It's time for us Canadians to take a long, hard look in the mirror and confess our sin.
In Canada, too many of us are hopeless Nortel-holics, reliving the nightmare. Mention technology and we still think Nortel Networks. That symbol - NT - is like a bad rash that won't go away.
From an investment perspective, the disgraced telecommunications company is probably the worst trainwreck in Canadian history. Yet some investors still long for those glory years when the stock traded over $100 a share, peaking at $124 in the madness of 2000 before crashing.
The stock now trades in the $3.50 range, but it still gets more attention on the investment chatboards than the relatively new kid on the block, Research In Motion (TSX:RIM), which now has a larger market capitalization than Nortel.
The boards still light up with Nortel-holics bitching and moaning and calling each other names so they can feel better. On Report On Business TV, hardly a day goes by without someone calling and asking guests on the Market Call program about Nortel.
The Nortel-holics will tell you they're quitting. But then, like a pack-a-day smoker cutting down to half a pack, they still find themselves getting their fix by copping a couple of Nortel quotes a day and checking to see if there are any more titillating earnings restatements or investor class-action lawsuits.
The sad part of this scenario is that with Nortel in the doghouse, people automatically think the tech sector in Canada is also in dire straits.
Well, here's a revelation. Even big, bad NT hasn't been able to drag down the TSX information technology (IT) sector, despite this national obsession over anything that resembles a commodity stock or a doughnut.
Those analysts who cheered the arrival of much-ballyhooed turnaround specialist Mike Zafirovski as Nortel CEO last October were a tad over-zealous.
Nortel stock is down almost 20 per cent since Mr. Z came on the scene.
So it's time to face the facts, Nortel-holics. Nortel isn't what it's all about anymore. Although it still manages to crack the top 10 in volume trading on the TSX most days, it doesn't even track the tech sector anymore. On days when the tech-heavy Nasdaq is in rally mode, Nortel often spins its wheels, going nowhere.
Yet, believe it or not, there are IT companies in Canada that let their investors sleep at night.
And we're not even talking about Research In Motion that, in spite of the recent surge in share price, has given its shareholders more sleepless nights than they deserve before settling that protracted patent lawsuit.
There are other IT companies that have been doing business as usual for years without driving their shareholders batty.
They have steady earnings growth, stable management and no accounting issues. This may seem boring to a Nortel-holic. But the capital gains haven't been boring at all.
One upstart company that comes to mind is Aastra Technologies (TSX:AAH), which is just starting to catch the attention of Bay Street.
Aastra is a developer and marketer of a broad range of telecommunications products, including the hot area of voice-over-Internet protocol (VoIP). The company, based in Concord, Ont., earned $26.3 million in 2005 and the shares have doubled over the past year.
Another company churning out stellar results with little fanfare is MacDonald Dettwiler & Associates (TSX:MDA). Based in Richmond, B.C., MDA provides information services to businesses and government organizations.
Since MDA went public in July of 2000 at $14, just as investors began to flee the dot-coms en masse, shares in MDA have quietly tripled on rock-solid fundamentals.
In its latest quarter, the company earned $20.1 million or 49 cents per share, a leap from $14 million in the year-ago period. With MDA's market cap approaching $2 billion, the company still is off the radar of many investors.
A common denominator of most successful companies, particularly tech companies, is a low turnover rate in the executive suite. Nortel has had four CEOs since 2000. MDA has had only one CEO, and you probably haven't even heard of Daniel Friedmann.
Only a handful of small-cap or microcap companies have been able to rebound from the dot-com crash, but one worth noting is Axia NetMedia (TSX:AXX), another high-tech success story overshadowed by a market infatuated by oil and mining plays.
It would have been easy to write off Axia two years ago when it was trading in the 50-cent range.
But the Calgary IT company - headed by former Husky Oil CEO Art Price since it was founded in 1995 - has seen its shares soar 400 per cent since then, largely on its success in the rolling out of the Alberta SuperNet broadband wireless network.
Axia's recent price/earnings ratio was an eye-popping 7.4.
Yes indeed, Nortel-holics, there is life after Nortel.
* STREET TALK: Say, feeling a little too comfortable with your portfolio?
Here's a bone-chilling rant from the venerable Richard Russell in a recent Dow Theory Letters report in which he makes a case to his subscribers to own some gold in their portfolios.
"Listen, despite the low stock market volatility, despite the fact that investors don't think there's any risk ahead, plenty of bad things can or could happen. I could list them all day long. A few ... extremists could blow up a few oil pipelines. There could be another 9/11-type attack. A nuclear bomb could be set off somewhere in the U.S. The (U.S.) administration could continue doing dumb things and could get this nation even deeper into trouble. The U.S. could sink into deflation. U.S. consumers could start cutting back on their buying, and we could have a world recession. A plague could hit the world including the U.S. - bird flu maybe?" Gang, this is not a happy camper.
* SAGE WORDS: "Do what turns you on. Do something that if you had all the money in the world, you'd still be doing it. You've got to have a reason to get out of bed in the morning."
- Investment legend Warren Buffett, in a speech to University of Nevada business students.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)
