So maybe we’ve hit the bottom for tech stocks. A prominent Nasdaq bear thinks the tech-heavy index will enjoy a big surge by year-end. And indeed, the Nasdaq Composite is bulling its way out of the December slump that put it in a bear market.
Paul Meeks, who made a name for himself running six tech mutual funds for Merrill Lynch in the late 1990s and early 2000s, told CNBC that “when you get to December 31 of this year, the Nasdaq will be up double digit in calendar 2019.” He said he expected Nasdaq to outpace both the Dow Jones Industrial Average and the S&P 500 this year.
But at the end of 2018, when tech stocks were tumbling, he cautioned that they were “uninvestable.” This sentiment is one of several downbeat investment developments that has caused pension funds, for example, to expect lower returns this year.
The reason for the switch: Tech stocks have lost sufficient value that some are worth buying now, provided that investors are cautious.
Since its Christmas Eve low, the Nasdaq has climbed almost 18% through Friday. Fourth quarter earnings reports for the biggest tech names were mixed, but at least have provided enough optimism to propel the Nasdaq higher.
Apple, for instance, pared its quarterly revenue forecast for the first time in more than 15 years, pointing to plummeting iPhone sales in China. Institutions and individual investors alike took a beating on the once high-flying stock. But the fact remains that Apple still turns robust profits and sports an enormous cash trove. No wonder that, with the stock down some 40% from the autumn, investors began snapping it up after New Year’s Day.
Meanwhile, Facebook posted record earnings in the last quarter, and this despite all the heat it is getting over privacy and other issues from pension heads, regulators, and lawmakers.
Now managing a small fund called the Wireless Fund, Meeks still owns the FANG stocks—Facebook, Amazon, Netflix, and Google parent Alphabet—although he cautioned against adding more at this time. He said he believed they will face more of a rocky road in the next few months due to ongoing US-China trade clashes.
Overall, however, Meeks said, “I’m starting to creep out of the bunker.”