The best and worst opportunities are in technology. The sector that is the most tradeable is technology. Technology is what the crowd focuses on when they think about the stock market these days. After gleaming through history and looking ahead into the future, it becomes readily apparent that there are a lot of inefficiencies in pricing tech companies.

Looking in the rear view mirror is the most common error a tech investor can make. That's what happens to those who bought IBM instead of MSFT in the 1980s. DSL stocks instead of fiber optics stocks in 2000. What matters is the future, not the past. DSL will slowly die as fiber optics connections and its potential of an end to end fiber network is just too enormous to ignore. DSL is a bridging technology that has way too many limitations to be a viable long-term internet solution. It is a step up from ISDN and phone modems, and that's it. The first thing smart telecommunication companies will do is cut back spending on temporarily viable technology and focus on long-term solutions to the broadband buildout. A case where the future is much more important than the present.

The P/E ratio can be misleading when a company is depending on aging technology to carry them into the future. In effect, the R&D departments and upcoming patents are the main assets a tech company can have. This brings me to CSCO, JNPR, and EXTR. These are 3 companies that focus their business on making routers for data networks. The main difference is that CSCO focuses on an all-in-one solution with a heavy reliance on lower-end networking products for the bulk of their profits. These lower-end routers will go the way of the dinosaur along with all those projected earnings XX years out into the future where there is no change. That's ludicrous. Technology 10 years from now will make current networking products look like Commodore 64s. Thus, the only way to really compare a CSCO with a JNPR or an EXTR is what they have coming out of the pipeline and what their leading edge products are going to be in the future. Who is coming up with the better innovations? Who is stealing market share in the all-important high-end market? That's where the future lies.

I liken a company like CSCO to a beached whale with a small gold nugget in it. Sure, there is a lot of product there, but the long-lasting assets are only a small percentage of the company. JNPR is a like trout with a similarly small gold nugget in it. Not as much product, but a higher percentage of it is long-lasting in the form of gold. A somewhat odd analogy, but it rings true the point of focusing on the long-term horizon rather than on current market share. JNPR and EXTR are flat-out stealing market share from CSCO in the high-end ethernet market like gigabit ethernet where the future lies. JNPR's business is smoking. So is EXTR's. CSCO is doing well, but its obviously still caught up in the idea of an all in one networking company rather than excelling in high-end niches that will become mainstream in the future. So although CSCO's P/E is 80+ and JNPR's P/E is 400+, CSCO is probably more overvalued due to its reliance on aging technology for the bulk of its earnings! In other words, the quality of CSCO's E is much less than JNPR's E or EXTR's E. I know that will make all the fundamental analysts go crazy, but it's true. Just look at the market capitalizations. CSCO has one that is $281 billion. JNPR's is paltry in comparison at $42 billion. EXTR's market cap is still very much in the growth phase and at $4.6 billion. One of those market capitalizations is truly bloated and has little room for improvement. As the internet networks get faster and faster, the networking components will have to be increasingly sophisticated, right where JNPR's sweet spot lies. This does not mean that JNPR is a buy. It just means that JNPR is a better investment than CSCO.

CSCO is probably the most overrated stock out there. ORCL also faces the same dilemma from the SEBLs, ARBAs, and ITWOs of the world. That's why there is such a premium to these up and coming growth gators. And that's why in the long-term, CSCO and ORCL are likely to be much poorer investments than so-called "overvalued" newer companies with smaller market caps. Why do I not include MSFT here as an aging dinosaur getting ready to be slayed by an RHAT(please don't laugh)? Because it has a monopoly and uses it in the most manipulative way ever in the history of high tech. And one more point that is often missed is this: the most successful company investment 25 years down the road is probably not even public now.

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