U.S. Investing

Legacy Blue Chip Tech Stocks Marching Quietly Ahead

There isn’t a day that goes by when viewers of financial media channels and outlets don’t get a real-time update on Cathie Wood’s ARKK Fund stocks, or what Tesla Inc. (NASDAQ:TSLA) is trading at in the past hour.

Financial pundits love talking up online gambling stocks, pot stocks, cryptocurrency exchange-traded funds (ETFs), cybersecurity stocks, electric vehicle (EV) stocks and video streaming stocks. While this is considered popular fodder for capturing and keeping eyeballs on cable business channels, all of these companies sport impressive top-line growth, but often have no earnings, no profits and sky-high price-to-earnings (P/E) ratios.

Most, if not all, of these Nasdaq high-beta hotties are trading well off their extreme 2020 highs as a lot of air has come out of their valuations. For some companies, it will be years until they see those highs from last year again, if ever.

Legacy Blue Chip Tech Stocks Marching Without FAANGs

Even some of the vaunted FAANG stocks, composed of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX) and Google’s parent Alphabet (NASDAQ:GOOGL), are stuck in the mud, well off their highs. Shares of Netflix Inc., Amazon.com and Apple Inc., in particular, have gone nowhere for months.

At a time when there is so much attention being given to these notable stocks that are all part of what is called the “crowded tech trade,” shares of International Business Machines Corp. (IBM), Oracle Corp. (ORCL), Dell Technologies (DELL), Cisco Systems Inc. (CSCO), VMWare Inc. (WMW), Hewlett Packard Enterprise Co. (HPE) and Texas Instruments Inc. (TXN) are all trading at or near new 52-week highs. Their performance shows the less popular names may have been undervalued compared to the technology industry titans.

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It is not surprising to me that the market has turned its attention to tech stocks with real earnings, growing dividends, stock buybacks and reasonable P/E ratios, while all the hotties do what is called “reverting to the mean.” That’s Wall Street lingo for multiple contraction to where lofty stocks are repriced to reflect their organic growth and not the hype that surrounds their future earnings potential.

Market ‘Hotties’ Upstaged by Legacy Blue Chip Tech Stocks Marching Forward

At some point, the market will likely bid up the hotties again when it’s fashionable to do so, but it could be a long hot summer for the high P/E stocks if the current pattern is sustained, as I believe it will be. The old Wall Street maxim of “follow the money” still holds true. Right now, the money is buying blue-chip legacy tech with both hands.

I follow technology stocks closely in my Hi-Tech Trader advisory service. Investors seeking to know which technology stocks to buy and others to sell at a given time receive guidance from me every week about the market trends.

For more information about how to invest using subscription-based Hi-Tech Trader, click here. I track all the latest technology advances such as 5G, cybersecurity stocks, electric vehicle (EV) stocks and video streaming stocks, so it avoids you needing to become ensconced in any of them. Let me take care of the research and recommending for you.

It is times like Memorial Day, upon which we honor those who have made the ultimate sacrifice to provide the freedom we enjoy today, that we have a chance to reflect upon and fully appreciate what is so good about America, the country where most of us live. Let me allow you to focus on enjoying the freedom to travel, do what you want and spend your time how you wish, not just on Memorial Day, but during the rest of the year.

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Bryan Perry

For over a decade, Bryan Perry has brought his expertise on high-yielding investments to his Cash Machine subscribers. Before launching the Cash Machine advisory service, Bryan spent more than 20 years working as a financial adviser for major Wall Street firms, including Bear Stearns, Paine Webber and Lehman Brothers. Bryan co-hosted weekly financial news shows on the Bloomberg affiliate radio network from 1997 to 1999, and he’s frequently quoted by Forbes, Business Week and CBS’ MarketWatch. He often participates as a guest speaker on numerous investment forums and regional money shows around the nation. With over three decades of experience inside Wall Street, Bryan has proved himself to be an asset to subscribers who are looking to receive a juicy check in the mail each month, quarter or year. Bryan’s experience has given him a unique approach to high-yield investing: He combines his insights into dividend-paying investments with in-depth fundamental research in order to pick stocks with high dividend yields and potential capital appreciation. With his reputation for taking complex investment strategies and breaking them down to easy-to-understand advice for investors, Bryan also has several other services. His other services range from products that generate a juicy income flow to quick capital gains by using a variety of other strategies in his Premium Income Pro , Quick Income Trader, Breakout Profits Alert, Micro-Cap Stock Trader and Hi-Tech Trader services.