Large-cap technology stocks have been hit hard. But analysts expect many to come roaring back. Let’s get to those names. First, let’s put the recent action into perspective.
The Dow Jones Industrial Average DJIA, -0.40% has fallen 3.8% since the end of September (with dividends reinvested), but is up 4.7% this year through Nov. 12. The S&P 500 SPX, -0.15% is down 6.3% since the end of September, but up 3.7% this year.
The new S&P 500 communications-services sector was created by S&P Dow Jones Indices in September.
The energy sector has fared worst since the end of September, as the price of West Texas Intermediate crude oil (WTI) CL1, -6.08% has declined 18% since then. The technology sector has been the second-worst performer, with a 10.5% decline. However, the sector is still up 8% for 2018, ranking third behind the health-care and consumer-discretionary sectors.
Rising interest rates, political uncertainty (Italy’s status within the European Union and the expected near-term announcement of Special Counsel Robert Mueller’s findings from his investigation into allegations of collusion between Russia and President Trump’s 2016 campaign) and economic uncertainty (inflation and the trade war with China) may all be weighing on the market. But if you look at the long-term returns on the chart above and are not especially worried about the economy, you might still believe the tech sector is a good place for your money and that the recent drop presents a buying opportunity.
Using data as of the close on Oct. 29, we listed all stocks in the S&P 500 information-technology sector and showed how much their forward price-to-earnings ratios had changed from the end of September (the sector was up slightly from Oct. 29 through Nov. 12).
There are 66 stocks in the S&P 500 information technology sector, but we can bring that number to 75 if we include Amazon.com AMZN, -0.35% both share classes of Google holding company Alphabet GOOG, -0.25% GOOGL, -0.13% Facebook FB, +0.43% Netflix NFLX, +0.11% Twitter TWTR, +1.50% and the three video-game developers.
Among these 75 tech stocks, analysts have majority “buy” ratings on 47.
