After a massive flight to safety in the first half of the year, investors are buying into tech once again — but top tech investor Paul Meeks is far from convinced. “I feel this way not really because I see the fundamentals for the bulk of these companies improving much in the near term, but more because it looks like investors are beginning to look past near-term weakness in these businesses,” Meeks, portfolio manager at Independent Solutions Wealth Management, told CNBC Pro Talks on Wednesday. Instead, he is choosing to stay defensive and is looking for what he considers to be safer bets within the tech space. “I think that the more speculative names in the sector won’t come back for some time, so the smart thing to do would be to continue to play defensive instead of offensive tech,” he said. One stock that Meeks likes is tech giant IBM . He noted that CEO Arvind Krishna has transformed the company since his appointment in April 2020, divesting “big chunks” of the business and putting IBM on the path of revenue growth. The company posted revenue of $15.54 billion in the second quarter, beating analysts’ consensus estimate of $15.18 billion, according to Refinitiv. It also delivered a beat on earnings. “So now the company is actually growing at a pretty reasonable clip, when it had been perpetually shrinking quarter after quarter, year after year,” Meeks said. He added that the company pays a “whopping” dividend that “should even please a value investor.” Meeks also likes telecom giant AT & T as a “place to hide.” The company is now once again a telco, after the unwinding of its failed Hollywood venture , according to Meeks, and is gaining market share against T-Mobile and Verizon . AT & T also generates “a lot of cash,” and pays a dividend yield of around 5% to 6%, he added. When to go all-in “All these companies should have less volatility and be a way for investors to play defensive tech until offensive tech comes back into favor. But when tech comes back, do I want to have AT & T and IBM as big stocks in my portfolio? No, because then I want to play offense,” Meeks said. But he plans to “wait a bit longer” to reinvest aggressively in tech stocks. “Before I’m all-in, I need to feel more confident that analysts have lowered their estimates as far as they need to go to reflect a recession. Even cheap stocks can’t rally meaningfully or consistently until trough revenue and [earnings per share] forecasts have been posted,” he said. Read more Asset manager likes this chip stock so much, he’s putting his own money into it Top investor Paul Meeks says chipmakers are ‘gold’ – and reveals his ‘must own’ stock Tech investor names a ‘must own’ FAANG stock to buy the dip — and one to avoid Analysts are betting that any recession in the U.S. will be “short and shallow”, or that the Federal Reserve will step in and lower interest rates as fast as it had increased them, according to Meeks. “I think that this current narrative, or range of potential outcomes, is too optimistic, or at least I’m not sold on it yet,” he added. ‘Best idea’ for making money On a long-term horizon, his “best idea for making money long term” is chip giant Micron — a stock he acknowledged is a contrarian call given the company’s challenging outlook. He said he is looking past this, as he believes the glut of memory chips in the market is a “short-term correction” that will blow over in few quarters. “Here is a company that dominates, with only two other players worldwide in an oligopoly,” Meeks said of Micron. “I think over the next couple of years with all the drivers such as artificial intelligence which are demanding more and more chips, more and more chip concentration of memory, that stock will do particularly well,” he added.
