Financials are the Tech Stocks of this Bust

The financial sector in the S&P 500 continues to dive. Most of the stocks in the sector are down big. Some, such as Lehman Brothers (LEH) are down 30% in just the last week.

Others, such as Bank of America (BAC), are hinting that they’ll throw in the towel and cut their dividends. Bank of America is at 52-week lows and down nearly 50%.

The talking heads on tv keep saying that now is the time to buy the financials. That this is the “bottom” for the sector.

But this all reminds me a lot of 2001 and 2002 as the NASDAQ kept falling, taking the tech sector with it.

Eight years after the dot-com bust, the old leaders of the technology sector are still mired in averageness. Sure there are newer companies such as Google and RIMM that have soared in recent years. But outside of Apple, the old tech names that were owned by every mutual fund on the planet in the 1990s haven’t done much.

When the mighty fall, they stay down for a long, long time.

No one was hotter in the late 1990s than the tech titans of Microsoft, Intel and Cisco. But in the last decade, the story has been completely different. In 2003, the NASDAQ crash hit a bottom. But the individual stocks have yet to recover.

On June 9, 2003, Microsoft (MSFT) traded at $24.65. Yesterday, it closed at $27.12.

On June 9, 2003, Cisco (CSCO) traded for $17.41. Today it’s at $25.65.

On June 9, 2003, Intel (INTC) traded for $21.31. Today, it’s trading at $21.81.

These stocks were up and down during these five years. But if you bought and held at the “bottom” of the NASDAQ bust (which 2003 was), you still haven’t made hardly anything.

This will also be true of the financials.

They are not yet at the bottom, but even when they get there, they won’t be the “bargain” you think they are. For one, their earnings won’t come close to matching the prior few years. This also happened with the tech sector. It’s taken years to even come close to the boom years.

And with stocks, earnings are really everything.

So before you jump into the sector that is getting beaten down, think about the sectors that are soaring.

Buy those instead.