Technology investors are eager to support their favorites
Technology investors are eager to support their favorites
Last week's 3.8% drop in the Nasdaq Composite index has not shaken the faith of many investors in technological stocks.
When customers call Steven Dudash and ask the Chicago financial advisor to sell shares of
and Netflix Inc., responds in this way: "No. I'll buy you more."
Mr. Dudash, whose IHT Wealth Management manages $ 3 billion, said he has been buying more consumer technology stocks and selling some of the real estate client and stock bonds, which he believes have little prospect. as interest rates rise. Those decisions feel frightening and potentially painful now, but they will be rewarded when the current fear has passed, he assures them.
"For me, these cries are going to buy everything you can," he said.
A loss of shares in October is placing investors like Mr. Dudash at a crossroads, and the path they choose will have a significant impact on the direction of the market in the coming months. On Friday, sellers were back in force after the soft revenue figures from Amazon and
Alphabet
Inc.
GOOGL -1.80%
Dow industrials fell 296 points, Amazon fell by 7.8% and Alphabet fell by 1.8%.
It is the latest installment of what has become an almost daily drama this fall: technology stocks that increased large gains earlier this year are falling rapidly, while higher interest rates and fears of a The slowdown in global growth has diminished the actions of companies that depend on trade.
This week's sell-off has eliminated the once solid year-to-date earnings for the Dow Jones Industrial Average and the S & P 500.
For now, the faith of many investors in technology stocks seems largely unshakeable despite the declines. Interviews with half a dozen portfolio managers indicate that none are selling shares, although some have expressed concern about the market environment and signs that demand for products such as semiconductors is softening.
Making the choice especially difficult is the fact that, while the losses have been serious, in many cases the actions are still sports profits. Netflix has fallen by 20% in October, Amazon has fallen by 18% and the Google Alphabet has fallen by 10%. So far this year, however, they have risen 56%, 40% and 2.9%, respectively.
Jason Tauber
Photo:
Neuberger Berman
Some are waiting for the storm to pass, which has hit technological actions of all descriptions. Jason Tauber, portfolio manager of the growth strategy of Disrupters All-Cap Crib of Neuberger Berman, has maintained shares of
Cognex
Corp.
, which manufactures vision sensors used by global manufacturers, including those in China, and
IPG Photonics
Corp.
, which also sells its lasers to Chinese customers. Cognex shares have plummeted by approximately 26% so far this month, while IPG Photonics has fallen by 14%.
"It has been painful," he said.
Although these companies have been affected by a slowdown in Chinese industrial orders, due in part to tariffs, Tauber said he still believes in his ability to boost sales. "I do not think this is going to cause a global recession," he said, a belief that is stopping him from what he calls a panic sale.
Mr. Tauber added that "it seems that this is an opportunity to buy some of these technology companies", although so far he has not made additional purchases.
Ed Cofrancesco, executive director of International Assets Advisory LLC, a brokerage firm based in Orlando, Florida, which manages more than $ 2.5 billion, said some investors are trimming growth and boosting stocks while favoring equities. and bonds of public and financial services companies.
"All clients, regardless of the composition of the portfolio, have expressed anxiety and nervousness," said Mr. Cofrancesco.
Jim Callinan, portfolio manager at Osterweis Capital Management in San Francisco, said he downloaded his stake in two technology companies he considered "of lower quality." Due to his debt and leverage, he said he was worried about his prospects in an environment of rising interest rates. . He also said that he took advantage of the massive sale of technology to return to the shares he sold earlier this year. He would not name the actions, citing the compliance policies of his signature.
The decline of the market has not completely surprised him, as he said he felt the correction had been delayed.
"Some of these companies had risen to outrageous levels," he said.
Dan Morgan, a portfolio manager at
Trust Co., is observing the volatility of the laterals. "Six months ago, you could not go wrong with technology," he said. "It did not matter what you chose, it went up, obviously, now you need to be more demanding."
His positions in technology giants such as Amazon, Apple and the father of Google Alphabet declined this month, but said he has not seen changes in consumer demand for iPhones or changes in terms of advertising projections compared to the previous month. In addition, he said he owns Apple shares since 2005. Stocks rose more than 2,000% since the end of 2005, putting the recent 4.4% decline in October in context, he added.
In addition, the profits of the largest companies in general have been positive, even if the market has not always welcomed them. Netflix and Amazon, for example, have reported solid earnings growth this year.
More worrying for Mr. Morgan are the comments about the reduction in demand from the executives of the chip makers. Semiconductor stocks, as measured by the PHLX semiconductor index, fell 15% since the beginning of October. For the year, the index had a lower performance than the rest of the technology sector, falling by 7.5% compared to the increase of 3.9% of the Nasdaq.
"The shares of chips are the plankton of technological stocks," said Morgan. For now, Mr. Morgan said it's "still too early to press the panic button, but obviously there are warnings out there."
--- Michael Wursthorn contributed to this article.
Write to Corrie Driebusch in corrie.driebusch@wsj.com
.
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