Categories: Markets

High-tech stocks with a strong sense of overpriced, investors worried about whether to buy or take profit

High-tech stock .SPLRCT, which has led the market rebound from the bottom in March, has been sluggish recently, and its performance by sector in September remained in the lowest class. The rate of decline from the latest high on September 2 is about 8%, which is larger than about 5% of the total S & P 500 species. SPX .

Even so, the price-earnings ratio (PER) based on the expected profit of S & P500 ‘s information technology sector SPLRCT is around 25 times, which is nearly 55% higher than the 10-year average. The PER of the sector reached 28.4 times, the highest since 2004, on September 3. The PER of all 500 types of S & P at the moment is 21.8 times.

Some investors see tech stocks as a good investment destination if the coronavirus infection continues to rise and the US economy continues to sway.

“High-tech stocks have their own problems, whether they’re too high or too fast, but Corona will start this year and next year,” said Rick Meckler, a partner at Cherry Lane Investments. If it continues to weigh on the core of the United States, tech stocks are still the best place to protect your money. “

Meanwhile, Lori Carbacina, head of US equity strategy at RBC Capital Markets, said in a September survey of US equity investors that the company had a clear consensus on how to handle large tech and internet-related stocks. Was not found, pointed out in a recent commentary report.

“38% of investors think it’s reasonable to buy these stocks, and another 36% think they should move to profit-taking.”

The weight of information technology stocks in the 500 S & P totals is 28%, and the influence as a sector is overwhelmingly large. Looking at Apple and Microsoft, which are the top two by market capitalization , valuations are well above the long-term average.

Based on Apple’s expected profit, PER is 30.1 times, premium to 10-year average is 116%, Microsoft is 31.4 times, 79%.

Still, it may not be as overvalued as the 2000 dot-com bubble phase. BMO Capital Markets Chief Investment Strategist Brian Belski said in a note dated 6th that the current tech stock valuation is 60% below the dot-com bubble era. He said that profitability, dividend levels, and balance sheets are all much stronger than they were 20 years ago, and that he should buy if there is a squeeze.

The next opportunity to test whether the current valuation level is appropriate for tech stocks will be in the third quarter earnings release season.

Market officials believe that rapid work remotening against a pandemic will continue to be a tailwind for tech stocks. In fact, analysts forecast third-quarter profits for S & P 500 tech stocks to fall 0.6% year-on-year, the smallest decline in all sectors. The total number of S & P 500 species is expected to decrease by 21.3%.

Quincy Crosby, Chief Market Strategist at Prudential Financial, said tech stocks will continue to dominate the stock market.