Facebook’s historic sell-off this week has capsized the rest of the tech sector. Since Thursday, the FANG stocks – Facebook, Apple, Netflix, and Alphabet – have lost nearly $166 billion in market cap.
Even after that sell-off, the Wall Street darlings aren’t cheap enough for long-time tech investor Paul Meeks.
“I wouldn’t buy them today. I would buy them on a correction,” Meeks, chief investment officer at Sloy, Dahl, & Holst, told CNBC’s “Trading Nation” on Friday. A correction marks a 10 percent pullback from 52-week highs. Such a drop would put Apple and Netflix at levels not seen since the beginning of May, and Alphabet back to its early July price.
“They will have a slip up at some point and these stocks won’t go down 2 percent, they’ll go down 20 percent because they’re volatile tech names and that’s your buying opportunity,” he added.
The possible exception is Facebook, which needs to offer up better incentive before Meeks feels comfortable buying the stock.
“I’ll get re-interested in Facebook under two scenarios: One, some clarity around the business model or two, the stock probably has to be $10 or $15 lower than where it’s currently trading to get me back in,” he said.
Meeks reduced his position in Facebook when it hit the high-$170s earlier in the week. He still has a small holding.
Facebook stock ended the week around $174, roughly 20 percent lower than the all-time high set on Wednesday. The following day, the social network lost $119 billion, a Wall Street record, after warning of increased expenses on security and privacy improvements.
While in wait of a bigger drop in the major U.S. tech names, Meeks suggests two other industry stocks that have solid long-term fundamentals but offer better value.
“I like some of the Chinese tech names, particularly the internet leaders like Alibaba and Tencent,” said Meeks. “In some cases you could say they have better growth potential than the American net leaders, and you’re buying them in just a total wipeout in their stock markets.”
The Shanghai Composite, China’s major stock market, is on the edge of a bear market after having fallen more than 19 percent from a 52-week high set in January. It is now down 13 percent for the year.
Alibaba and Tencent are due to report on their quarters in August, and Meeks says it’s best to wait to see their results before taking the leap.
