If you own technology stocks, you need not be reminded 2022 has been an annus horribilis.
The S&P/ASX All Technology Index (ASX: XTX) is now more than 30% lower than where it started the year, and many individual ASX shares have halved in value.
This industry-wide devaluation happened largely because of the fear of rising interest rates.
The technology sector is full of growth companies, which are valued on the basis of their future potential. Therefore when the cost of money rises, their prospects decline.
But now, with just six weeks left in the year, relief is in sight.
Although the Reserve Bank is still in the middle of hiking rates, the market is starting to look forward to this part of the cycle slowing or even ceasing altogether.
Therefore many experts, such as Shaw and Partners portfolio manager James Gerrish, are tipping a resurgence for ASX tech shares heading into Christmas.
"The underlying theme is we're looking for a recovery in the tech sector."
But which tech stocks are the best ways to take advantage?
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Best large-cap tech stock
Gerrish this week said that there's no doubt not all tech stocks are built the same, and we would see a big variation in performance between individual shares.
"At this stage, we would pick out three for very different reasons depending on an investor's goal/risk appetite," he told a Market Matters Q&A.
Out of the large caps, Gerrish's team favours Altium Limited (ASX: ALU).
The stock closed Monday at $36.27.
"We believe this is a top quality ASX tech name which looks destined to break well above $40 into 2023," said Gerrish.
"This would be a number one large-cap tech pick."
The electronics design software maker has proven relatively resilient, only losing 16.2% year to date. In fact, the Altium share price has risen almost 50% since the middle of June.
Best high risk-reward play
For a higher risk but potentially higher reward play, Gerrish likes New Zealand software provider Xero Limited (ASX: XRO).
"After falling 60% in 2022, this online accounting [stock] could squeeze sharply into 2023," he said.
"At this stage, it's more of an aggressive play than Altium, in our opinion."
Despite the disastrous plunge in share price this year, Xero shares have still gained 131% for investors over the past five years.
How about the best tech in the world?
Of course, the ASX is far from claiming to be the home of technology. The best and brightest in that sector list is on the NASDAQ in the United States.
For this reason, Gerrish's third pick is Betashares Nasdaq 100 ETF (ASX: NDQ).
Even though it's an index exchange-traded fund (ETF), he expects serious returns over the next few weeks.
"We hold this ASX traded ETF in our Macro ETF Portfolio," said Gerrish.
"We can see it rallying 10% to 15% into Christmas."
The Betashares Nasdaq 100 ETF share price has dipped more than 26% year to date.
