If the correction turns into a bear market, can you still hide out in tech?
Market chatter suggests tech investors will have a rough ride. Here’s the argument:
- Investors will likely cash out their high beta trades to lock in profits
- A weak economy seems likely to delay IT spending, something already factored into many estimates
- Discretionary spending on gadgets and the like could fall sharply and drag down profits.
But analyst Colin Gillis isn’t buying it. “The sector is well positioned to have beautiful growth for the next several years,” he says.
”Yes of course there’s exposure to Europe but productivity gains should more than offset that,” he adds.
What’s the trade?
Look at Google, says Gillis. It’s defensive and typically does well in a down cycle. However the June quarter tends to be the weakest quarter so be careful holding it through earnings.
Also, think about Yahoo! he counsels. I’m a buyer ahead of Wednesday’s analyst conference. (That means buying at the open)