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We stopped buying tech, but just picked up these 2 ASX shares

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Many professional investors have avoided technology shares in recent months.

And it’s no wonder, with the S&P/ASX All Technology Index (ASX: XTX) losing a quarter of its value since November.

But with such depressed valuations now, some fund managers are dipping their toes back in.

One such investor is WAM Leaders Ltd (ASX: WLE) portfolio manager John Ayoub.

“We have been fairly resolute in not owning any overvalued tech stocks. [But] what we have seen recently is a slight change to that outlook,” he said in a conference call to clients this month.

“The sell-off has provided some opportunities within those sectors where we think individual stocks who have the ability to demonstrate superior earnings can grow into their multiples, and it presented opportunities over the recent past.”

Ayoub named 2 examples of such ASX shares that he’s added to the fund in recent weeks.

Saying that they are “market-leading franchises” and “extremely well positioned”, Ayoub revealed his team had started buying shares in REA Group Limited (ASX: REA) and Seek Limited (ASX: SEK).

“No matter what the macro backdrop provides, …there is somewhat more valuation support today,” he said.

“We think these stocks can also be drivers of the portfolio. So we have put positions within the portfolio with those — some larger than others — and we will continue to build on those positions over the next 6 to 12 months.”

REA shares have dropped almost 18% this year. But with a price-to-earnings ratio close to 50, the valuation of REA is still polarising.

According to CMC Markets, 8 of 16 analysts rate the tech stock as a “buy” but 7 of them rate it as a “hold”.

The Seek share price has shaved more than 9% off this year, and 13.6% since November.

The jobs classifieds site also divides the professionals, with 8 of 15 analysts surveyed in CMC Markets rating it as a “buy” while 7 reckon investors should hold or sell it.

‘A game of 3D chess’

Ayoub likened the current state of the portfolio as “a game of 3D chess”.

“We are juggling rate movements, we are juggling coronavirus and now we are juggling more on the Ukraine and Russia,” he said.

“It makes it awfully difficult to get a clear and confident path as to the shape of the portfolio for the next month, let alone for the next 6 to 12 months.”

The portfolio manager emphasised the importance of investors’ ability to be nimble.

“We have to adapt and we have to be ready to change as new information comes. That is really our focal point today.”

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