- Bank of America says a select group of smaller technology companies could thrive in spite of both a pandemic and rising US-China trade tensions.
- While the biggest tech companies are dominating the market to an unprecedented degree, Bank of America says there are smaller firms that may have greater upside.
- Strategist Jill Carey Hall’s team applied those ideas to a wide range of companies in areas including software, hardware, and manufacturing.
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After a decade of stock market dominance leading up to this winter’s crash, giant technology companies are back in the lead.
But any investor who looks at Amazon’s 30% gain this year, or Microsoft’s 15% increase, likely wonders if that kind of leadership is sustainable. Bank of America is happy to inform them that there are other options — even within the tech sphere.
A team at the firm led by Jill Carey Hall — the firm’s head of US small- and mid-cap strategy — just released a guide to tech investing. It identifies two major themes for stock picking in the sector. One, of course, is the coronavirus pandemic and its aftermath. The other is US-China trade tensions, which are suddenly a front-burner issue again.
While recessions and periods of economic weakness are usually bad news for small cap tech companies, Carey Hall’s group says those two themes help identify some companies that will benefit from the ways the world is changing.
“While COVID has slowed overall demand, it has also benefitted parts of Internet (streaming, social medial, e-commerce), Software (e-commerce, unified communications, employee mass notification, cloud-based applications), Semis (Compute) and demand for select Hardware products amid work-from home/telehealth/increased supply chain focus,” she wrote.
Meanwhile, the combination of the pandemic and the trade dispute will push more companies to move their plants out of China. That could help some US chipmakers and designers and companies that have the manufacturing capacity to help global companies relocate.
They’ve taken a comprehensive look at the small- and mid-size companies they follow to show investors some of the most promising stocks in software, chips, hardware, and services, resulting in this list of 13.