The Nasdaq has led the broader markets lower since the start of the year as inflation concerns ripple through technology names. However, mega cap tech stocks have shown relative strength and one analyst sees opportunity in a few of the market giants.
What To Know: Apple Inc AAPL, Microsoft Corp MSFT and Alphabet Inc GOOG could be the best investments over the next two to five years, BK Asset Management’s Boris Schlossberg said Tuesday on CNBC’s “Power Lunch.”
“Warren Buffett once said that ‘I would rather own a wonderful company at a fair price than a fair company at a wonderful price’ and that’s really my thesis here,” he said.
Apple is trading at a forward price-to-earnings multiple around 21, according to data from Benzinga Pro. Microsoft’s forward earnings multiple is just over 22, while Google’s multiple has fallen to less than 19 times forward earnings.
With all three stocks having fallen more than 25% year-to-date, Schlossberg doesn’t see much downside risk over the long term.
“If you own these three bluest of the blue chips, Microsoft, Apple and Google, for the next two to five years, there’s little that I can think of that could go really wrong in this position,” he said.
“These are companies that have massive, massive market dominance over their spaces. Their products essentially have a perpetual demand, and they are huge cash cows.”
Schlossberg also highlighted the strong growth rates of the trio, which are averaging around 20% growth, he said: “To me that’s an incredible value at this point.”
He told CNBC that he recommends investors scale into positions instead of buying all at once. Investors can look to dollar-cost average into the blue chip names or sell puts and incrementally build a position, he said.
“There’s obviously no way to know if we’re at the bottom of the move here or not, but my point is that we are at a fair valuation and if you look two to three years forward, the growth of these companies is almost certain to surpass where we’re at, at this point,” Schlossberg said.
AAPL, MSFT GOOG Price Action: At time of publication, Apple was up 0.42% at $132.44, Microsoft was up 0.32% at $243.04 and Alphabet was up 0.34% at $2,144.72.
Photo: courtesy of Apple.