Fundstrat's Tom Lee recommends technology stocks for the rest of the year, predicting the group will outperform the market based on historical moves when investors get this bearish.
"Sentiment is so negative, it is at an extreme for sell-side strategists (target price) and for individual investors (AAII % bulls less bears)," Lee wrote in a note to clients Friday. "Strategists [are] so bearish, their S&P 500 target has zero upside."
The strategist cited that when Wall Street's targets show no upside like now, the market has rallied 95 percent of the time with an average gain of 11 percent the next 12 months since 1999.
Moreover, the AAII bulls less bear investor sentiment number, tracking retail investors, is currently at a negative 13 reading, which historically led to a market rally 87 percent of the time the next six months since 1987 if registered in the months of September or October.
Lee said of the 25 sectors and styles he analyzed when the AAII reached this "negative extreme," technology did the best. The sector outperformed the market by 6.3 percentage points on average during the next three months with a 71 percent win rate in the time periods.
"Investors need to buy technology stocks ... whenever sentiment [is] this negative," he wrote.
Here are the three technology stocks Fundstrat highlights to take advantage of the call.
