Hedge Funds' Hail Mary: Bet on Tech

With returns lagging, firms pour cash into slumping Web companies

It’s been a brutal year for some big Internet stocks: Shares of Facebook are down 28 percent, Zynga has dropped 76 percent, and Groupon has plunged 82 percent as of Dec. 4. Yahoo! struggled, and even Apple saw a rough stretch eat a quarter of its market value in recent months. Along the way, some began to look like steals to hedge funds. “In technology, you can hit home runs,” says Donald Steinbrugge, a managing partner at consulting firm Agecroft Partners. “That’s always been the case. What has not always been the case is that technology, from a [price-earnings ratio] standpoint, is fairly inexpensive relative to what it’s been over the last 15 years.”

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