Last week, a rotation started to form from the technology sector into value: sectors that are still discounted such as the energy, financial services, and retail sector. Over the course of the week, the S&P 500 Value ETF (SPYV) gained nearly 5%, while the S&P Technology Sector ETF (XLK) gained a mere 2%.
This can be attributed to concerns over how much tech stocks, especially the bigger FAANG names, have run up since the market’s March lows. Notably, the XLK is approaching its pre-corona, all-time high again, whereas the SPYV is still lagging that by a considerable 15%.
Now this doesn’t mean that value can’t be found within the technology sector anymore. That’s especially true if you invest in specific stocks, which is considered more risky than passively investing in broader, exchange traded funds (baskets of securities).
So for those who like to create their own basket of investments, here are three publicly listed tech companies that are still reasonably priced, using the following conditions:
- Their price-to-earnings (P/E) ratio is below 25.
- They’re trading 20% or more below their 1-year high.
- Up until the coronavirus crisis, their 5-year stock price trajectory was positive.
- Their market cap is above $10 billion.
Lam Research (LRCX)
Lam Research is one of the larger companies in the world dedicated to manufacturing tools for semiconductor (chip) fabrication.
It’s got a market capitalization of $33 billion, is trading at a P/E multiple of 19x, and currently still trades 20% below its all-time high of February.
CDW provides integrated IT solutions to businesses, governments, educational institutions, and healthcare providers.
It’s got a market capitalization of $16 billion, is trading at a P/E multiple of 22x, and currently still trades 23% below its all-time high of January.
CGI is a globally operating IT consulting firm, headquartered in Montreal, Canada.
It’s got a market capitalization of $21 billion, is trading at a P/E multiple of 19x, and currently still trades 26% below its all-time high of January.
Published June 2, 2020 — 13:02 UTC