Technology shares have been in freefall since November, with the S&P/ASX All Technology Index (ASX: XTX) losing 23% since then.
But as we see a mini-revival in March, the question remains whether some tech stocks have been sold too much.
After all, interest rate fears have triggered the market to dump high-growth ASX shares — but those rate hikes haven’t actually happened yet.
So is it foolish to buy now when there is more pain to come?
Burman Invest chief investment officer Julia Lee reckons selective buying is key at the moment.
“As interest rates rise, if you don’t have any profit or cash flow coming through then your valuation is going to deteriorate very rapidly,” she told Switzer TV Investing.
“So it is important to back those more mature companies… that do have a stable growth outlook as well as profit coming in through the door.”
As such, Lee named 3 ASX shares that currently fit these criteria:
Lee said that the technology sector has “some interesting companies” worth consideration.
“Block Inc CDI (ASX: SQ2)… probably has a valuation north of about $200 and it’s trading at about $180,” she said.
The common attribute with this trio, according to Lee, is that they have been reporting good numbers. So the current dip in market valuation is a severe mismatch.
“The share price action has been horrible in 2022 so far,” she said.
“But if you have a look at the fundamentals, there are some companies that have exceeded expectations and are showing strong signs of momentum.”
Lee thought Australian investors might have a false impression of Block because of its association with Afterpay.
“But really, it’s a payments company. So it is exposed to small and medium enterprises. It also helps get websites off the ground.”
The US company announced “quite a good earnings result”, she added.
“The fundamentals and the technicals have been saying something different. But now we’re seeing the share price playing a bit of catch up.”
Right on cue, Block shares spiked up a massive 5.17% on the NASDAQ and 7.49% on the ASX on Wednesday.
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