Investors seem to have lost their appetite for tech stocks this year amid a flight to safety. Tuesday’s sell-off on Wall Street saw the six largest US technology companies shed more than $500 billion in market value after a hotter-than-expected inflation report in August sent stocks tumbling. Paul Meeks, chief technology investor, is advising investors to stay away for now – unless one is prepared to punch holes until the storm subsides. “I think technology should continue to be avoided for now unless one is really a long-term investor. Now, a lot of people say they are, but they are affected by short-term losses, so they really aren’t,” Mix, portfolio manager at Independent Solutions Wealth Management, he told CNBC’s “Street Signs Asia” on Thursday. “Add a stock patch to the existing problems with semiconductors, and that’s another reason to stay away from that because the sector probably can’t outperform without semiconductor recovery.” Against this background, the Meeks choose to remain on the defensive in the sector, preferring safer bets with “abnormally high cash levels”. Here’s what he has to say about two tech giants: Apple and Samsung. Short-term exposure to semiconductors, Meeks prefers Apple due to its relative safety. “The most troubled part of the tech sector around the world right now is the semiconductors. They have all kinds of problems. First, the side effects of the Covid-19 pandemic, but recently it has only gotten worse because there are now stock patch semiconductors all over the world. “. He believes Samsung will be “severely affected” as it derives nearly a third of its revenue from its memory chip business. The South Korean electronics giant saw 18% growth in its semiconductor sector in the second quarter of the year, a performance Mix described as “heroic in the downturn.” But he said investors should expect “some damage to be seen” in the sector in the third quarter, as the stock correction comes “fast and furious” after Samsung announced its earnings. So Meeks believes Apple is a safer bet in the short term because it doesn’t have as much exposure to the embattled semiconductor sector. He said, “The semiconductor business is a very good business, but it is very cyclical. While Apple does a lot of things well, it is not in the semiconductor business.” Samsung long-term bet? In the long run, however, Mix believes Samsung is the better bet. “In the long run, once you get past the short and mid-term risks, I’ll probably prefer Samsung. While they’re two great companies, Samsung is a lot cheaper,” he said. “What I see is that a year or so from now you might want to be at Samsung. Cheaper valuation, bigger upside and you’d be ready to get a good surprise in semiconductors. I’m just worried about the next couple of periods between here and then.” Shares in Apple are down 12.2% this year, although they have beaten the high-tech Nasdaq Composite, which has lost nearly 25% of its market value in the same period. The company is rated by 78% of the analysts covering it, who give it an average potential high of 17.5%, according to FactSet data. Samsung lost nearly a third of its market value in this year’s tech defeat, but is ranked as a buy by 94% of analysts covering the stock. FactSet data shows that the stock has an average potential rally of 43.1%.
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