Bank of America has created a list of technology stocks with attractive features.
Of course, tech stocks haven’t fared well lately. The tech-heavy Nasdaq Composite has slid 14% year to date.
“BofA Client Flow data indicate that institutional clients were larger net sellers of tech stocks in January than in any other month over the past year,” BofA strategists, led by Savita Subramanian, wrote in a commentary.
“But capitulation-like selling was far from evident. Our ownership data shows barely a budge in long-only tech relative positioning. Hedge funds and individuals have sold or covered short positions in tech, but this began mid-last year, rather than a 2022 trend.” Long only refers to fund managers who only go long stocks, with no short-selling.
So when should you buy tech stocks en masse? “When everyone stops asking when to buy tech,” the strategists said. “Before that it might be a falling knife or dead money.”
After the tech bubble burst in 2000, it took about 10 years for tech companies to consolidate and repair their balance sheets, the strategists said. “Then it was a buying opportunity, and tech outperformed over the next decade.”
For its list, BofA screened stocks that are buy-rated by its analysts for a combination of high one-year return on equity, high relative strength (the ratio of the stock price's five-week moving average to its 30-week moving average), high earnings-per-share revisions and a high free cash flow-to-enterprise value ratio.
Among the stocks making the list are Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Mastercard (MA), networking giant Cisco Systems (CSCO), semiconductor company Qualcomm (QCOM), data management company Hewlett Packard Enterprise (HPE), networking company Cisco Systems, semiconductor company Nvidia (NVDA), semiconductor company Applied Materials (AMAT), and information technology services firm Accenture (ACN).
