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Cramer uses tech's top 10 stocks to argue the sector is not overvalued

Technology stocks have been fairly consistent out-performers in the stock market, so much so that Jim Cramer wanted to counter growing worries that the tech sector is overvalued.

"It seems like every hedge fund manager who still cares about individual stocks believes that tech is too expensive. It doesn't matter what these companies do, or how overwhelmingly profitable some of them are," the "Mad Money" host said.

Investors and money managers have also developed concerns that tech's current situation resembles the run-up to the dotcom bubble burst of 2000.

To seek out the counterweights to this argument, Cramer zoomed in on the 10 best performing tech stocks in the S&P 500 for the first half of 2017.

Watch the full segment here:

Up 59 and 34 percent for the year, respectively, Activision Blizzard and top competitor Electronic Arts are at the heart of the entertainment world's expansion into digital video games, Cramer said.

Along with fellow game maker Take Two Interactive, these gaming giants are riding several major trends: an expanding base of tens of millions of players around the world, improving semiconductor chip technology that makes for better games, and the rise of eSports.

"In 2000, most of the tech leaders were about to experience a sudden drop-off in sales. I'd argue that the exact opposite is true for these major video game companies, all of which seem like they're on the verge of an earnings breakout of epic proportions," Cramer said.

Cloud-based software creator and Cramer-fave Adobe has rallied 37 percent in 2017, and the "Mad Money" host thinks its multiple-revenue-stream strategy looks quite promising.

Not only has Adobe's software-as-a-service model delivered a large boost to the company's gross margins, but its foray into artificial intelligence could make for another untapped growth category, Cramer said.

"Adobe's price-to-earnings multiple of 34 may seem reminiscent of the dotcom era, at least until you do the homework, at which point you realize that valuations would've made it one of the cheapest tech stocks around in 1999 or 2000," he added.

With a 36 percent gain for the first half of 2017, open-source software player Red Hat has been able to seize on the beginnings of various industries' migration to the cloud.

"The company just had a big uptick in earnings because their platform allows for an instant shift from cloud to cloud," Cramer said. "Red Hat, like Adobe and the gaming...


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