Hey Insiders,
This is the last special issue of the holiday season before we return to the regular market previews tomorrow morning.
Today I will be doing a deep dive into the technology industry. Since the Great Recession, technology stocks have become some of the most reliable. They have sold the promise of the future and garnered trillions in investment by convincing investors that present-day spending will lead to outsized future profits. The economic environment supported this investing thesis with low-interest rates making capital easily accessible and allowing companies like Tesla to mortgage their futures to spend on high-risk R&D activities.
This year, however, with interest rates rising, a social trend away from technological reliance, and a looming recession, this thesis of spending big now for future profits collapsed, sending technology stocks spiraling. Most technology companies ended up with no or low growth, little profits, and oversized staff. This led to layoffs and other cost-cutting measures, which have caused a decline in investor and consumer confidence in these brands.
The figures tell the same story; so far, in 2022, the Nasdaq Composite is down 30%, Meta and Alphabet are down more than 25%, software stocks are down 32%, and semiconductor companies are down 35%.
Despite this decline, the technology sector is still overvalued when looking at the Price to Earnings ratio. The S&P 500 is trading at an 18 P/E on average, but Apple is at 22, Microsoft at 26, and Amazon at 78.
Today we will look at eight technology stocks recommended by Wall Street analysts that you should follow if you believe the old investment thesis may be accepted again in 2023.
Onward and Upward,
Liam
