If technology stocks and ETFs were part of your value investing strategy in the past several years, you probably have plenty to be happy with. Microsoft (MSFT), for example, has seen a book value increase of more than 24% in the past year. Apple (AAPL) share prices rose more than 27% in 2021.
Will technology and FAANG stocks continue to perform well in 2022, or are they due for a correction? Value investors will want to look at the overall financial health and real potential of the companies and not just trade on trends of today.
Here is my take on some tech options and their possibilities for value investing in 2022.
Microsoft
Microsoft is perhaps the best known of the software-as-a-service (SaaS) stocks, and it has a monopoly with programs such as Word and Office. Whether working at home or working in person, Microsoft will be in use. With its net income up 47.6% year over year, Microsoft is producing real results in line with its stock price increase, so I think it could be a solid value option.
Apple
Apple has built a consumer tech products empire with a reputation for quality. Apple has an iPhone with 5G capability that’s expected to be launched in 2022, which could give share prices a boost. The price-earnings ratio is a little high, but it is on solid financial footing, so it could still represent an attractive growth option.
Meta Platforms
Meta Platforms (FB, Financial), which changed its name from Facebook late last year, has had plenty of public relations nightmares in 2021, but its growth plans in the metaverse, a 3D version of the internet that is currently in its early stages, may bring new investor interest to the company. Even in a year punctuated by PR issues, the company's Ebitda rose 55.40.%, and the growth of its core social media business remains strong.
Netflix
Gone are the early days of the Covid-19 pandemic lockdowns that gave Netflix (NFLX, Financial) a boost. The stock took a beating in 2021 as subscription growth slowed, and it faces competition from myriad new streaming services. It’s expected that Netflix will show a decline of per-share profits of more than 30% at its next earnings release. The company has a high price-earnings ratio that should make a value investor look to other choices for 2022.
Amazon
With rising profits in the past year, Amazon (AMZN, Financial) is still growing fast. At 65.79, its high price-earnings ratio ratio might not put it in value territory, but few tech companies have the firm financial foundation and number of monopolies that Amazon does. With a strong presence in streaming content, cloud services and grocery (via Whole Foods) as well as its cash cow online shopping business, Amazon has plenty of ways to grow in 2022.
Alphabet
Alphabet (GOOG, Financial)(GOOGL, Financial), the parent company that owns Google, has profit growth outpacing the S&P 500 and is among the world’s largest companies. With a price-earnings ratio that’s among the lower ones among the stocks in this article, Alphabet could be a quality addition to a value-based portfolio, in my opinion.
Zoom
Zoom (ZM, Financial) got loads of growth during the early days of the pandemic, when everything from board meetings to cocktail parties moved to the videoconferencing platform. Given that pandemic exhaustion and moves to bring teams back to in-person work could cause Zoom profits to fall, I think there are better tech options for value investors.
Technology Select Sector SPDR Fund
ETFs are a low-fee way for value investors to get the safety of diversification within a sector, and theTechnology Select Sector SPDR Fund (XLK, Financial) is one that has a record for outperforming the market over the past 10-year, five-year and one-year periods. This ETF’s top holdings include Apple and Microsoft as well as financials such as Mastercard (MA, Financial) and Visa (V, Financial), so it brings exposure that tempers risk.
iShares Global Tech ETF
The iShares Global Tech ETF (IXN, Financial) has smaller percentages of American stocks such as Apple and Microsoft and additions such as Taiwan Semiconductor (TSM, Financial) and Samsung Electronics (XKRX:005930, Financial). For value investors who are interested in international tech stocks, this option provides greater diversification, which could result in less risk.
VanEck Biotech ETF
With performance similar to that of the S&P 500, theVanEck Biotech ETF (BBH, Financial) includes biotech holdings such as Moderna (MRNA, Financial), Amgen (AMGN, Financial) and Regeneron (REGN, Financial). With Covid-19 still a global worry in 2022, biotech will be at the forefront in health care research. The best option for adding biotech into a portfolio is to buy shares of an ETF in the sector, in my view, due to the high risk of the individual stocks.
