The rerating of the tech sector has been one of the standout stories of 2022 but after the US NASDAQ’s 18% correction since November last year we believe it’s time for the brave investor to start considering some of the beaten up names, if only for a short sharp recovery.
- US NASDAQ futures fell 1.9% overnight to test Januarys low, a test 3-5% below this swing low feels inevitable in the next 24-48 hours.
- However our preference is this will become the final leg down, at least for the initial tech unwind, and the next 10-15% is up, not down.
The underweight growth story has rapidly become a very crowded trade and MM believes it’s one of those rare times to don a contrarian hat targeting a lack of follow through on the downside. The latest Bank of America (BoFA) showed fund managers are holding their largest underweight tech position since 2006 providing plenty of reason for an upside squeeze. There are a couple of ways to play this view in our opinion:
- Simply be patient and look to reduce tech exposure into strength as opposed to sell current weakness.
- Alternatively more active investors can look to increase tech exposure into current weakness.
MM likes the risk / reward towards tech into fresh 2022 lows
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