- Famed investor Mark Mobius said the tech sell-off is a good chance to snap up FAANG stocks.
- Mobius told CNBC investors need to be looking for money-making companies that can ride out 2022.
- The tech-heavy Nasdaq 100 plunged 3.1% Wednesday, with unprofitable companies the worst hit.
Famed investor Mark Mobius has said the steep equity market sell-off is a good time to load up on profitable technology stocks such as the so-called FAANG companies.
Mobius told CNBC Wednesday: “Those [companies] that have been hit as a result of the overall decline in tech stocks, that are making money, that have a good return on capital that are growing… these are great buys right now.”
Tech stocks got crushed Wednesday after the release of minutes from the Federal Reserve’s December meeting, which showed that the central bank could start withdrawing support for the economy and raising interest rates sooner than expected.
The tech-heavy Nasdaq 100 index dropped 3.12% and the benchmark S&P 500 fell 1.94%. Ark Invest’s Innovation ETF – seen by analysts as a proxy for unprofitable and speculative technology companies – plunged 7.09%.
Yet Mobius, a veteran emerging-markets investor and the founder of Mobius Capital Partners, told CNBC he was keen on FAANG – Facebook (now Meta), Apple, Amazon, Netflix and Google (now Alphabet) – because they’re strong earners.
All were hit in Wednesday’s sell-off, with Alphabet down the most at 4.59% and Netflix the second-worst hit at 4%.
Mobius said investors needed to be looking for “good stocks” that are making money and can deliver strong returns even as borrowing costs rise.
“Those companies that are losing money, particularly in the tech sector… are gonna get hit very badly, and of course those that are making money will do well,” he said.
Many tech stocks fared particularly well in 2020 and 2021 as central banks snapped up bonds and slashed interest rates after coronavirus hit, with investors betting the companies could keep growing even as the economy slumped.
But the Fed has signaled that it is likely to raise interest rates numerous times in 2022, bring to an end the era of easy money that boosted some of those speculative and unprofitable companies.
Investors are now turning to businesses that stand to do better as the economy grows, borrowing costs rise, and inflation remains elevated. Financials and energy have been particularly popular buys.
Mobius told CNBC he thinks there will still be plenty of liquidity – that is, willingness from investors to buy and sell stocks – in the market.
“There’s a lot of liquidity, a lot of currencies have been issued around the world because of COVID then you have to add all of the cryptocurrencies that are making people feel rich,” he said.
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