Tech valuations are ‘pretty reasonable’ given growth rates despite drop in big tech – strategist

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Matthew Mishkin, Manulife John Hancock Investments co-chief investment strategist, warned investors about high-flying tech stocks like Palantir (PLTR [https://seekingalpha.com/symbol/PLTR]), suggesting a more measured approach to evaluating investments.

In an interview with CNBC, Mishkin expressed concern about companies trading at “100+ PE ratios” while emphasizing the importance of considering growth rates when assessing valuation.

“The way that we’re looking at valuations today is relative to the growth,” he said, explaining that the PEG ratio – PE divided by the growth rate – allows investors to normalize valuations against growth potential, helping identify more sustainable investment opportunities.

Mishkin highlighted that despite elevated PE ratios in the technology sector (XLK [https://seekingalpha.com/symbol/XLK]), (IYW [https://seekingalpha.com/symbol/IYW]), the 20% earnings growth rate makes many tech investments “pretty reasonable” when properly analyzed.

“We’re looking for high quality companies with low PEG ratios. So, things like the return on equity, good balance sheets,” he noted, adding that communication services (XLC [https://seekingalpha.com/symbol/XLC]), healthcare (XLV [https://seekingalpha.com/symbol/XLV]), and industrials (XLI [https://seekingalpha.com/symbol/XLI]) present compelling opportunities based on projected earnings through 2026.

Technology stocks (XLK [https://seekingalpha.com/symbol/XLK]), especially those associated to AI, have come under fire on Tuesday [https://seekingalpha.com/news/4514322-sp500-nasdaq-composite-dow-jones-stock-market], as giants such as Palantir (PLTR [https://seekingalpha.com/symbol/PLTR]), Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]), AMD (AMD [https://seekingalpha.com/symbol/AMD]) are in the negative.

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* XLK: No Reason To Sell A Stake In Tech, More Gains Are Ahead [https://seekingalpha.com/article/4820550-xlk-no-reason-to-sell-a-stake-in-tech-more-gains-are-ahead]
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* Michael Burry’s ‘Big Short’ instincts target AI trade with puts on Nvidia, Palantir [https://seekingalpha.com/news/4514017-michael-burrys-big-short-instincts-target-ai-trade-with-puts-on-nvidia-palantir]