The volatility this year may scare novice investors, but experienced folk know there are plenty of opportunities.
After the earlier market plunge amid inflation panic and a war in Ukraine that’s still in progress, the S&P/ASX 200 Index (ASX: XJO) has recovered most of its losses and could even set new records this month.
“Over the last 10 years the average gain for April, usually the second strongest month of the year, is +2.7%, which would take us to a new milestone high,” said Market Matters portfolio manager James Gerrish.
“[That’s] Market Matters’ call since the start of 2022, with the ‘fun’ just about to start in earnest.”
Gerrish told his newsletter subscribers that it’s currently an “exciting time” for active investors.
“We fully expect to rotate between cyclical and defensive stocks, growth and value sectors and high and low cash levels, to name a few, through the remainder of the year.”
One rotation candidate is the technology sector, which has been brutally sold off the past few months. With valuations now dirt cheap, there could be some upside.
In response to reader questions, there were a couple of tech ASX shares that Gerrish found value in:
Data centre operator NextDC, according to Gerrish, looks like a one-way bet.
“We actually think NextDC looks great from a risk-reward perspective with stops below $11, less than 8% downside with significant upside.”
The NextDC share price closed Wednesday at $11.81.
The team at Citi is also bullish on the stock, rating it as a “buy” with a price target of $14.55.
According to CMC Markets, 12 out of 17 analysts rate NextDC as a “buy”. Eleven of them even label it as a “strong buy”.
Meanwhile, audio tech provider Audinate has seen its shares plummet almost 40% since mid-December as it struggles with supply constraints.
“We haven’t had an update from the company since [February] around chip supply,” Gerrish said.
“The stock has continued to drift lower with chip supplies likely to be weighing on investors confidence along with the stock being associated with the out-of-favour growth sector.”
He was asked how Audinate shares might perform in a climate of increasing inflation.
“A rising inflation environment has been a headwind for virtually all growth stocks and this is likely to continue until inflation and bond yields reach a new period of equilibrium.
“We believe this can happen shortly on a short-term basis.”
Four out of five analysts surveyed on CMC Markets rate the stock as a “strong buy”.
Medallion Financial managing director Michael Wayne has been a long-time fan of the company, and has kept his faith through the stock price plunge.
“The fact that it’s basically a monopoly in that space at the moment, growing many multiple times the nearest competitor, we think it’s worth persisting.”
Audinate shares finished Wednesday at $6.32.