The unexpected Brexit vote on June 23 wiped $3.0 trillion off of global stocks in the worst two-day sell-off in history. Since then, investors have shrugged off the Brexit vote and North American markets have largely rebounded.
While the S&P 500 continues to trade near record levels, uncertainty remains and investors continue to be cautious. Of course, it’s not without cause. There are concerns about the U.S. economy; the slowdown in China, Japan, and the eurozone; as well as the ongoing adoption of monetary easing strategies, including the onslaught of negative rates.
Many are also hedging their bets on when the Federal Reserve might hike rates again. Correlation is not causation, but things didn’t go too well on Wall Street the last time the Fed raised rates back in December. There’s also an excellent chance that the Bank of England could introduce additional monetary easing strategies that could make the rate go to zero from the current record-low rate of 0.5%.
The point is that there is plenty for investors to be nervous about but should they be? It might be a good time to consider the recent past and remember why it’s a good idea to sometimes ignore your flight instinct and fight. Why? Because the markets always go through cycles.
If you can recall, Wall Street kicked off 2016 with the worst start to a year ever. Staging a remarkable comeback, it wasn’t based on any broad-based fundamental strengths in the underlying stocks, but investors still helped resuscitate Wall Street nonetheless. In fact, broaching a new record means Wall Street has rebounded off every other depression, recession, crash, and sell-off.
If things happen in threes, we still have one more stock market–gutting event to look forward to in 2016. That translates into one more opportunity to get in ahead of the curve.
Broad-Based Sell-Off Hammers Tech Stocks…or Did It?
Both the early January and Brexit sell-offs were broad-based and tech stocks were part of the spiraling free-fall. Case in point is the S&P 500 North American Technology Sector Index, which is down -0.21% year-to-date. The S&P 500, on the other hand, is up roughly three percent. (Source: “S&P North American Technology Sector Index,” S&P Indices, July 5, 2016.)
In the midst of the January/February sell-off, the same index lost 14% of its value before recovering. During the Brexit sell-off, it tumbled 3.2%. But again, this index has clawed its way back and is essentially flat year-to-date.
On a brighter note, the S&P 500 North American Technology Sector Index is up six percent year-over-year. The S&P 500 is up less than one percent, so it’s all about perspective. The future looks bright, since the second half of the year is typically a stronger period for tech stocks.
Three of the Best Tech Stocks
Despite ongoing uncertainty, there are still many tech stocks that have tumbled recently but may continue to perform well.
1. Apple Inc. (NASDAQ:AAPL)
Apple is down 15% since the middle of April and 24% year-over-year, but the company isn’t going anywhere. In fact, thanks to the Brexit, Apple is at a great support level. Toss in its strong fundamentals, a strong cash position, a solid growth outlook, a 2.4% annual dividend ($2.28 per share), and a median12-month target of $120.00, and you’re looking at great medium-term growth. (Source: “Apple Inc.,” CNN Money, July 5, 2016.)
2. Facebook Inc (NASDAQ:FB)
This is another tech stock no-brainer. While the company’s share price is up 30.5% year-over-year and 12% year-to-date, the moneymaking machine still has lots of room for growth. Of the 44 analysts providing 12-month price forecasts, the median target is $145.00 per share, a 27.2% premium over the current $114.00 share price. (Source: “Facebook Inc,” CNN Money, July 5, 2016.)
3. Citrix Systems, Inc. (NASDAQ:CTXS)
This company has a lot of room to run. The company’s share price is up roughly 6.5% since the beginning of the year, but it still hasn’t recovered from the Brexit shock. The company needs to climb around eight percent just to get to its pre-Brexit level of around $85.00 per share. First-quarter revenue and earnings were up significantly and provided a strong outlook for the remainder of the year. The median 12-month price forecast for Citrix is $90.00, for a 13.55% increase over the current price of $79.25. High estimates of $100.00 per share represent a 26.2% increase. (Source: “Citrix Systems, Inc.,” CNN Money, July 5, 2016.)