As Expected, Big Cheap Tech Is Powering Higher

 If you're long tech stocks, you now have a powerful market phenomenon on your side...

 

As we reminded you two weeks ago, many of the world's dominant tech companies – like Apple, Microsoft, Cisco, and Intel – are trading for cheap valuations right now, especially once you take their big cash hoards into consideration.

 

And over the past few weeks, the market phenomenon known as "acting well" has come into play...

 

 

 When we say an asset is "acting well," we mean that it's advancing – rather than declining – in the face of bad news.

 

When a beaten-down asset can advance in the face of bad (or at least "not good") news, it's a sign that the worst is over for that market... sellers are exhausted... and prices are ready to rise. It's a sign that powerful bullish forces are working in the asset's favor.

 

Over the past couple months, the news from tech stocks has been "not good." Sales of conventional computers dropped 14% worldwide last quarter, the worst-ever decline. Earnings reports from IBM, Apple, Intel, Microsoft, Google, and networking-equipment giant JDS Uniphase disappointed Wall Street analysts.

 

But instead of declining, the tech sector has actually powered higher.

 

Intel, Microsoft, IBM, Apple, and Google are all up double digits from their April bottoms. The sector is enjoying rallies that are typically reserved for an environment filled with great news and rosy reports.

 

 Considering how cheap these stocks still are... and considering they are now "acting well"... we still like the idea of being long tech stocks. And we still like buying shares of the double-long tech fund (NYSE: ROM).

 

This fund holds stakes in more than 100 companies. But about 70% of its weighting is in just 10 stocks... most of which are the Big Cheap Tech "dominators." Apple makes up about 17% of the fund. Microsoft, Google, and IBM make up another 9%-10% each. And it has 5% chunks in Oracle, Cisco, Qualcomm, and Intel.

 

The big moves higher in these names have helped ROM stage a multi-month price breakout. It's 11% higher than it was when we last checked in with Big Cheap Tech...

 

 

We expect the run in tech stocks – and in shares of ROM – to continue. Tech stocks now have a strong tailwind at their backs. They're "acting well." Stay long.

 

– Amber Lee Mason and Brian Hunt