If certain investment corners have gone through roof this year despite trade war fear and a sudden slowdown in global growth, the tech space is one of them. SPDR Dow Jones Industrial Average ETF DIA is up 1.7%, SPDR S&P 500 ETF SPY has added about 4.8% and the tech-heavy Invesco QQQ Trust QQQ has advanced nearly 13.8% in the year-to-date frame (as of Jul 24, 2018).
Despite being vulnerable to U.S.-Sino trade tensions, the tech space has proven its worth thanks to improving industry fundamentals, rapid adoption of emerging technology and President Trump’s proposed corporate tax reform.
Are Overvaluation Concerns Rife?
After such an upward journey, overvaluation concerns are sure to crop up in investors’ mind. Morningstar equity analysts feel the tech sector is slightly overvalued now, but not as much as the first quarter as global markets are less stretched.
Chris Harvey, head of equity strategy at Wells Fargo, has also started believing that “tech stocks may be nearing a peak.” The Leuthold Group is also worried about the swarming investments in "a very narrow number of popular names" like FAANG.
Portfolio Wealth Advisors president and CIO Lee Munson sees overvaluation in tech stocks and that the market is in a state close to 1999 before the burst of the 2000 Dotcom bubble. And hardly any investor wants to bet against FAANG.
This may catch some investors off guard. But then, fundamentals behind the sector are rock solid. So, investors can definitely pick some tech stocks that are still undervalued.
Are There Any Undervalued Gems?
It would be intriguing to highlight a few tech stocks that have below-average current year P/E ratios in the tech space. Below-mentioned stocks have a P/E less than that of the largest tech ETF Technology Select Sector SPDR Fund XLK (P/E 18.23x) as well as the broader market index fund SPY (P/E 17.25x). All these stocks have a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology Inc. MU – P/E 4.63x
It is s one of the world's leading providers of advanced semiconductor solutions. The stock belongs to a top-ranked Zacks industry (top 1%).
YY Inc. YY – P/E 11.77x
The company is a communication social platform, which engages users in online group activities through voice, text and video. The stock hails from a top-ranked Zacks sector (top 38%).
Intel Corporation INTC – P/E 12.98x
Intel is one of the world's largest semiconductor chip maker. The stock hails from a top-ranked Zacks sector (top 4%).
Vishay Intertechnology Inc. VSH – P/E 13.57x
This is one of the world's largest manufacturers of discrete semiconductors (diodes, MOSFETs, and infrared optoelectronics) and passive electronic components (resistors, inductors, and capacitors). The stock is placed in a top-ranked Zacks industry (top 5%).
Microchip Technology Inc. MCHP– P/E 13.57x
The company manufactures and sells specialized semiconductor products used by the customers for a wide variety of embedded control applications. The stock belongs to a top-ranked Zacks industry (top 20%).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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YY Inc. (YY) : Free Stock Analysis Report
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NASDAQ-100 SHRS (QQQ): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
Intel Corporation (INTC) : Free Stock Analysis Report
Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
Vishay Intertechnology, Inc. (VSH) : Free Stock Analysis Report
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