Business

Here are the three overlooked tech stocks from a fund manager with “mission-critical” products to weather any economic storm

A rising interest rate environment has the Nasdaq Composite COMP,
-0.73%
The past year has been hard to love, but its 22% decline seems to open up some opportunities.

Which brings us to ours call of the dayby Chul Chang, a manager of Vontobel’s US Equity Institutional Fund VTUIX,
-1.06%.
He says investors have been so busy chasing companies that can handle unexpected macro concerns that they’ve overlooked gems with “mission-critical products” that are well-equipped for economic downturns.

“We’re looking for enduring franchises that we believe can outgrow their competition and the market and get into positions where they grow stronger and bigger on the other side of macro weakness,” Chang said in an interview with MarketWatch on Wednesday .

His fund holds staples like Coca-Cola KO,
-0.57%,
and top holding company Microsoft MSFT,
-0.77%.

As for those diamonds in the dust, Synopsys SNPS manager points out,
-2.01%,
a manufacturer of electronic design automation software tools. Investors are getting a defensive stance, a forward-looking business with good growth, Chang said.

“The reason we know this through a downside, through an up cycle [Synopsys] What will be sustainable is that they will have high recurring revenue, which chip engineers need to do business critically,” he said. “So it’s not a tool that you cancel because you think a recession is coming in the next 12 months or interest rates are going up.”

Even in 2008 and 2009, when the chip industry was actually shrinking, Synopsys saw stagnant revenue and turned a profit, he said. Shares are down 12% this year.

He also likes ServiceNow NOW,
-0.20%,
Down 22% so far this year. The software company and its cloud computing platform are the “key players” used by companies to systematize their workflows.

“It’s early when we’re talking about digital transformation, so there’s still a lot of growth ahead just from stock gains in this one category,” he said. ServiceNow has expanded into operations, employee management and customer service management.

“Coming back to the issue of being defensive in weaker times, we believe this is a company that will continue to grow not just because of the secular trends observed, but solely because of the subscription model and the defensiveness of its profile,” he said .

Chang’s final choice is Keysight Technologies KEYS,
-2.41%,
a leading measurement company that has the “broadest range of equipment to measure electrical or radio signals” with growth also supported by industry trends. Keysight is down 29% this year.

“In this case 5G, but also what 5G is going to do for the Internet of Things or AI or EVs,” he said, noting that Keysight’s tools for testing EV infrastructure, batteries, inverters, etc. are used a lot “increasing use that is just beginning”.

Keysight also sells manufacturing tools that customers use to develop new cars, products, or smartphones. As such, these customers view Keysight tools as “mission-critical” and “won’t come cheap,” making it a company “that can deliver double-digit earnings growth over the long term,” he said.

The Buzz

The European Central Bank announced an end to quantitative easing on July 1, leaving its key deposit rate unchanged at 0.5% but expecting a quarter-point hike in July and a further rise in September. A press conference with ECB President Christine Lagarde has begun. Next week we will meet the Fed, Bank of England and Bank of Japan.

Weekly jobless claims were slightly higher than analysts had expected. Household net worth figures are due later in the day.

Chinese EV manufacturer NIO NIO,
+3.72%
falls on disappointing second-quarter sales guidance, although it reined in its first-quarter loss. Chinese ADRs also came under pressure after a report that China’s securities regulator was failing to do work to revive Ant Group’s IPO.

Bilibili camp BILI,
+5.99%
slumps after the China-based video-sharing company reported a bigger-than-expected loss.

fuel cell energy FCEL,
-4.24%
falls after reporting a larger-than-expected second-quarter loss and disappointing earnings.

Twitter TWTR,
+0.77%
Elon Musk will reportedly offer a data-sharing agreement to settle the Tesla TSLA,
+1.25%
Chiefs cast doubt on bots on social media site and advance $44 billion acquisition deal

Dutch and UK natural gas prices GWM00,
+22.23%
are up in double digits at major liquefied natural gas exporter Freeport following an explosion in Texas. The blast will cause a standstill for at least three weeks.

The Shanghai district of Minhang (2 million inhabitants) is under strict lockdown and is undergoing mass testing due to a COVID outbreak. “Markets naively priced in that the easing of restrictions in Beijing and Shanghai was the eventual victory over Omicron and thus the culmination of Covid-zero,” noted Jeffery Halley, senior market analyst at OANDA.

The markets

Uncredited

stock futures ES00,
+0.02%

YM00,
+0.04%

NQ00,
-0.04%
rise as bond yields TMUBMUSD10Y,
3,062%
withdraw. oil prices CL.1,
+0.01%
consolidating at $121 a barrel, the dollar DXY,
-0.30%
and gold GC00,
-0.12%
slip while Bitcoin BTCUSD,
-0.42%
holds on to the $30,000 mark.

Read: Oil prices could become ‘parabolic’, putting the global economy in a ‘critical situation’, says the head of the commodities trading giant

The tickers

These were the most traded tickers on MarketWatch as of 6:00 a.m. Eastern Time:

The graphic

Our chart of the day is by Michael Cembalest, Chair of Markets and Investment Strategy at JP Morgan Asset Management, and sets out trends in the energy transition. He includes a chart showing how disruption has slowed in some areas of the economy over the past 20 years itself than in others. For example, everyone seems to have a smartphone, but far fewer people than you might think own an electric car.

blank

Random Reading

American tourists will be fined afterwards throw a scooter down the steps a UNESCO World Heritage site in Rome that caused $26,000 in damage.

Late-night talk show host Jimmy Kimmel tells President Biden he “needs to start yelling at people.”

Tik Tok Trend mixes sparkling water and balsamic vinegar for the summer hottest, healthiest new cola.

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https://www.marketwatch.com/story/heres-a-fund-managers-three-overlooked-tech-stocks-with-mission-critical-products-to-weather-any-economic-storm-11654773383?rss=1&siteid=rss Here are the three overlooked tech stocks from a fund manager with “mission-critical” products to weather any economic storm

Brian Lowry

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