Big Tech's had a devastating year. Here's why we're holding on

Published Thu, Dec 15 20222:32 PM ESTUpdated Thu, Dec 15 20223:04 PM EST

Our Big Tech holdings — Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Meta Platforms (META) — have been weighed down in 2022 by stubbornly high inflation, rising interest rates, a strong U.S. dollar and broad economic volatility. While inflation appears to be easing and the pace of the Federal Reserve's interest rate hikes could slow next year, the macroeconomic picture remains cloudy. That's why we remain cautious on our tech holdings, which could face contracted earnings in a potential recession. Here's what happened to our tech stocks this year and — and why we're still sticking with them. Apple Apple's iPhone production has been hindered by production hold-ups at a factory in China , a result of the country's strict Covid-19 regulations. While Beijing moved to lift restrictions this month, earnings should be squeezed in the short term. But we see this as a temporary headwind and think Apple can make up for production shortages over time. "I believe the stock is headed lower, not higher," Jim said during the Club's "Monthly Meeting" on Thursday. He added that it's possible the iPhone maker could preannounce a weak quarter in early January. However, at the Club, we're not traders who sell today when the stock is weaker and then buy back at a later date. We maintain our position on Apple: Own it, don't trade it. That's because of its ecosystem of products and services that attract persistent demand from a loyal customer base. While shares of Apple are down about 23% year-to-date, we consider Apple one of our core holdings. Amazon Amazon has been battling with rightsizing its business due to the pull-forward demand it experienced during the COVID-19 pandemic. That's when the company mistakenly doubled down by going on a hiring spree as the business was booming. It caught up with them this year as the global economy slowed, higher costs ate into consumer balance sheets and inflationary pressures dragged down earnings in its latest quarter . The stock has fallen roughly 47% this year, but we're encouraged by the fact that management has taken steps to control expenses by laying off roughly 10,000 employees . Layoffs could continue in the new year as the company pushes for efficiencies across the organization. We'd also like to see how the company is addressing slower growth at its cloud business, Amazon Web Services (AWS). An industry leader, AWS has faced growing competition from other giants including Google and Microsoft. "When it gets its employment count right and exits extraneous businesses…you are going to want to be in it, as the numbers will be going higher," Jim said. Alphabet Alphabet also faces the dilemma of having over hired. But it decided to rectify the move by curbing costs on projects. Still, an even bigger challenge the tech giant faced this year was its slowing advertising business. Concerns of an imminent recession, coupled with the U.S. dollar 's 8% gain this year, have made advertisers pull back spending on Google. This has pressured the stock, which is down 37.6% this year. Management expects the strong dollar to be a continued headwind in the current quarter. Alphabet has tried to stay nimble during this challenging period by slowing its capital expenditures. We don't see the ad business coming back as strong and it's expected to see weaker growth ahead. But as another one of our core holdings, we still see Google as the preferred destination for online ads and believe when companies have more capacity for spending, Alphabet's ad business can recover. Microsoft Microsoft has been pressured by weakening demand for personal computers, the strong U.S. dollar and tightening enterprise budgets for the cloud. But Jim said MSFT is "less risky than others," with a solid valuation — a current price-to-earnings multiple of 25, lower than its 5-year historical average of 27.4. "I think the company could have a decent quarter and it hasn't had to issue a warning about what is now the declining dollar," Jim said. We trimmed some Microsoft into strength last month when the stock rose on a softer-than-expected inflation reading in October. MSFT stock is down more than 26% year-to-date. Meta Platforms Meta has been another victim of slower advertising sales, but what really caught investors off guard this year was its exorbitant spending on the metaverse. Nevertheless, we still see the company's underlying fundamentals as resilient. Here are a few reasons we're holding onto the stock: Zuckerberg fired more than 11,000 employees to better manage expenses and more layoffs could be on the horizon. Zuckerberg told Jim he's spending less time on the metaverse than what was originally thought. Reels could get a boost from a possible TikTok ban. We also think the company could benefit if it monetizes WhatsApp. Progress on these fronts could help offset downside risk and potentially lift the stock, which is down 65.7% this year. (Jim Cramer's Charitable Trust is long AAPL, AMZN, GOOGL, MSFT, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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