U.S. technology stocks are currently under significant pressure, as noted by Citigroup Inc. strategists per Bloomberg. Despite a recent selloff, investor positioning remains heavily weighted toward bullish sentiment. According to the team led by Chris Montagu, there is still approximately $22.5 billion in long positions on futures tied to the Nasdaq 100 Index, which is tech-heavy.
Likelihood of Losses on Tech Long Positions
Montagu indicated that any negative economic data could put substantial pressure on these long positions, which are facing an average potential loss of 7.6%. This could, in turn, cause any downward movements in the market in the near term.
Impact of High Tech Valuations and Economic Concerns
Tech stocks have been at the forefront of a broader rout in global financial markets, driven by concerns over high valuations amid a slowing U.S. economy. Although the Nasdaq 100 has recovered its losses from early last week, it remains about 10% below its record high reached in July.
A survey by Bank of America Corp. reveals that investor optimism regarding large technology companies or a soft economic landing remains high. However, confidence in large-cap growth stocks, particularly those subjugated by tech, of being the leaders of a new U.S. equity bull market, slightly fell from 47% in July to 36%.
Low P/E Tech ETFs to Play?
Against this backdrop, investors can invest in low price-to-earnings ratio (P/E) tech exchange-traded funds (ETFs) as these are still not richly valued.
Technology Select Sector SPDR Fund XLK – P/E 23.77X
The underlying Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics. The fund charges 9 bps in fees.
SPDR NYSE Technology ETF XNTK – P/E 23.44X
The underlying NYSE Technology Index is composed of 35 leading U.S.-listed technology-related companies. The fund charges 35 bps in fees.
Fidelity Cloud Computing ETF FCLD – P/E 20.92X
The underlying Fidelity Cloud Computing Index reflects the performance of a global universe of companies across the market capitalization spectrum that provide products or services enabling the increased adoption of cloud computing, characterized by the delivery of computing services over the internet. The fund charges 39 bps in fees.
SPDR S&P Semiconductor ETF XSD – P/E 20.85X
The underlying S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index. The fund charges 35 bps in fees.
Global X Internet of Things ETF SNSR – P/E 20.66X
The underlying Indxx Global Internet of Things Thematic Index invests in companies that stand to potentially benefit from the broader adoption of the Internet of Things. This includes the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet. The fund charges 68 bps in fees.
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Technology Select Sector SPDR ETF (XLK): ETF Research Reports
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
Global X Internet of Things ETF (SNSR): ETF Research Reports
SPDR NYSE Technology ETF (XNTK): ETF Research Reports
Fidelity Cloud Computing ETF (FCLD): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
