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Tech stock winners that may 'power through' inflation and other market risks

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Independent Wealth Solutions Management Paul Meeks joins Yahoo Finance Live to discuss the outlook for tech stocks amid U.S. inflation and the Russia-Ukraine crisis.

Video Transcript

ALEXIS CHRISTOFOROUS: The Russian-Ukraine crisis briefly sent tech stocks to bear market levels this week before bouncing back, and bouncing back, they did. Here with the outlook for big tech is Paul Meeks, portfolio manager at Independent Wealth Solutions Management. So Paul, in just the past two days, the NASDAQ is up something like 4 and 1/2%. Are you a buyer of big tech right now? And if so, which areas are you focused on?

PAUL MEEKS: So I'm a buyer of selected names and selected industries within big tech. You know, I don't have any underhanded relationship with your Yahoo Finance Plus ideas, but I do like Palo Alto Networks and cybersecurity. I'm also a big fan of semiconductors, and not just the vendors themselves, but the semiconductor capital equipment companies. Companies like Advanced Micro Devices, Micron, Qualcomm, Broadcom are all on my fresh money buy list as of today.

ALEXIS CHRISTOFOROUS: How are you looking at these stocks, or should I say, choosing, cherry picking the tech sector, with the Federal Reserve on the fringe of raising interest rates? We don't know by how much. And of course, the Russia-Ukraine crisis is going to play into all of that. But if we give in to the idea that rates are going to be going up throughout the year, and their impact possibly on these growth stocks and their bottom lines, how is that factoring into what you're buying now?

PAUL MEEKS: That's an excellent question because right now, macro trumps all micro and company-specific stuff. So what I'm looking for is a couple of things. Obviously, as it goes to increasing inflation, which will increase rates, I want to see companies that can power through that on both their top line revenue and bottom line earnings per share. So I'm screening for companies that regardless of the environment, macro and geopolitical, are going to grow their revenue and EPS this year and next. And you would think for a tech company, that that would be a slam dunk. Not so in this environment. You go from putting a lot of stuff in the funnel to something much more selective.

And then when it goes to the geopolitical issues of the day, I'm thinking that with the market rallying so strongly on the first two days of a ground war in the Ukraine, that maybe that bad news is in our rearview. You know, I can't promise that, but I'm feeling much more optimistic that at least the bad news had been buried in stock prices, and we might be able to launch from here. And that's why you've seen a couple of tech stocks do extremely well in the last two trading sessions.

ALEXIS CHRISTOFOROUS: Can you share with us any names? I don't want to put you on the spot, but do you have any particular tech companies that you think are better positioned to weather the months ahead than others?

PAUL MEEKS: Yeah, and like I said, semiconductors because I think we're going to be semiconductor short supply, which is bad for the customers, but great for the companies because they dictate pricing. So in the semiconductor complex, Advanced Micro Devices, Qualcomm, Broadcom, which is part semiconductor and part software company, and Micron Technology, which dominates at least the United States, memory chips, both NAND and DRAM.

As I mentioned, I do like some of the cybersecurity plays, including your Palo Alto Networks and also Datadog. And I had been away from Apple for a long period of time, not because I'm not a big fan of Apple-- of course I am-- but I was worried about the valuation. But their most recent report and their accelerated growth took me from being neutral ish on Apple to much more constructive. And that's where I am today.

ALEXIS CHRISTOFOROUS: All right, so you talked to Apple. That's one of the biggest. Let's talk a little Amazon, Meta, Netflix. What are you doing with those stocks right now?

PAUL MEEKS: Yeah, among the FAANGS, I'm actually much more sour on most of them. Amazon had a nice overall report, but it was driven by greatness in digital advertising and Amazon Web Services, but actually fairly significant loss in e-commerce. So I'm actually on the sidelines with Amazon. Facebook, or Meta, is in the midst of changing its business model. And I have covered tech since the '80s. I'm pretty well known for it, and I'm not even sure what the Metaverse is. So anybody that tells you what it is or how well it's going to do, I think is spinning some yarn.

And then Netflix really showed for the first time in its history that it is being actually impacted by competitors in video streaming. So among the FAANGs, I do like Microsoft, and I do like Alphabet, and I do like Apple. And I don't like the others. I actually wouldn't put the others, even though they're so well-known with such big market caps, on my buy list.

ALEXIS CHRISTOFOROUS: All right, I think we're all together on still trying to figure out what Meta is. What about self-driving cars and a Tesla? What do you make of-- and AI? What do you make of that group right now? Anything there that you like in particular?

PAUL MEEKS: Yeah, I think it's difficult to figure out, at least today, who the winners are going to be on the software and hardware side. But I do know who is going to propel the high speed computing that's going to make it all happen. It's, again, my semiconductor and semiconductor capital equipment companies. So in that space in particular-- I'm glad you asked the question-- I like Nvidia and Advanced Micro Devices, AMD.

ALEXIS CHRISTOFOROUS: I love that you came on and talked real companies with us. You actually did not shy away from giving us some names. Always appreciate that. Paul Meeks, portfolio manager at Independent Wealth Solutions Management, good to see you.