To The Moon

Focus on Tech with Solid Fundamentals

Mega tech stocks such as $Microsoft(MSFT)$, $Alphabet(GOOG)$, $Amazon.com(AMZN)$have been obliterated as their latest earnings or forecasts missed expectations, leading to many investors offloading these mega tech stocks. This is further exacerbated by the hawkish Fed as they continue their aggressive quest to curb inflation.

With these mega tech stocks so beaten down from their highs, many would start wondering if there is indeed a buying opportunity or it is time to flee from tech. With prices plummeting and fears of rising interest rates impacting valuations, investing in tech stocks seems like catching a falling knife.

While not all tech stocks will recover, it is imperative not to overlook mega techs that are profitable have strong balance sheets and continue to enjoy a strong operating cash flow supported by sustainable and diversified revenue streams. Macroeconomic headwinds such as weakening consumer demand, strong US dollar are inevitable as part of the usual economic lifecycle. However, most mega tech companies are seasoned and experienced in being becoming more strategic to remain profitable. For example, Microsoft, Apple and Google are freezing hiring to manage operating expenses and maintain their profit margins in anticipation of slowing demand.

Although high quality tech companies may appear much cheaper than a year ago, one must be cognisant that the macroeconomic headwinds are not over. Earnings of these tech companies are projected to fall and there may be more short-term corrections in the coming quarters. However, some of these names can still be great buys when considering their underlying fundamentals and how tech continues to play an important role in our daily personal and work lives.

Don’t be quick to rule out the mega tech yet. Perhaps they can provide an opportunity for potential upside that you can capitalise. Proceed with caution and all the best in your investment journey!

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