Goldman fund manager reveals 'massive' opportunity in tech, says investors are missing 2 stocks

Published Sun, May 8 20227:50 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

One of Goldman's top tech fund managers, Brook Dane, says the recent sell-off has created buying opportunities — and named two stocks investors are missing out on that the bank is "incredibly positive" about. Dane, fundamental equity portfolio manager at Goldman Sachs Asset Management, compared last week's sharp falls in stocks to those seen after the dotcom bubble burst in 2000 and following the global financial crisis of 2007 and 2008. But, unlike then, "this feels like a real opportunity," he told CNBC's "Squawk Box Europe" on Thursday. More losses on Friday clinched a losing week for all three major U.S. indexes despite starting off the period with three straight positive sessions. Indeed, the Dow Jones Industrial Average last week posted both its best and worst days since 2020. Speaking even ahead of Thursday and Friday's volatile moves, Dane said investors were too focused on "mega cap" tech stocks. Instead, he stressed that the buying opportunities were in mid-cap companies in areas like software, cybersecurity and semiconductors . "There's a massive global opportunity that clients are missing, especially in the mid-cap companies. So we are seeing opportunities right now, for example, [in] cybersecurity, a very topical conversation," he said. 'Exceptional' risk-rewards Two of Dane's picks are U.S. cloud security companies Palo Alto Networks and Zscaler , which he described as "very innovative, disruptive companies that are driving change in that sector." Cybersecurity, he said, has shifted from being mostly about external protection, to now including attacks from inside a company. This trend towards so-called zero trust security is creating a "whole new investment cycle" in the sector, Dane added. "Those two names we think offer exceptional risk-rewards as we sit here today, and we are very positive about their outlook over the coming years," he said. Tech trends The tech-heavy Nasdaq was down 22% year-to-date at Friday's close and there are several factors that make the current cycle a buying opportunity, Dane said. "Tech corrections usually last seven or eight months, we are about seven months into this one. In general, tech stocks correct [at] about 30%; we are down mid 20s for the average tech stock, and the pain in some of the higher growth parts of tech have been much greater than that," he stated. Dane also shared an interesting perspective on how tech stocks reacts to rising interest rates — arguing that as the rate cycle progresses, tech actually tends to outperform. "This is basically because the differentials in the growth rates across tech companies really starts to shine through as the rest of the economy slows down," Dane stated. Generally, rising rates are seen as bad for tech stocks as they can hit future cash flows. The Federal Reserve Bank increased rates by half a percentage point on Thursday, the biggest hike since 2000. Read more Cloud computing is a bright spot for tech as the economy grapples with war and inflation Howard Marks is not as worried as other notable investors. Here's why CNBC Pro Talks at Milken Global Conference: Investors talk inflation, Fed, crypto Dane is co-manager of two of Goldman's big tech funds, including its Future Tech Leaders Equity ETF. "The basic thesis of that fund was that innovation was democratizing around the world, and that there was this incredibly rich environment globally for new tech companies that were springing up that were disrupting existing business models and really changing major industries and attacking big profit pools," Dane said. The fund's top holdings include Palo Alto, Marvell Technology , ON Semiconductor Corp and Cadence Design Systems .

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