The technology sector may not be on sale, but it certainly has gotten cheaper lately.
Major technology stocks like
Apple
(ticker: AAPL),
Alphabet
(GOOGL),
Microsoft
(MSFT), and
Meta Platforms
(FB) are down 10% to 17% from their 2021 highs.
But highfliers in the tech sector and elsewhere like Snap (SNAP),
Zoom Video Communications
(ZM),
Roku
(ROKU),
Zillow Group
(Z), and
Teladoc Health
(TDOC) are more than 50% and in some cases 75% off their peaks of last year. The selloff has been particularly severe in unprofitable companies that had been valued at elevated multiples of more than 10 times sales.
Investors may want to consider some of the tech leaders and bottom fish among the busted growth stocks.
Mark Stoeckle, manager of the
Adams Diversified Equity
(ADX), a $2.5 billion closed-end fund, favors the industry leaders including Alphabet, Meta Platforms (formerly Facebook), and
Amazon.com
(AMZN).
“Investors aren’t making a big enough distinction between the megacap tech stocks and the hair-on-fire multiples of revenue tech stocks,” he says. “The big tech stocks are trading at much lower valuations and are generating immense amounts of free cash flow.”
The Adams fund, whose shares trade at $18, a roughly 13% discount to its net asset value, has sizable stakes in the tech giants.
Take Alphabet. Its class C shares (GOOG) are off 0.4% to $2658.26 Friday and are down about 10% from their late 2021 highs. Alphabet is valued at 23 times projected 2022 earnings of $114 a…
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