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Should You Go Bottom Fishing Big Tech ETFs Following Soros?

U.S. tech stocks have been hitting rough weather this year as surging inflation has been weighing on their lofty valuations caused by massive policy easing since the COVID-19 outbreak. Although tech stocks tried to recoup losses several times, investors remained cautious about betting big on growth stocks. Hence, shares of high-growth technology companies remain in a tight spot.

Among the group of mega-cap companies, Amazon is down about 44% this year. Google parent Alphabet and Facebook parent Meta have declined about 32% and 66%, respectively. All three companies are on a cost-cutting mode thanks to waning consumer demand, subdued ad spending, and inflationary pressure on wages and products.

George Soros Bets Big on Alphabet

Against this backdrop, billionaire investor George Soros, through his firm Soros Fund Management (SFM), held 53,175 Alphabet shares as of Jul 31. Three months later, his stake in Alphabet rose to 1,01 million shares, marking an increase of 1,806%, according to a regulatory filing, as quoted on thestreet.com. Soros scooped up shares in the quarter in which Alphabet stock prices declined 12.2% of their value.

Alphabet’s third-quarter results were driven by its strength in the cloud business. Solid momentum across the Other Bets segment was a positive. Robust cloud division remains the key catalyst. Expanding data centers will continue to bolster its presence in the cloud space.

Also, strong focus on AI techniques and the home automation space should aid business growth. The company’s growing efforts to gain a foothold in the healthcare industry are the other catalysts. Its deepening focus on the wearables category continues to act as a tailwind. Alphabet’s expanding presence in the autonomous driving space is contributing well.

Alphabet’s revenues are likely to gain 10.4% year over year and earnings are likely to decline 16.6% in 2022, as suggested by the Zacks Consensus Estimate. However, sluggishness in the advertisement business remains a major headwind.

If you are skeptical about Alphabet itself, you can bet on Alphabet-heavy ETFs like Technology Select Sector SPDR Fund XLK (Alphabet weight – 22.64%), Vanguard Information Technology ETF VGT (Alphabet weight – 22.61%) and Fidelity MSCI Information Technology Index ETF FTEC (Alphabet weight – 21.51%). XLK, VGT and FTEC have lost 22.7%, 24.9% and 24.8%, respectively this year.

Soros Sells Certain Amazon Shares But Still Holds a Lot

SFM owns 1,981,161 Amazon shares compared to 2,004,500 in the second quarter. This marks a small decrease of 1.16%. This means that Soros still has faith in the e-commerce giant. Amazon’s third-quarter results were driven by Prime and AWS momentum. Strengthening AWS services portfolio and its growing adoption rate contributed well.

Ultrafast delivery services and an expanding content portfolio were beneficial. Strengthening relationship with third-party sellers was also a positive. Growing capabilities in grocery, pharmacy, Amazon Care, Kuiper and Zoox also helped. Amazon is likely to record 8.63% sales growth in 2022 while earnings are likely to nosedive a solid 102%, going by the Zacks Consensus Estimate.

There are a lot of Amazon-heavy ETFs that include ProShares Online Retail ETF ONLN (Amazon weight – 19.18%), Vanguard Consumer Discretionary ETF VCR (Amazon weight – 19.11%) and Consumer Discretionary Select Sector SPDR Fund XLY (Amazon weight – 18.73%).

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Technology Select Sector SPDR ETF (XLK): ETF Research Reports

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports

Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports

Vanguard Information Technology ETF (VGT): ETF Research Reports

ProShares Online Retail ETF (ONLN): ETF Research Reports

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Zacks Investment Research