Is It Time to Exit Tech Stocks?

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By Jacob Maslow

wall street bullDon’t let the title of this blog post scare you. You have to understand that the term “tech stock” is actually quite broad. We are, of course, talking about software technology, online technology, and biotechnology. These different spaces have different risk factors. The better question to ask would be, “Which tech stocks should you seriously consider exiting soon?”

Well, now is quite a good time to take a long hard look at your portfolio. It may be a good time to reconsider biotechnology stocks. These stocks have gone through a massive run and they have put a lot of upward pressure on the NASDAQ 500. However, just like with any kind of party on Wall Street, the party has to end soon. With the recent fall of the NASDAQ, it may be a good time to prune back on the more speculative parts of your tech portfolio and hang on to the ones that are proven winners.

How can you tell a winner from a potential loser? Well, proven winners actually have revenues. Most importantly, those revenues grow year after year. They may not beat analysts’ expectations, but they are growing at a healthy clip. Second, winners are market dominant, meaning they own or they are in the top three of their market verticals or categories. Finally, winners can be long-term plays, meaning you are not just betting on the volatility or market hype of a particular stock. You actually believe that this company produces a product or service that will stand the test of time.

If you use those filters, your list of tech stocks can be shortened dramatically. I suggest you consider doing that as the strong US dollar, the collapsed price of oil, and other factors start looming in the short-term horizon. Expect further downward pressure on the stock market.

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