Tech Stocks Going On Sale

There is a sale going on right now in technology stocks: are you buying? Since hitting a high on March 6, the tech sector, as represented by the NASDAQ, has dropped 6.25%. More recently, the index has dropped 4.58% in just the past four trading days alone. Previous high-flyers like FireEye (FEYE – down 49%), Twitter (TWTR – down 43%), Rackspace (RAX – down 38%), Yelp (YELP – down 32%) and Netflix (NFLX – down 25%) are just a few of the examples of the recent carnage.

So what’s a growth investor to do? Do what I do: make a list of the stocks you’d like to own, along with an entry point at which you would start to buy. If a stock you want falls into the buy range, don’t buy a full position right away. This way you’re protected in case the price continues to fall. Consider buying in three equal tranches to build a full position.

Unless you’re a seasoned growth investor, be careful about which stocks you go after. You may want to pass on those trading at triple-digit multiples, or without earnings of any kind. These “story” stocks can be incredibly volatile and short-term losses can be severe. Just take a look at the┬áchart for 3D Systems (DDD). If you can’t stomach the ups and downs of that rollercoaster ride then perhaps you may want to look at more seasoned at companies like Amazon (AMZN), Mastercard (MA) or even Facebook (FB).

Whatever you choose, go in with the understanding that you may have to be patient as you wait for the sector to recover. If you manage your expectations, and invest a reasonable amount of money (probably starting at 5-10%) then this could be a good time to dip your toes in the high growth arena.

 

*Disclosure: Werlinich Asset Management, LLC owns small positions in NFLX, AMZN and FB.