Two tech stocks to buy for a stock market rebound

Is this the bottom of the market? Or a bear market rally?

There are some signs of a bottom,” Ed Clissold, chief U.S. strategist at Ned Davis Research told Reuters recently. “In terms of whether or not it is the bottom, there is still more to prove for the market.”

With inflation still at levels not seen in decades, a war still raging in Ukraine and the shadow of COVID-19 still lurking, the fact is it is impossible to tell. Those who try to time markets, history tells us, do not fare well.

What we do know is that some experts feel there are stock that are “on sale” in this market. And with technology taking a disproportionate amount of the calamity, there may be some bargains. We highlight two that portfolio managers recently cited.

Portfolio manager Kim Bolton says why wait when one big American tech stock stock is already boasting big upside potential.

“We still own PayPal (PayPal Stock Quote, Chart, News, Analysts NASDAQ:PYPL). We haven’t added to it but we like the company,” said Bolton, President of Black Swan Dexteritas, who spoke on a BNN Bloomberg segment on Wednesday.

“You’ve got to be able to have that protection on top of it to be able to stick with these [stocks] because the intrinsic value of these companies and the runway is huge,” he said. “[Last year], the runway for a lot of these stocks was only ten to 15 per cent to the price target. Now, you’re looking at runways of 40, 50, 60 per cent. So, now’s the time to invest.”

““[PayPal] is all around digital payments and commerce and services, and Europe has really jumped on with PayPal. It’s the preferred method of payment over Visa or MasterCard, especially in Germany and France and Italy. They’re also a leader when it comes to QR codes,” he added.

It’s been a terrible 12 months for fans of big American tech, and that includes Alphabet (Alphabet Stock Quote, Charts, News, Analysts, Financials NASDAQ:GOOGL), which is down by about a third over that stretch, as the market pulls back on worries about growth in the online advertising business, GOOGL’s bread and butter.

But according to portfolio manager Paul Harris, digital advertising still has too much of a runway for investors to worry about a behemoth like Alphabet.

“It’s Kleenex, basically,” says Harris, partner at Harris Douglas Asset Management, who spoke on a BNN Bloomberg segment on Thursday.

“It’s a great business because it’s a search marketing platform for advertisers and merchants, and that [industry] is not going to change. Online advertising will continue to grow,” he said.

For Harris, Alphabet’s fundamentals continue to be strong, despite the lull in the ad market.

“The stock trades at 18.6x earnings with no debt and it throws off $54 billion in free cash flow. They have 30 per cent of the digital ad market and I think that’s getting better because Meta Platforms is having a difficult time on the ad side,” Harris said.

“Digital advertising is going to be about a $400-billion business in 2024, and so the numbers are quite huge for them. I think they can continue to do that,” he said.

Harris said that while platforms like YouTube are down on a comparative basis, as the pandemic saw a big increase in eyeballs glued to screens, but he says YouTube is basically peerless in its business.

“YouTube is a great franchise. If you want to learn how to put up drywall or boil an egg, you go to YouTube, right? So, to me, it’s going to take some time to get back to those [pandemic] levels, but I think they eventually will,” he said.

“I like the story here. I think it’s not an expensive stock and you’re getting a company that can actually grow quite rapidly,” he said.