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Big Tech is looking more attractive, this portfolio manager says

It’s hard to know where the bottom is to the current pullback in tech stocks but if you’re looking for names that are now more reasonable from a valuation perspective portfolio manager Christine Poole says there are opportunities to be had among the big American tech names.

“If you want to buy something in technology, look at some [of the] large cap tech stocks that have pulled back,” said Poole, CEO and managing director at GlobeInvest Capital Management, who spoke on BNN Bloomberg on Tuesday.

“Of all those big FAANG stocks, we own Alphabet, Microsoft and Apple. I think all those names at these price levels — they’ve all pulled back about 20-25 per cent from their highs — we would be adding to those names in new client money, so it might be potential opportunity to add another position in technology,” she said.

It’s hard to remember a world where companies like Amazon, Apple and Microsoft didn’t dominate discussions not just about where the market is heading but how our economies are faring in general. But it was a mere nine years ago when CNBC stock picker Jim Cramer came up with the FAANG moniker (at the time, Facebook, Apple, Amazon, Netflix and Google) to denote that group of high growth, high market cap and hugely influential technology companies that were taking up more and more space in the average investor’s portfolio. And for good reason, as these stocks were bringing home big earnings and big money for investors almost regardless of when in the market’s cycle one bought the FAANGs — or, going by a more recent grouping, the MAMAA stocks (Meta, Apple, Microsoft, Amazon and Alphabet). 

Now, though, those huge gains especially over the last couple of years have made it all the easier for investors to ditch or at least trim their positions in those stocks, simply because we’d already made a lot of cash on them. Add to that a rising interest rate environment, a more muted picture for online and digital growth over the next while and ongoing supply chain issues and you’ve got the current state of affairs: a big pullback for Big Tech. 

Since mid-November, Meta Platforms is now down about 47 per cent, Amazon is down 36 per cent, Apple is down just three per cent, Alphabet is down 23 per cent and Netflix is down an incredible 72 per cent. And the impact of those declines is huge, as the five FAANG stocks currently make up about 19 per cent of the entire S&P 500.

But Poole says while the pullback in Big Tech may have put some stocks back in the Buy category others are still no-go’s, as there’s less tolerance for growth stories whose profits are still a ways into the future.

“It’s really [about] the large technology companies that are actually making money and cash flow,” she said. “We saw a lot of fluff last year and I couldn’t understand the valuations. And so, those are the stocks that are down 75 and 80 per cent over the past year. I’m still not interested in buying those things.”

“But the three companies I mentioned are actually making a lot of money. [They are] high margin businesses, they’ve come back and the valuations are much more reasonable now, and so you can start building positions,” Poole said. “You don’t have to buy it all at once, but you can start nibbling.”

As for Cramer, his current opinion of the FAANGs (or MAMAAs) seems to be that considering the rising interest rate climate it may take a while for them to recover to their former glory. But he nonetheless claims that the power behind brands like Apple and Amazon is not to be trifled with, simply because they’re innovation powerhouses. 

Speaking on CNBC in March, Cramer pointed to Apple whose products and services amount to “the greatest technology apparatus ever created,” while Netflix’s aims to carve out a space within the gaming industry and Google’s Google Play app store is looking like it’ll compete with Apple’s in the ever-expanding app market.

“Remember these innovations the next time some wannabe coroner pronounces FAANG dead on arrival,” Cramer said. “That’ll be the perfect moment to do some buying.”

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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