Tech stocks: I’m buying the dip

Tech stocks have experienced a huge sell-off recently as bond yields have risen. Edward Sheldon explains why he’s been buying shares during the sell-off.

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Tech stocks have experienced a huge sell-off recently. With vaccines being rolled out rapidly, investors have offloaded tech holdings and turned their attention to reopening stocks.

Personally, I’ve been taking advantage of the share price weakness in the tech sector. I’ve added to some of my favourite holdings. I’ve also bought some new tech stocks. I’m not entirely convinced the worst is over for the technology sector.

In the short term, I wouldn’t be surprised to see another leg down for tech as the global economy opens up. However, given that we’re in the midst of a technology revolution, I think plenty of tech stocks are likely to do well in the long run, driven by dominant digital trends.

Online shopping is just getting started

One area of the technology sector I’m particularly bullish on is e-commerce. Online shopping sales have risen significantly over the last decade. However, in the years and decades ahead, they’re likely to climb much higher. By 2027, the global online shopping market is expected to be worth around $10trn, up from around $4trn in 2020.

Escalating usage of smartphones and increasing disposable income levels are likely to be key growth drivers. Advances in augmented reality (AR) technology could also be a growth driver. AR can offer customers virtual changing rooms. 

Given the huge growth potential of this industry, I recently added to my Amazon holding. It’s one of the biggest online retailers globally. I also grabbed some shares in social media company Pinterest. I believe it has the potential to be a big player in e-commerce after its recent deal with Shopify. Both shares could fall further in the short term. However, I’m optimistic about their long-term prospects.

The world is shifting away from cash

Digital payments is another area of technology I’m excited about. This is obviously closely linked to e-commerce. The more we buy online, the more digital payments take place. According to analysts at Accenture, we’ll see 2.7trn transactions move from cash to cards and e-payments by 2030.

One company I like a lot in this space is PayPal. It’s a dominant player in the financial technology space with a very powerful brand. Last year, it was one of the most downloaded financial apps across Europe. I took the opportunity to buy some more shares recently after its share price was hammered in the tech sell-off, despite the fact it still sports quite a high valuation (which adds risk).

PayPal growth stock

Source: Sifted

Tech stocks I’m watching

There are plenty of other tech stocks I’m watching closely after the recent sell-off. Many aren’t quite in my ‘buy zone’ yet however.

Some stocks I’d like to own include vacation company Airbnb, software giant Adobe, semiconductor powerhouse ASML, and artificial intelligence chip specialist Nvidia. All of these companies appear well-placed to benefit from the tech revolution. If their share prices come down further, I may pull the trigger and buy them for my portfolio.

As I said earlier, we could see further volatility in the technology sector in the short term. Valuations across the tech sector are still very high. If bond yields continue to rise, tech stocks may take another hit.

However, the long-term growth story is still very much in play, in my view. That’s why I’m buying tech stocks now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Amazon, PayPal, and Shopify, and Pinterest. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, ASML Holding, NVIDIA, PayPal Holdings, Pinterest, and Shopify. The Motley Fool UK has recommended Airbnb, Inc and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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