There’s been an exodus from US technology stocks in 2022, causing a 15% fall in the Nasdaq. The heady valuations of ‘spec-tech’ growth stocks have been hit by a double whammy of rising interest rates and fears of a recession.
Yet US tech stocks remain in favour with UK retail investors. According to Freetrade’s Retail Investor Barometer, Tesla, Meta, Apple and Alphabet were the most-bought shares on their platform in February. Freetrade’s senior analyst, Dan Lane, commented that “Behind those valuations are titanic businesses still at the forefront of how we live our lives.”
Let’s take a closer look at the most-bought shares to see what they’re signalling about current investor appetite for the technology sector.
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What were the most-bought shares in February?
For the second month running, US technology stocks accounted for six of the most-bought shares on Freetrade’s platform. Vanguard’s S&P 500 ETF remained a popular choice, with BP and Evraz Steel bringing up the rear.
Position
Company
Previous month
1
Tesla
1
2
Meta (formerly Facebook)
11
3
Apple
2
4
Alphabet
7
5
BP
17
6
Microsoft
3
7
Amazon
4
8
Vanguard S&P 500 UCITS ETF (Acc.)
5
9
Vanguard S&P 500 UCITS ETF (Dist.)
6
10
Evraz Steel
50
What can we learn about the most popular tech stocks?
1. Tesla
Tesla was the most-bought stock in February, narrowly beating Meta. Although its share price has fallen by nearly 30% this year, its eye-watering price-to-earnings ratio of 176 remains well above its peers.
Why is Tesla attractive to investors? Probably because it’s one of the dominant players in the booming electric car market. The Tesla Model S took the accolade for the best-selling electric car in the world in 2021, according to Statista.
And ReAnIn forecasts the global electric car market will grow by 21% annually over the next five years. As a result, Tesla’s current share price is attracting investors who believe in Elon Musk’s vision of Tesla dominating the future of driving.
2. Meta
Meta (formerly Facebook) has certainly been hit hard by the tech sell-off, with a 40% fall in its share price this year after a stream of bad news.
First, its latest earnings figures fell short of market expectations, causing a 26% crash in its share price (a record daily loss for a US firm). Its clash with European regulators was followed by a fall in daily user numbers for Facebook for the first time in its 18-year history. Meanwhile, the rise in popularity of TikTok poses an increasing challenge to its social media presence among young people.
That said, Meta shares are currently trading at around 200p for the first time in almost two years. It seems that UK investors are hoping for a rebound in its share price.
3. Apple
Unlike Tesla and Meta, Apple’s share price has been relatively resilient in 2022, falling by only 7%. Indeed, it became the first US company to hit a $3 trillion market capitalisation in January after announcing record revenues.
As global demand for iPhones continues to outstrip supply, Apple may be viewed as a relatively safe haven for investors looking to invest in tech stocks. Business Insider commented that “The Apple fundamentals are the envy of most others. Steve Jobs built a golden goose and a cash machine.”
4. Alphabet
Alphabet is another industry behemoth, owning products such as Google and YouTube. Like Apple, its share price has been relatively immune to the tech stock downturn, falling by less than 10% this year.
Alphabet also has strong fundamentals, with a huge war chest of cash and impressive revenue growth. It’s prompted legendary fund manager Terry Smith to add Alphabet to his Fundsmith Equity portfolio for the first time.
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Final thoughts
It’s likely that US technology stocks will continue to face headwinds in 2022. Soaring inflation means rising interest rates. And higher interest rates have a knock-on impact on the valuation of high-growth companies by reducing the present value of their cash flows.
Here at The Motley Fool, we advocate buying and holding quality shares for the long term, rather than trying to ‘beat the market’. Dan Lane from Freetrade also believes that investors “buying [US tech stocks] at more reasonable valuations now is an insight into just how long-term these thinkers may be.” This means focusing less on current share prices and more on companies with strong fundamentals and a competitive advantage.
If you’re looking to buy or sell shares in a stocks and shares ISA, it’s worth checking out our top-rated ISA providers picked by our experts. If you’re an active investor, the IG Stocks and Shares ISA is one of our top choices.
We’ve also produced a guide to our top-rated cheap share dealing accounts if you’re interested in opening a trading account to buy and sell shares.
The post US tech stocks top the list of most-bought shares by UK investors last month appeared first on The Motley Fool UK.
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