Those expecting stocks to go higher in the coming months in anticipation of the Federal Reserve cutting rates may want to take positions in a familiar sector: tech. But specifically, smaller tech stocks. The thinking goes that some small- and mid-cap growth names — which have come under pressure from concerns of a recession — will benefit from the broadening out of participation from the megacap tech stocks, as well as a boost from artificial intelligence. For example, the SPDR S & P Software & Services ETF (XSW), an equal-weighted index of tech names, is starting to show signs of breaking higher after a year-long bottoming pattern, according to Ari Wald, head of technical analysis at Oppenheimer. As of Monday’s close, it’s up more than 30% this year at $141.83, close to its 2021 highs when it traded around $165. “We like the sector because it goes beyond the Magnificent Seven,” said Wald, who specified he likes large-cap names for their leadership and mid-cap names for their rotation potential. “You got a lot of these mid-cap growth stocks, mid-cap tech stocks, that are just starting to get going and reverse their 2021 to 2022 decline.” Specifically, he said that he would buy artificial intelligence growth beneficiaries such as Cloudflare and Twilio , which are up by 72% and 46% this year, respectively. He also said he would buy the pullback in Tyler Technologies and MongoDB, which are down by more than 1% and 5% this month. Shopify and Roku are two other stocks that capture the mid-cap growth theme, he said. “A lot of these stocks are really just starting to break higher from yearlong basins,” said Wald, adding that they are not as overextended as large-cap names, and not so beaten up as some pandemic beneficiaries. “I think there’s a nice in-between there, and I think that’s the attractive balance that investors should be looking for.” Bokeh Capital Partners’ Kim Forrest favors optical materials maker Coherent , which has a roughly $6 billion market cap….
2023-12-12 11:10:00
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