The market experienced a sell-off earlier this week. So is now a good time to buy into tech? Luke Barrs, Goldman Sachs Asset Management Fundamental Equity Managing Director, joins Yahoo Finance to give his insight into the tech trade.
“Selectively, there’s great opportunity across the broad market, but specifically in tech as well. There are some transformational themes that are coming through that are driving earnings,” Barrs says.
He notes that there was likely some froth in the market, so the recent sell-off was likely healthy for stocks.
“When we come to technology, what is very apparent is not just the macroeconomic picture, but also the fact that people want to see… evidence that that gen AI trade is actually driving positive outcomes,” Barrs adds.
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date 2024-08-09 16:22:17
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author UCEAZeUIeJs0IjQiqTCdVSIg
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Title: There’s ‘great opportunity’ in tech stocks: Strategist says
Goldman Sachs Asset Management’s managing director, Luke Bars, shared his insights on the current state of the tech market, saying that “selective” investors can find “great opportunity” in the sector. According to Bars, the recent market correction has led to more attractive valuations, making it a good time to invest.
Bars emphasizes that it’s essential to decompose the tech sector, as not all companies are created equal. He highlights the existence of “transformational themes” in tech, such as artificial intelligence, which are driving earnings growth and cash flow generation. However, he advises being cautious when investing in hyperscalers, as their valuation has reached unsustainable levels.
Bars also discusses the importance of looking for evidence of fundamental strength in software companies, citing the need for “clear proof statements” of their ability to generate positive earnings outcomes. He suggests that investors should focus on businesses with large market share, as they are more likely to maintain their position if they can stay ahead of the curve in terms of adopting newer technologies and capabilities.
In terms of small caps, Bars believes that a soft landing scenario is more likely, with the Federal Reserve normalizing interest rates gradually. This should bode well for small caps, which tend to outperform large caps after the first rate cut. According to historical data, small caps typically see a 10-15% outperformance over the next 12 months following the first rate cut.
Overall, Bars’ message is one of optimism, but with a cautious approach. He recommends being selective and focusing on companies with strong fundamentals, as well as being patient and waiting for evidence of “clear proof statements” of their ability to deliver positive earnings outcomes.
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