IT stocks at bargain prices

Amazon founder, Geoff Ballard, coined the truism that technology watchers dramatically overestimate the impact of developments over the next two years, but they equally underestimate the level of change that will take place over the next 10 years. The exponential rate of technological change is transforming the world's media and communication structures, but IT stocks remains oddly cheap by historical valuations, as investors' confidence is yet to be fully regained in the sector since the dotcom bubble at the turn of the millennium. With the squeeze on private equity and leveraged debt, IT companies with strong secular growth on low multiples may finally become appreciated."We think there is still a lot of growth in internet companies," says Simon White, head of investment trusts at RCM. "At the top of the dotcom boom, many IT companies were on price-earnings growth (PEG) multiples of four or five. Many attractive IT companies are now on PEGs of one or two, and some of those that are growing fastest are the cheapest. Even if PEs expand, we think the level of growth coming through will make the sector perform well relative to the rest of the market."