Rising valuations and hefty year-to-date gains for big technology stocks are pushing some investors to diversify away from the sector that has led markets for years.
has helped push the index to records with a 25.1% year-to-date gain in 2021.
, for instance, trades at a 12-month forward price-to-earnings ratio of 26.6, compared to a valuation of 21.1 for the S&P 500.is valued at 26.2 forward earnings, while the information technology sector, up nearly 28% this year, carries a forward P/E of 26.4. Fund managers in last month's BoFA Global Research Survey named “long tech” as the market’s most crowded trade and had collectively reduced their “overweight” positions in tech stocks to the lowest level since May. The market’s top four most crowded individual stocks are Microsoft, Apple, Alphabet and Amazon, according to a recent analysis by research firm Bernstein, incorporating factors such as institutional ownership and price momentum.
Garret Melson, a portfolio strategist at Natixis Investment Managers Solutions, believes large technology company stocks may be vulnerable to investors seeking to lock in profits and move some funds to other sectors. Melton is buying shares in financial and energy companies, which he believes will benefit from rising inflation and a strong economic recovery.
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