Long-Term Investors Prefer Microsoft And Amazon Over Tesla And Facebook, Tech Survey Says

One of the biggest debates on Wall Street in 2020 has been whether or not the tech sector is currently experiencing a bubble like it did during the dot com era roughly 20 years ago. DataTrek Research recently conducted a survey of more than 300 subscribers to determine how the average investor feels about tech stocks these days.

When asked if they believe the tech sector is currently experiencing a market bubble, 56% of respondents said no and just 44% said yes.

The Nasdaq is up another 36.3% in the past year despite the first economic recession in more than a decade. Even with the skepticism over tech stock valuations, 85% of respondents believe big U.S. tech stocks have additional upside over the next 12 months, with 70% expecting at least 5% additional upside.

Survey respondents said COVID-19’s impact on American’s use of technology (33%) and Federal Reserve stimulus (27%) are the two biggest factors driving tech stock outperformance in 2020.

Possible Bubble Stocks: DataTrek also asked about the valuations of popular tech stocks Facebook, Inc. FB, Amazon.com, Inc. AMZN, Alphabet, Inc. GOOG GOOGL, Apple, Inc. AAPL and Microsoft Corporation MSFT.

Respondents named Facebook (37%) and Amazon (33%) as the most overvalued tech stocks in the group.

However, when asked about which stocks they would be most comfortable holding for the next 10 years among the five stocks mentioned above and Tesla Inc TSLA, respondents changed their tune on Amazon. Investors were most comfortable holding Microsoft (36%) and Amazon (29%) for the long haul and least comfortable buying and holding Tesla (4%) and Facebook (2%).

The Good News: The good news for tech investors is that, bubble or not, survey respondents said the tech sector remains the place to be over the next decade. An overwhelming 85% of respondents expect the tech sector to outperform the S&P 500 as a whole over the next decade.

“Perhaps ‘Big Tech’ is different than earlier forms of Technology stock investing because the business models here touch so much more of the global economy and our lives than ever before,” DataTrek Research co-founder Nicholas Colas said. “In the end, that is the best explanation for why Technology stocks writ large are not in a bubble.”

Benzinga’s Take: Given the shifting role of technology in the global economy, it’s understandable for tech stocks to command a premium valuation relative to other sectors of the market. However, investors should be particularly careful with stocks that have seen extremely large changes in share price in a relatively short amount of time and have stretched valuations even relative to their technology peers.

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