Why I remain wary of US tech stocks (even after recent updates)

first_img “This Stock Could Be Like Buying Amazon in 1997” Why I remain wary of US tech stocks (even after recent updates) See all posts by Andy Ross Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Andy Ross owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Amazon, and Microsoft and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.center_img Image source: Getty Images Simply click below to discover how you can take advantage of this. This week has seen a number of US tech stocks report strong earnings, including some of the famous FAANGs, as well as older tech companies such as Microsoft. It’s widely accepted that the pandemic has been a massive tailwind behind these share prices. The pandemic has been a catalyst for trends that were already happening – the rise in e-commerce and more flexible working, to name just two examples. But is that enough to justify share prices rising so rapidly in such a short space of time?I believe a whole new generation of investors are also getting involved in the markets. The popularity of apps like Robinhood in the US and Trading 212 here in the UK show this. The bizarre GameStop share price rise this week is also evidence of this trend, I think.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The downside of this market exuberance is the possibility that the share prices of well-known, popular companies may rise beyond what I would consider a fair price.A bubble or just a high price for high-quality companies? I don’t know if there’s a bubble. But the view among some — that these tech shares can only go up in value –makes me nervous. In my experience, investing is more complicated than that. Among US tech stocks, there will be winners and losers. I think the winners are likely to be those with a wide moat – meaning high barriers to entry – and those that continue to innovate and keep customers happy. That potentially makes Alphabet, Amazon, and Microsoft among my top picks if I was to put my own money directly into a US tech stock. Although I’m reticent to do so. The pandemic has provided a tailwind that might eventually fizzle out, meaning I wouldn’t want to be buying shares at too high a price. I’m keen to make sure the price-to-earnings ratio, and other valuation metrics, makes sense. I’d want the share price to give me a margin of safety. Investing beyond the FAANGs and other US tech stocks like TeslaI do think some of US tech stocks are very strong and could continue to do well. As ever, I prefer to take a long-term view and invest at a sensible, fair price.One potential way to diversify my risk is to invest in a fund or trust. They can buy a wider pool of investments. Or even buy an S&P 500 ETF, for example, which can track the US market. That’s how I plan to ride the tech wave without putting all my eggs in one basket. I’m more comfortable with this, because I remain aware of the risks these companies face, especially when it comes to their valuations. At the end of the day, all shares carry some risk. For me, although the growth in US tech stocks has been impressive, I remain wary of buying into them. Especially now after such strong share price rises. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Andy Ross | Friday, 29th January, 2021 Our 6 ‘Best Buys Now’ Shareslast_img read more