, movingaverages are easy to find and track. Quote.com is one of the best web sites that offers this tool (www.quote.com).Sometimes a stock will “bounce” or rise again when it reaches the 50-DMA. After bouncing off the 50-DMA, the stock climbs quickly as momentum and buy-andhold investors feel that the crossover confirms the support level and once again buyshares of the stock. On the other hand, the stock may also continue to sell off if the50-DMA drops below the 200-DMA. In this case, a flood of selling drives the stockdown sharply in a no-confidence vote. At some point, however, bargain hunters stepin; buyers overwhelm the sellers, and this leads to an upward move in the stock’sprice. At this point, the 50-DMA serves as a resistance point instead. These kinds ofinterpretations help traders determine market trends as they take an initial scan of astock or index.
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Support: Support is a historical price level at which falling prices stop fallingand either move sideways or reverse direction.Resistance: Resistance is a historical price level at which rising prices have ahard time breaking through to the upside.
TRADING APPROACHESThere are numerous strategies people can use when investing in the stock market.However, there are three general approaches: growth, value, and momentum. Let’stake a look at each of these approaches so that you can get a feel for the kind ofinvesting that suits your lifestyle and investment goals.
Growth InvestingThroughout the past decade, investing in growth stocks has been one of the most popular styles of investing. A growth stock is a company whose earnings and/or revenues
50 DMA
200 DMA
Figure 4.5 Nasdaq Composite Index with 50- and 200-Day Moving Averages(Courtesy of QCharts (www.qcharts.com))
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Growth stock: A relatively new stock that continues to show healthy expansionand strong earnings, and invests its profits into the continued growth of the company rather than providing dividends to its shareholders.
are expected to grow more rapidly than the average earnings of the overall stock market. Generally, growth stocks are extremely well managed companies in expandingindustries that consistently show strong earnings. Their objective is to continue delivering the performance their investors expect by developing new products and servicesand bringing them to market in a timely fashion. For example, a growth investor maypurchase Cisco Systems (CSCO) stock because of the company’s dominant marketshare and its potential for sustained high earnings growth. Dell Computer (DELL)also grew at an incredibly fast rate in the 1990s as shown in the price chart in Figure4.6. These types of companies generally do not pay dividends to shareholders becausethey need all their available cash to fund the rapid growth. As a result of the potentialfor spectacular earnings growth, these types of stocks are usually priced higher (interms of P/E ratios, etc.) than a value stock. As long as earnings continue to grow,investors assume the price of the stock will grow as well.
50 DMA
200 DMA
Figure 4.6 Dell Computer Weekly Chart with 50- and 200-Day Moving Averages1996–2000 (Courtesy of QCharts (www.qcharts.com))
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Value InvestingWhen evaluating a company, the value investor is more interested in a company’s tangible assets and not as concerned with the future earnings prospects of the company.A value stock signifies a bargain because the stock appears to be priced below its realworth. The great bull market of the past decade has taken the breath out of many valueinvestors because growth stocks have performed superbly and value stocks haveunderperformed the market. This is because many of the best-performing stocks hadno book value. They were cyber stocks, not brick and mortar. Investors seemed tothrow old economy valuations out the window, literally betting these new economystocks would grow like Dell or Cisco.Value stocks: Stocks that appear to be bargains because they are priced lowerthan their calculated worth.Book value: A fundamental measurement of a common share calculated by subtracting the par value of outstanding preferred shares from the net worth of thecompany (as shown on the balance sheet), divided by the number of commonshares outstanding.
Value investors look to a company’s balance sheet (see Chapter 8), subtract liabilities from assets, compare the result to the current market price, and then make adecision as to the attractiveness of the stock. Finding value, especially when investing, does not refer to finding the cheapest stocks out there with respect to prices.Finding value means discovering something others failed to see that provides hidden value to the company and turning that discovery into a profit. Hidden valuecould be in the form of real estate worth more than it cost as shown on a company’sbalance sheet. Other types of hidden value can be unlocked by restructuring thecompany to run more efficiently, improving the operations of the company so thatcustomers buy more products, lowering the cost structure of the company, or introducing a great new product.The primary objective of a value investor is to use fundamental analysis tobuy a company for less than what the investor thinks it is really worth.
Momentum InvestingMomentum investors are more technically oriented than value investors; that is,they look at how a stock is behaving by applying various methods of technicalanalysis. They are concerned primarily with a stock’s price pattern and other technical indicators, rather than the company’s earnings, price/earnings (P/E) ratio, orother fundamental criteria. Specifically, they look for indications that a stock is going to continue in the same direction for the time being (see Figure 4.7). Momentum
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50 DMA
200 DMA
Figure 4.7
Momentum Move in EMC (Courtesy of Quote.com)
investors like to find the primary trend of a stock or index and invest with that momentum in hopes of profiting from it. Once again, as long as earnings expectationsare met and on the rise, the price of the stock will follow suit.Momentum: When a market continues in the same direction for a certain timeframe, the market is said to have momentum. A momentum indicator is a technical indicator that utilizes price and volume statistics for predicting the strengthor weakness of a current market. Momentum trading exists when a trader invests with (or against) the momentum of the market in hopes of profiting from it.
The momentum style of investing tends to be shorter-term and looks for resultsimmediately. Momentum investors want a quick burst of energy from fast-movingstocks. They employ different tools, like oscillators, to help them pinpoint thesetypes of opportunities. Utilizing price and volume statistics, oscillators are used topredict the strength or weakness of a market, determine overbought and oversoldconditions, and locate turning points within the market. Momentum charts and rateof change (ROC) oscillators can help initiate momentum investing in order to tradewith or against the momentum of the market. The trick to momentum investing isbeing able to anticipate when the primary trend is going to reverse, so that the
A WORD ABOUT VENTURE CAPITALISTS AND THE IPO
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investor is able to get out of the position profitably and to be in place to take full advantage of a big move in the opposite direction.Figure 4.8 provides the characteristics of each of these investment approaches(plus the IPO market, discussed in the next section) as well as their advantages anddisadvantages.Oscillators: Technical indicators used to identify stocks and options with overbought or oversold prices that may trigger a trend reversal.Rate of change: Used to monitor momentum by making direct comparisons between current and past prices on a continual basis. The results can be used todetermine the strength of a price trend.
A WORD ABOUT VENTURE CAPITALISTS AND THE IPOSome new businesses can grow organically: The business owners can buy, lease, orotherwise acquire the necessary resources to grow their business to the point it cangenerate revenues. But for many businesses, start-up costs are too great for thefounders to fund on their own. Costs may include salaries for high-level employees,expenditures for expensive equipment, or funds to develop proprietary technology.Because the business is unproven, a bank is unlikely to lend the new concern moneywithout substantial security. In this case, outside funding becomes necessary.Many businesses turn to venture capitalists (VCs) because new businesses are considered high-risk investments. A venture capital firm is usually comprised of the managing partners and professional staff, who select and manage the investments, andoutside investors. Venture capital firms are set up as partnerships, meaning that the investors are the partners. Partners do not always manage investments. The VC will invest in stages as more capital is needed and certain benchmarks are achieved. Eachstage usually brings increasing percentage levels of equity to the VC and its investors.Venture capitalists: Outside investors that provide financing in the form of equity, secured loans, and unsecured loans to a nonpublic firm, most often in startup situations. Typically, venture capital financing entails relatively high risk, andconsequently venture capitalists look for high potential returns usually from theequity position they take in the firm.
In order to generate a return to their investors, VC firms have to have a way toconvert their investments back into cash. This is usually done through some sort ofexit strategy, most commonly an initial public offering (IPO) or a merger. This allows the venture capitalists to sell part of their stake in the company for a profit.The IPO is the first time that shares are made available to the general public. Before the offering occurs, the company has to comply with a wide range of rules and
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Approach
Characteristics
Advantages
Disadvantages
Growth
• Growth rate is highlydependent on therate of compounding.• High return onequity (ROE).• Debt levels vary.• Rarely pay dividendsto shareholders—reinvest their profitsin R&D, production,and marketing.• Sound balance sheet.• Competitiveadvantage.
• Proven record ofearnings.• Soundmanagement.• Good brokerageresearchavailable.• Analysts know theindustry andsector well.• Good prospectsfor long-termwealth creation.
• Sector downturnsdirectly affectthem.• Managementupheavals canderail growth plans.• Negative earningssurprises can sendthe stock down forextended periods.• Somewhatdependent on goodmarket conditionsto perform.
Value
• Fundamentallysound.• Conservative.• Usually lower betathan market.• In bull market, it’snot unusual for thisgroup to lag.
• Assets measurable • Time required forand marketable.market to• Low chance forrecognize the valuebankruptcy.may be long.• Compelling• Experience poorrationale forreturns whenbuyers to buy “$1compared to broadfor $.50.”market duringwaiting period.
Momentum
• Technicals are• Quick rewards• Potential high riskattractive.when you buyfrom “greater fool”• Price pattern iscorrectly.premise.consistent, buyers• When they’re hot, • When they cool off,appearing on thethey stay hot.the losses can bedips.• Good liquidity.large if you stay in.• Momentum lasts for• Option premiumsvarying periods, fromhigh.days to weeks.
IPO market
• Frequently largeprice increases fromthe offering price towhere it opens(begins trading in theopen market).• Pent-up demand forthose that didn’t getshares at offeringprice.• Price swings wildand unpredictable.
Figure 4.8
Trading Approach Matrix
• If you’re luckyenough to getshares allocatedto you, you’re ina good spot.• Rich opportunityfor the trader withearly entry and aquick exit finger.• Many IPOs turninto good longterm investments.
• Good markets bringincreasly lowerquality IPOs,making it difficult todetermine quality.• Poor liquiditywhen prices fall.• Lots of traders tocompete against.• Playing field is notlevel!
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regulations from the Securities and Exchange Commission (SEC). In brief, the regulations require the company to create a disclosure document that discusses thestrengths and weaknesses of the company, the competitive environment, and itsplans for the future—in general to protect the new shareholders. The prospectus, ordocument that discloses this information, is then reviewed by the SEC to verify thatall statements are true and accurate. The SEC’s approval enables potential investorsto evaluate the company.Securities and Exchange Commission (SEC): Commission created by Congressto regulate the securities markets and protect investors. It is composed of fivecommissioners appointed by the President of the United States and approved bythe Senate (www.sec.gov).Prospectus: A formal written document that describes the plan for a proposedbusiness enterprise, or the facts concerning an existing one, that investors needto make informed decisions.
The IPO is a liquidity event for the initial investors because it is the first timethat they are able to resell their equity shares and realize a profit. In an IPO, thecompany sells a fixed number of shares to the public. Many of the shares sold areshares that were held by the early-stage investors. Many times, the shares held byVCs may have been bought for pennies and can now be sold in the IPO for hundreds (or even thousands) of times their initial investment.Determining the initial sales price for an IPO stock is both an art and a science.Investment bankers are largely responsible for creating and assessing demand forthe IPO. Offering prices fluctuate, sometimes wildly, based on the general atmosphere for IPOs at the time. The investment bankers will try to set an initial price thatraises the most money for the company while at the same time making it appealingto a wide number of investors.It’s nearly impossible to tell how reasonable the initial pricing is beforehand. TheIPO-oriented investor of the late 1990s has been richly rewarded, with single-daygains of several hundred percent in some cases! A lot of pre-IPO hype creates ahuge demand for shares. As the excitement wears off, sometimes the price of thenew issue stays higher than the IPO price; other times it sinks, never to recover. Unless you are a founder or one of the early venture investors, you run the risk of buying at the top, and losing big. This is a very aggressive game.
THE SELECTION PROCESSThere are a few ways to select a stock, ranging from the obvious to balance sheetdetective work. Peter Lynch, the man credited with making the Fidelity MagellanFund almost a household word, recommended buying stocks you know about. Stories grew from that wisdom of housewives buying Clorox stock, and there’s morethan a few rich people in Arkansas who bought into Wal-Mart, early or late, after
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seeing for themselves the impact and success each new store enjoyed. New fadsoften translate into skyrocketing charts for companies that catch the attention ofinvestors and then dwindle into oblivion as the fad passes.There’s a multitude of magazines, newsletters, and web sites touting stocks thatoutperform or somehow enrich the pockets of anyone owning them. A lead to agood investment may be overheard while standing in line to buy groceries, or sittingreading magazines in the doctor’s office. But never follow it blindly. Always research it before putting your money on the line. The basics any buyer wants to seebefore investing in a stock include:• What market sector is it in, and what’s the competition like? AT&T tried tosell microcomputers, but failed against the likes of IBM and Compaq. RCCola versus Coke and Pepsi is a tough hill to climb. A new fast-food chainselling carp sandwiches isn’t likely to make it.• How strong and entrepreneurial-minded is the management? Good examples of the importance of solid leadership at the helm can be found at AppleComputer, where Steve Jobs turned a sinking ship into a profitable companywith a bright future. Jack Welch of General Electric took a staid and maturecompany and turned it into a growth vehicle with his vision and leadership.Marc Andreessen, founder of Netscape, brings immediate legitimacy to anycompany he gets involved with, just like Steve Case of AOL or WayneHuzienga of Blockbuster.• Do you understand what they do? High-tech companies attracted and burneda ton of investors who were willing to buy anything with a “dot-com” attachedto the name. Blind trust and overreliance on the action of the herd, coupledwith being clueless about the nature of the business and expected profitability,make a recipe for disaster.• Focus on a few sectors. Trying to learn about the entire market is virtually impossible. Becoming functionally knowledgeable about a few sectors is practical and can be profitable as well. Start with a sector that appeals to you. If youcan’t stand biotech stocks, don’t invest in them. If oil exploration is of interest,you’re more likely to enjoy researching it.• Find out what the experts think. Many a web site provides research and offersa compilation of opinions. A brokerage firm’s site (or their “hard” research)will keep you abreast of a sector’s prospects. Zacks Investment Research getsdown and dirty; it’s a great place for information and recommendation summaries (my.zacks.com).
DESIGNING YOUR PORTFOLIOPersonal choice is the landmark of a stock portfolio. But to help you get a sense ofhow to start, I’d like to create a hypothetical portfolio with three stocks: growth andincome, growth only (no income), and an aggressive growth company (33% in eachcategory).
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Growth and Income ExampleDuke Energy Corporation (DUK) is one of North America’s leading energy and energy services companies. It is involved in the production, transmission, and sales ofenergy and the delivery of energy-related services worldwide. This company hasthe ability to offer physical delivery and management of both electricity and naturalgas throughout the United States and abroad. Duke Energy provides these servicesprimarily through four business segments: Electric Operations, Natural Gas Transmission, Energy Services, and Parent and Other Operations, according to Zacks Investment Research company reports.This corporation operates in the energy sector. Obviously, energy makes theworld go around, and Duke Energy possesses the characteristics of a company withan eye toward growth; but it pays a dividend as well, currently $2.20 per share,payable in four quarterly installments.Utilities tend to appreciate in value as bond yields go down; the stocks go downwhen bond yields go up. (Think of the two on opposite ends of a teeter-totter.) Figure 4.9 shows how Duke compares to the U.S. 30-year bond (the long bond as it’ssometimes called). You’re not going to hit a home run with Duke, but by reinvestingthe dividends to buy more shares, you get the combination of compound interest aswell as the potential for price appreciation. Utility stocks are a good start for anyconservative portfolio.
Growth ExampleEMC Corporation (EMC) is the world’s technology and market leader in the rapidlygrowing market for intelligent enterprise storage systems, software, and services.
Figure 4.9
Duke Energy versus 30-Year Bond (Courtesy of Quote.com)
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The company’s products store, retrieve, manage, protect, and share informationfrom all major computing environments, including UNIX, Windows NT, Linux, andmainframe platforms, according to Zacks Investment Research company reports(www.zacksadvisor.com).Wow! What a chart (see Figure 4.10)! EMC has been a market favorite, and afterlooking at this chart it’s not hard to see why. EMC just keeps plowing ahead, almostunaffected by market conditions. If you really focused in on the day-today fluctuations there would be some worry lines formed as a result, but since you’re lookingat the long run, tuck this one away and forget about it. This company, like virtuallyall pure-growth stocks, pays no dividend. You bought it to give your portfolio somehigh-octane fuel, but it is not considered way out on the risk scale.
Aggressive Growth ExampleThis category is not quite like Vegas, though some consider it to be. This categoryconsists of newly formed companies with big ideas and bigger dreams. All of theblue-chip companies were once aggressive growth stocks. Stories abound of peoplewho literally made millions. Phil Knight of Nike sold shoes out of the back of hiscar and stock in his company way back when. Runners got a better shoe than wasotherwise available, and a $10,000 investment turned into millions. Microsoft, Dell,
Figure 4.10
EMC Weekly Bar Chart (Courtesy of Quote.com)
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and many other success stories convince us that a portion of our portfolio should belooking for these kinds of results.Check Point Software Technologies Ltd. (CHKP) provides technology that permits the secure transfer of data over the Internet as Web traffic management solutions. As Web traffic increases, the need to provide security for online transactionswill soar, as will the need for Web servers to accommodate the ever-increasing demands for server management. Check Point is a leader in these categories. Accordingto Zacks Investment Research, 17 brokerage firms currently follow the company; ofthe 17, 13 rank CHKP a strong buy, while the others rate it simply a buy. Zacks ranksit a strong buy as well (as of June, 2000). Companies involved in building out the infrastructure of the Internet will do well for the foreseeable future, provided theirtechnology remains at the forefront. Figure 4.11 shows the exploding chart of CHKP.
Portfolio AnalysisYour method for keeping track of your portfolio is a subjective one. Some peopleexamine it daily, others once a month when their statements arrive. Creating a balanced portfolio that adheres to your objectives and risk tolerance is one of the keysto your success. Changes in valuations can skew this balance to a more aggressiveweighting than you originally intended. For instance, let’s say you want a portfolio
Figure 4.11 Check Point Software Price Chart (Courtesy of QCharts(www.qcharts.com))
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consisting of 20% tech stocks and 80% blue-chip stocks. You have one tech stock(Rambus, Inc.—RMBS) and one blue-chip (General Motors—GM) in your portfolio as of December 1, 1999. With RMBS selling at $18 and GM selling at $72, thetech stock weighting is 20%. Three months later, GM is up almost 3% ($74) andRMBS is up 300% ($73). These new prices would give you a tech stock weightingof 50% (see Figure 4.12) if you didn’t make any adjustments