One indicator says yes. Among top institutional investors, the stocks are under-owned compared to their S&P 500 weightings.
If you go by contrarian indicators, now might be a good time to buy mega-cap technology stocks.
Among the top 100 actively-managed institutional-investor funds, Alphabet (GOOGL) – Get Alphabet Inc. Class A Report, Amazon (AMZN) – Get Amazon.com, Inc. Report, Apple (AAPL) – Get Apple Inc. Report, Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report and Microsoft (MSFT) – Get Microsoft Corporation Report all are under-owned compared to their S&P 500 weightings, according to Morgan Stanley, as cited by Bloomberg.
Morgan Stanley analysts found that the funds on average are underweighted in the stocks by 0.8%. And they note that stocks with low institutional ownership generally rise in the next quarter, as investors react quickly to bullish news so they don’t lag gains by broad market indices.
Morgan Stanley isn’t the only one reporting that investors are going light on tech stocks. A Bank of America survey this month found that fund managers have the biggest underweighting of tech stocks since August 2006.
Looking at Amazon, Morningstar analyst Dan Romanoff is bullish. He puts fair value at $4,100, compared to a recent quote of $2,939.
“Amazon dominates its served markets, notably for e-commerce and cloud services,” he wrote in a commentary this month. “It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader, given its size and scale, which yield an unmatched selection of low-priced goods for consumers.”
E-commerce continues its strong growth, “with the company continuing to grind out market share gains despite its size,” Romanoff said.
Meanwhile, Morningstar analyst Abhinav Davuluri sees Apple as somewhat overvalued. He puts fair value at $130, compared to a recent price quote of $161.45.
“Apple reported stellar fiscal first-quarter results that came in substantially ahead of our estimates, despite supply chain constraints and the ongoing chip shortage,” he wrote in a commentary last month.
“We remain positive on Apple’s ability to extract sales from its installed base via new products and services.” But, “we think the recent stretch of double-digit revenue growth will be difficult to maintain as Covid-19-related Mac and iPad demand subsides.”
As for Alphabet, Morningstar analyst Ali Mogharabi puts fair value at $3,600, compared to a recent quote of $2,567.
“While we expect slower revenue growth this year, we project double-digit growth in YouTube and cloud to continue,” he wrote in a commentary earlier this month.
“We have modeled lower margins in 2022 given Alphabet’s continuing aggressive investment in its cloud offerings. We foresee a return of margin expansion in 2023 due to the steady increase in Google’s cloud recurring revenue.”
