In recent months both the Australian and US tech sectors have been falling heavily. From August last year until two weeks ago, the Australian tech sector has fallen nearly 40%, while the US technology sector is down over 20% as of a few days ago.
While these falls indicate that the technology sector in both countries has crashed, is it now time to buy or should you run for the hills?
It’s important to understand that just because one sector has crashed doesn’t mean that the overall market has crashed or will crash.
In Australia, the technology sector fell 29% between January 1 and February 24, which would be considered a crash, while the All-Ordinaries Index has only fallen 4.41% for the year to date. From January 1 to March 14, the US technology sector fell more than 19%, while the Dow is only down 6.26% and the S&P500 is down 8.57% for the year.
The Australian stocks hit hardest since January 1 include Dubber Corp Ltd and Praemium Ltd (ASX:PPS), which are both down around 50%. Of the larger stocks, Appen Ltd is down 37%, Xero Limited is down 29% while Altium Limited (ASX:ALU) is down 27%. So has the Australian tech sector bottomed and is it time to look at these stocks for an opportunity to buy?
Last week the technology sector in Australia rose more than 6%, which indicates that it has likely bottomed or at the very least shown that the six-month downturn is very near its bottom. Given this, I recommend investors start to look at the tech sector with a view to entering some great stocks at very good prices.
That said, don’t blindly jump into any stock hoping to get in early, as you need to wait for confirmation that the stock has stopped falling. While the US tech sector has also risen strongly this week, investors would be wise not to jump in too early trying to grab a bargain, as it is yet to show signs that it has stopped falling.
Dale Gillham is chief analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online at www.wealthwithin.com.au