By Michael Brush, MarketWatch
Universal Pictures/Courtesy Everett Collection
While insiders appear to be telling us it’s time to start buying the pullback in stocks, not everyone is convinced.
“There is room for a little more freaking out,” says Kevin Landis, who manages the Firsthand Technology Opportunities Fund /zigman2/quotes/203635118/realtime TEFQX +0.36% . It’s all about the fear of the unknown. “When a panic really gets going, it can be more of an enthusiastic panic than you expected.”
Landis would know. He managed money through the wreckage of the tech bubble aftermath two decades ago, and every major “freakout” since.
The good news is that all these slumps taught us a simple lesson. Once the panic subsides, human ingenuity still survives and thrives, and drives progress, with tech leading the way. It’s the same with virus scares. The horror of the Spanish flu was followed by the Roaring ’20s, which was a great time to invest, points out Landis. Some executives are already buying shares of their own companies.
So it makes sense to check in now with an outperforming tech fund manager like Landis to create a shopping list of tech stocks to consider picking up in the mayhem.
Why should you listen to Landis? His Firsthand Technology Opportunities Fund beats his Morningstar U.S. Technology Index by 2.5 percentage points annualized over the past 15 years, and 5.1 percentage points annualized over the past three years, says Morningstar. The fund has underperformed recently because he raised some cash and sold the popular FAANG names a little too early last year. But the fund was still up 28.5% in 2019.
Here’s his guide to several next-generation tech stocks to consider. They’re all plays on trends that won’t be derailed by coronavirus. Several of these companies may actually do better because of the virus scare.
This stock is off 40% from its 52-week high. But the company is arguably an inadvertent beneficiary of the COVID-19 virus panic. That’s because virus fears could lead to “nesting,” or staying at home to avoid contracting the illness.
“Everyone is buying Netflix /zigman2/quotes/202353025/composite NFLX +8.07% because they think we may all stay at home,” says Landis. (Netfix shares hover near all-time highs in the selloff.) But Roku seems like a logical buy here, too, on the same logic. After all, this is the year of the “streaming wars.” And Roku is a beneficiary of these wars, points out Landis.
Roku offers a platform that hosts TV channels. It collects revenue by licensing its technology to smart-TV makers, and through revenue-sharing agreements with streaming services like Netflix.
“Roku is trying to be the Switzerland of the streaming wars. Every time someone steps in, they benefit,” says Landis.
Chegg offers online tutorial services and textbook rentals for students. Its services were already popular before the COVID-19 outbreak. The number of subscribers grew 29% last year to 3.9 million. Sales rose 31% to $332 million. The company expects sales to possibly hit $527 million this year.
Now, the virus may jolt demand.