Tech: A sector on sale

If you can keep calm and not panic, this market is presenting opportunities in fundamentally well-positioned tech companies at incredibly attractive valuations.

Josh Spencer

There are wonderful companies on sale, such as Amazon.com or Salesforce. In a market like this you cannot be sure if a stock is going to go up or down 10% at any time, but if you look out one or two years, you know companies with strong fundamentals and execution are going to grow their way out of this.

LinkedIn jumps out as a compelling opportunity during this weakness. It is still witnessing good engagement by its members and delivering mid-20% revenue growth, despite a challenging macro environment. hen they write the final history of central banks and the financial crisis, recent weeks will be a prominent late chapter. Central banks have been looking into the abyss of spiralling negative rates and all-out currency war over recent months – and the last few weeks saw them pull back from the edge. We have previously discussed how corrosive negative rates could be for banks and, potentially, for the financial system at large. During the March ECB press conference, Mario Draghi acknowledged the danger negative rates would pose to banks and confirmed a shift from “rates instruments to other, nonconventional instruments”. When the BoJ held rates There are suggestions the so-called ‘FANG’ trend is dead. However, these companies were not succeeding because they were part of FANG. The companies were thriving because of strong underlying fundamentals. Amazon.com is doing remarkably well in both elements of its business – e-commerce and the AWS cloud computing. This was not something made up by Wall Street. We could make the same case for many internet and software stocks hit hard lately.

Even in slow growth, tech companies are gaining share, adding content to new areas and penetrating new markets. Tech companies can outgrow the economy for years to come because technology is increasing its percentage of the economy.