One of the conundrums of 1996 was that companies made significant fundamental progress that wasn't reflected in the group's valuation. "1996 was a great year for companies in terms of raising capital, and a disappointing year for investors," said Hambrecht & Quist banker Dennis Purcell. "In 1997, we think the tables will be turned, with companies raising less capital and better returns for investors."

The sector's disappointing stock performance for the year wasn't wholly the fault of the group, but really reflected the disinclination of investors to put their money into growth stocks, Purcell said. He noted that the difference between the returns on the Russell 2000, which measures growth stocks, and the Dow Jones average has never been wider. "By and large, investors didn't go down into the smaller cap stocks," he said