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Tech Stocks Tune-Up — 2 to Buy, 3 to Sell

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Tech to Sell: Seagate

Seagate STXSince we are talking about secular growth, let’s also talk about secular slump in store for hard-drive companies like Seagate (NASDAQ:STX). The demand for desktop, laptop and DVR technologies are going to go the way of VHS tapes in the next few years — and companies whose bread-and-butter are these components will face pressures.

Investors might be fooled into thinking that Seagate is safe because of recent sales and profits numbers — but don’t buy it. The fact is flooding in Thailand late last year seriously hurt rival drive manufacturer Western Digital (NYSE:WDC) and allowed Seagate to command unusually high prices for its products and unusually brisk volume.

The results have helped fuel a jaw-dropping 60% gain year-to-date in STX stock.

Bulls will point to an ultra-low P/E of well under 5 right now based on 2013 earnings of $5.83 a share … but don’t get sucked in. The long-term threats to STX are going to be very difficult to combat — and in the short term, the earnings juice from its competitors’ missteps is not the same as sustainable growth in Seagate’s bottom line.

If you own this stock, take your profits off the table now and head for the hills.

If you don’t own it? Maybe consider playing the downside. Seagate is due for a crash just like those antiquated disk drives it likes to peddle.

Jeff Reeves is the editor of, and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace?.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff did not hold a position in any of the aforementioned stocks.

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