In the days before coronavirus, when markets were hitting new highs, technology stocks were the tip of the spear. Just a few weeks ago, there were four U.S. companies with market valuations above $1 trillion, all of them tech stocks.
Those companies— Microsoft (ticker: MSFT), Apple (AAPL), Amazon.com (AMZN), and Google parent Alphabet (GOOGL)—with their fortress-solid balance sheets, are poised to come out of the downturn just as strong as they went in.
But for intrepid tech investors, there are less obvious opportunities to be found amid the current carnage and chaos.
To help find the best ideas, Barron’s reached out to a few of our favorite tech-focused stockpickers. Some clear themes run through their recommendations: The work-from-home revolution underlines the power of cloud computing; we all still need to be entertained, even if we’re stuck at home; and we’re still going to need broadband, now more than ever.
Niles is founder and portfolio manager for the Satori Fund, a tech-focused hedge fund. On Feb. 17, just after Apple pulled its March quarter guidance, Niles tweeted that he had 50% of his portfolio short Apple, seven of the company’s suppliers, and QQQ, an exchange-traded fund that tracks the Nasdaq 100. It was a prescient call.
Niles remains generally bearish on the market, but there are stocks he likes and owns, particularly around videogames. While Niles thinks the market has exaggerated the impact of a fifth-generation, or 5G, iPhone launch later this year, he sees opportunity in a less-watched product cycle: new videogame consoles from Microsoft and Sony (SNE), expected this fall. “They’re going to launch the first new hardware platforms since 2013, and everyone is stuck at home,” he says. “I like them all,” he says of the videogame stocks, including Zynga (ZNGA), Take-Two Interactive Software (TTWO), and Electronic Arts (EA), along with China’s NetEase (NTES) and Tencent Holdings (700.Hong Kong).
Other Niles bets are Amazon, a beneficiary from the shift to e-commerce, and work-at-home play RingCentral (RNG), a cloud-based communications provider. Meanwhile, he’s still ready to short Apple again as the stock rallies. For one thing, he says, “I don’t know who is going to feel rich enough to buy an iPhone.” And he wonders why anyone would pay 19 times current earnings for Apple, when other hardware plays like Dell Technologies (DELL) and HP Inc. (HPQ) trade for just seven times.
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