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Investment banks pick their top stocks to buy in the ‘beaten down’ tech sector

Analysts at leading investment banks say a number of tech stocks present compelling buying opportunities right now — with some more than 30% off their 52-week highs. A storm of headwinds have hit tech stocks and investors are asking about names that are nearing the bottom, according to Bank of America . “Tech is facing the quadruple whammy of rising discount rates, peak globalization, tough comps and crowding,” BofA’s analysts stated in a 27 May research note. “But screen requests are for beaten down growth stocks, not inexpensive Energy stocks.” The bank said investors remain 23% overweight technology, media and telecoms stocks, “and their muscle memory of making money on dip-buying in Tech needs to fade before Tech bottoms.” Despite this, BofA said there are some buying opportunities in the sector right now, given its “big” underperformance — tech is down 24% year-to-date versus the S & P 500 index which has fallen 17%. “Some beaten-down Tech stocks present buying opportunities at these levels,” the bank said. It screened for “Beaten-down Tech stocks with strong FCF [free cash flow]” which are down more than 30% from 52-week highs. Big Tech names on the list include Facebook’s parent company Meta , as well as Google-owner Alphabet . The screen also includes semiconductor firms Advanced Micro Devices , Applied Materials and Micron Technology , as well as IT consultancies Accenture and Gartner . Bank of America is buy-rated on all of these stocks. Read more Tech shakeout: Where to find the best value plays in the beaten-up sector ‘We see a clear role for alternatives’: Pros give their tips on how to trade the volatile market Here are the top stock picks from UBS for the rest of the year Cisco makes BofA’s screen — and it is also on Credit Suisse ‘s list of outperform-rated tech stocks, per a research note published May 27. Additionally, Credit Suisse analysts led by Andrew Garthwaite picked Microsoft for its pricing power, as well as Salesforce , rating them both outperform. “Most software companies have a CPI link on their service contracts,” the bank’s analysts stated, a reference to their fees being linked to inflation rises. CPI refers to the consumer price index, a measure of the cost of goods and services, which rose 8.3% year-over-year in April . BofA said it took around a decade for the tech sector to recover after the dotcom crash of 2000, during which time “investors forgot about tech.” The bank’s analysts recommended being selective and taking advantage of volatility. “One out of four of 1999’s IPOs are blue chips today and IPOs that survived increased by [around] 400% market cap,” they noted. Strategists at UBS also said it may be time to buy tech stocks , in a research note published May 27. “Global tech stocks have fallen since April on growth concerns,” they noted. “Investors can consider rebalancing portfolios to increase exposure to quality tech companies,” the analysts added. UBS did not pick stocks but noted sectors it likes, including artificial intelligence, big data, cybersecurity and robotics.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 10, 2022.
Brendan Mcdermid | Reuters

Analysts at leading investment banks say a number of tech stocks present compelling buying opportunities right now — with some more than 30% off their 52-week highs.

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