Can we be wrong? Of course!
From a note to Wedbush clients that landed on my desktop Friday:
Let’s call it like it is: it’s probably the most complex macro backdrop in a 100 years. The world economy and consumers coming out of a once in a century pandemic, once in a fifty year supply chain disaster, raging war in Ukraine, sky high inflation, Fed chasing from behind, black box/machine algorithmic trading, and the cherry on top of the sundae is a social media world where all data points are microanalyzed by millions and can influence markets quickly in seconds…
In a nutshell, this is not a Dot-com Bubble 2.0 in our opinion, it’s a massive over correction in a higher rate environment that will cause a bifurcated tech tape with clear HAVES and HAVE NOTS of tech. Will there be the Pets.com, Webvan, Worldcom, and Global Crossings of 2022? Sure there will be many tech and EV players that go away or consolidate, but we pick the winners from our vantage point. All risk assets are selling off in tandem, which is why in this note we put together our Wedbush Tech Playbook to use this deleveraging and degrossing historic sell off to pick up the best disruptive tech names and what we view as near trough multiples.
Stress test models. Can 2022 and 2023 numbers come down for many of these enterprise players including stalwarts like Microsoft? Of course they can; the market is factoring in Street numbers coming down significantly from current estimates which we believe is way overdone. We have stress tested our tech models and believe in a worst case scenario Street numbers for 2023 come down by less than 10%, while in a base case scenario they are unchanged from today and in a soft landing scenario actually go up from current numbers. We believe these stocks are pricing in a “hard landing” with fears abound.
- Wedbush Tech Playbook-Large Cap Top Picks: Apple, Microsoft, Tesla
- Cyber Security Basket: Palo Alto Networks, Checkpoint, Zscaler, Fortinet, Tenable, CyberArk
- Value Tech with Strong End Markets: NICE Systems, Verint, Progress Software, Ziff Davis,
- Consensus EV Names to Navigate Storm: Tesla, Li-Cycle, XOS Trucks, Hyzon.
“You sound like a broken record the last 4 months! Why you writing this piece?” A good question many reading this will be asking so let’s address it head on. Our tech playbook list is combination of tech stalwarts, healthy exposed end market tech names, and value tech stocks to navigate this dark storm. Can we be wrong? Of course! and we have been wrong many times like every other human over the years in the markets. HOWEVER, our strength over the decades has been handholding in the storms and picking the tech winners in times of panic-which is why we wrote this piece for our clients in this scary market backdrop.
My take: I count more than Ives’ usual quota of rhetorical questions. Might he be a tad defensive?