Many cautious investors in recent years have shed their wariness of tech and bought shares of high-flying companies that are building the future.
Even the previously tech-phobic Warren Buffett (Trades, Portfolio) reevaluated his stance on the sector, buying a prodigious amount of Apple (AAPL, Financial) stock and stamping it with his approval again at Berkshire (BRK.A, Financial)(BRK.B, Financial)’s shareholder conference in the spring. Someone at his company then bought almost $1 billion of Amazon (AMZN, Financial) stock in the first quarter.
Embracing the sector five years ago via the S&P Technology ETF (XLK, Financial) would have given an investor an 87.35% gain – more than any of the 11 other select sector SPDRs, and double the 42.63% gain for the S&P 500 index. This year it has slowed. Tech rose 13.96% since Jan. 1, making it the second best-performer in the index behind an 18.1% gain for real estate, but beating the 9.48% rise for the index.
Past performance is no guarantee of future results, of course. Charles Schwab attributed the sector’s pullback to tariff tensions between China and the U.S., as it draws the majority of its revenue from overseas.
“Concerns about slowing global growth, as mentioned, appear to be ramping up and could negatively affect the group, while further trade dispute escalation with China could also weigh on the sector , as we saw recently. Additionally, although we still believe in the need for companies to expand their spending on capital improvements, especially in the technology area, we are concerned that trade concerns may delay some of that spending,” analyst Brad Sorensen wrote in a market commentary on May 23.
Nonetheless, he praised the companies’ strong balance sheets, low debt, high dividend payouts and increased share buybacks. The mix of positive and negative characteristics caused him to be neutral on the stocks “for the time being.”
A decline can also present a chance to buy at a lower price. In the first quarter, these were the stocks the most investors GuruFocus tracks were betting on: Facebook (FB, Financial), Microsoft (MSFT, Financial), Alphabet (GOOG, Financial), Nvidia (NVDA, Financial) and Micron Technology (MU, Financial).
Facebook shares were purchased by 23 investors GuruFocus tracks. Stanley Druckenmiller (Trades, Portfolio) started the largest position at 0.30% of his long portfolio. Pau Tudor Jones made the largest increase to his holding at 199.8%.
Facebook Inc. has a market cap of $478.13 billion; its shares were traded around $167.50 Tuesday with a price-earnings ratio of 24.90 and price-sales ratio of 8.23. Facebook Inc. had an annual average earnings growth of 48.30% over the past five years.
Twenty investors GuruFocus tracks bought shares of Microsoft in the first quarter. Robert Karr (Trades, Portfolio) started the largest position at 8.11% of his portfolio. Paul Tudor Jones (Trades, Portfolio) made the largest addition, increasing his holding by 702.71%.
Microsoft Corp. has a market cap of $943.75 billion; its shares were traded around $123.16 with a price-earnings ratio of 27.38 and price-sales ratio of 7.82. The trailing 12-month dividend yield of Microsoft Corp. is 1.45%. The forward dividend yield of Microsoft Corp stocks is 1.54%. Microsoft Corp. had an annual average earnings growth of 7.50% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 4.5-star.
Alphabet Inc. (GOOG, Financial)
Seventeen investors GuruFocus tracks bought shares of Alphabet in the first quarter. Steve Mandel (Trades, Portfolio) started the largest position at 3.05% of his reported portfolio. Al Gore (Trades, Portfolio) made the largest increase, at 75.08%.
Alphabet Inc. has a market cap of $731.96 billion; its shares were traded around $1053.05 with a price-earnings ratio of 26.46 and price-sales ratio of 5.39. Alphabet Inc. had an annual average earnings growth of 15.10% over the past 10 years. GuruFocus rated Alphabet Inc. the business predictability rank of 3.5-star.
Nvidia was purchased by 10 investors GuruFocus tracks. Andreas Halvorsen (Trades, Portfolio) started the largest position, at 1.94% of his reported portfolio. Mario Gabelli (Trades, Portfolio) made the largest increase, at 88.14%.
Nvidia Corp. has a market cap of $87.09 billion; its shares were traded around $143.00 Tuesday with a price-earnings ratio of 27.02 and price-sales ratio of 8.32. The trailing 12-month dividend yield of Nvidia Corp. is 0.45%. The forward dividend yield of Nvidia Corp. is 0.48%. Nvidia Corp. had an annual average earnings growth of 36.50% over the past 10 years. GuruFocus rated Nvidia Corp. the business predictability rank of 3-star.
Micron Technology (MU, Financial)
Ten investors GuruFocus tracks bought shares of Micron Technology. John Buckingham (Trades, Portfolio) started the largest position, at 0.72% of his reported portfolio. Philippe Laffont (Trades, Portfolio) made the largest increase, at 8,334.97%.
Micron Technology Inc. has a market cap of $38.17 billion; its shares were traded around $34.49 with a price-earnings ratio of 3.15 and price-sales ratio of 1.36. Micron Technology Inc. had an annual average earnings growth of 28.20% over the past 10 years. GuruFocus rated Micron Technology Inc. the business predictability rank of 3.5-star.
See more tech stocks investors are buying at the S&P 500 screener here.
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