By Chris Kraeuter, CBS.MarketWatch.com
SAN FRANCISCO (CBS.MW) -- After hitting a two-and-half-year high in January of 2,153, the Nasdaq Composite Index traveled a fairly steady downhill path through June.
Then it drove off a cliff.
Hammered by concerns over inventories, higher interest rates, oil prices and disappointments over second quarter results, the Nasdaq slid 14 percent from the start of July through Aug. 12 to a low of 1,752. Interactive timeline: A rough year for tech stocks.
Since then, the index has climbed back above 1,800, but the steep declines in the tech sector so far this year -- especially during the last two months -- have even seasoned pros clutching their stomachs. And concerns remain that the next sell-off is only an earnings warning away.
"To manage a portfolio based on all this short-term information is extremely difficult, if not impossible to do," said Tom Laming, who manages $120 million for his investment firm, TrendStar Advisors.
"You'll do much better to take a measured long-term approach, which allows you, to some extent, to be less concerned about the wiggles in between."
Laming has a master's degree from MIT and used to be a spacecraft-design engineer, but he professes no expertise of timing the market based on short-term concerns.
Over a longer time frame, like the next few years, Laming sees enterprise software, optical networking and Internet stocks struggling, but semiconductor stocks moving higher.
One potential positive is that interest rates remain low, even as investors wait to put a backlog of funds to work. "There's a ton of cash on the sidelines," said Randy Williams-Gurian, editor of investment newsletter Tech Stock Insights. Williams-Gurian sees at least some opportunities among the beaten down shares of the tech sector.
"The question," he added, "is what will be the catalyst to bring that back to the market." See related story on searching for undervalued tech stocks.
Others are less hopeful.
David Tice, an investment adviser with about $850 million in assets in his Prudent Bear /zigman2/quotes/209249238/realtime BEARX -0.22% and Prudent Global Income funds, sees a multiyear secular bear market in action. Last year's tech gains, Tice argues, were unsustainable.
He says semiconductor stocks, which have dropped about 20 percent since the end of the second quarter, will lead other tech issues lower.
"Technology stocks are a high-octane part of the stock market and we have a macro thesis that this stock market is breathing on extremely high debt levels and that the U.S. consumer is overburdened with debt," Tice said.
One of the key factors troubling tech investors in recent weeks has been the large buildup of inventories.
Anticipation of a strong economic recovery and the return of corporate information technology spending pumped up the sector's hopes.
But by late June, evidence that the economic recovery was slowing had begun to appear, leading to investor worries that shelves would remain loaded with unsold software, computers and microprocessors.
In some ways, technology may be a victim of its own success.
Productivity gains, made possible by investment in technology, have been "phenomenal," said Howard Silverblatt, a Standard & Poor's analyst. The gains have helped companies accumulate profits -- and big cash hoards.