Tech stocks haven’t really been anyone’s favourite for a while now and sentiment seems still against Big Tech firms like Google, Shopify and Amazon. But you’d be wrong to think that sentiment won’t ever change, and when it does, it’d be nice to say you bought back in at a good price. That’s the advice from portfolio manager Darren Sissons, who thinks now’s the time for tech.
“I’m starting to think that tech is now quite inexpensive,” said Sissons, partner at Campbell, Lee & Ross, who spoke on BNN Bloomberg on Friday.
Technology stocks have seen a nice rebound this year, with the tech-heavy Nasdaq Composite currently up about 18 per cent in comparison to the wider S&P 500, which is up about nine per cent. In Canada, the TSX Information Technology capped index has been rising since this past October and is up 42 per cent over that period. That compares to the TSX Financials capped index, which is up about six per cent since mid-October, and Utilities, which is up about five per cent.
The pullback in tech began in November 2021, when concerns over rising interest rates and inflation, coupled with supply chain problems and fear of an economic downturn combined to take the air out of a sector that had shined during the first two COVID years.
Investors appeared to be lining up the usual suspects. All of the FAANG stocks — Facebook (now Meta Platforms), Apple, Amazon, Netflix and Google (Alphabet) — for example, saw share prices drop dramatically, and while some like Apple and Microsoft have by now recouped a lot of those losses, many have not. Just take a look at Canadian tech darling Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials NYSE:SHOP), which continues to wallow at about a third of its value compared to November 2021.
“People are definitely disliking tech and they’re getting out of the FAANG stocks, so where are they going to go? They’re going to go to the quality names,” said Sissons. “Weakness gives you an opportunity, definitely, in a sector rotation.”
“For example, if you had’ve bought Google in 2004 and held it, what would that return look like? That’s how I think people need to start thinking about tech,” he said.
Sissons singled out Samsung Electronics as one of those quality companies currently on sale.
“Consumer electronics, consumer devices, you’ve got the phones and, obviously, the semiconductor foundry, and there are only two semiconductor places where you can make the highest-quality chips: Taiwan, which is under the aggression of China at the moment, and Korea, so Samsung would be the beneficiary there,” he said.
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