Are Big Tech Stocks A Trap?

Big, blue-chip tech stocks have had a terrible year, frustrating many bulls who see incredibly low PEs, and can’t fathom why they’ve been such losers.

Microsoft has a PE of 10x for example, and it’s sitting on a gigantic cash pile.

Google’s PE is a (relatively) slim 18x, with its forward PE only at 12x.

According to a recent investor survey from Oppenheimer, big investors view them as value traps: Stocks that look good on a PE basis, but just keep going lower and lower (like what’s happening right now). Microsoft has been a classic dead-money value trap forever.

So are investors fools for buying now?

Oppenheimer’s Brian Belski thinks they are worth buying.

Here’s why:

  • Tech stocks have better revenue growth forecasts than most industries.
  • Cash management (dividends are getting better).
  • And they’re among the most exposed to global growth.

This chart shows the estimated growth of various industries. Only energy and materials are expected to grow faster.


Photo: Oppenheimer

Among the tech stocks he favours (based on a screen of low PEs, a high S&P rating, and earnings growth of over 10%): Microsoft, Intel, Hewlett Packard, Adobe, and Dell.

Click here to see how rough of a year it’s been for big tech >

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