There’s no doubt about it: Last week was brutal.
Fears of rising interest rates and falling Chinese currency triggered a worldwide sell-off that kicked the market down to a low it hadn’t seen since 2011.
After a four-day slump, the Dow Jones Industrial Average fell by 531 points on Friday, making it the largest drop in four years — and even larger than the historic “Black Monday” in 1987 when the index lost 508 points.
The market at large slid and indices fell by 3%, but tech stocks took a beating of their own. The tech-heavy NASDAQ composite index fell 3.5%, and the S&P 500’s tech listings took some of the hardest drops of all sectors.
Apple Inc. (NASDAQ: AAPL) fell by more than 6% on Friday, bringing the powerhouse down to its lowest price of 2015. Google (NASDAQ: GOOG) slid by 5.2%, Microsoft (NASDAQ: MSFT) dropped by 5.67%, and Facebook (NASDAQ: FB) dipped by 4.97%. Twitter (NYSE: TWTR), which collapsed last May, fell off yet another cliff and is now priced below its IPO value.
The total value lost on Friday was nearly $95 billion.
While the week started with Asian markets down approximately 6%, it’s too soon to tell if this is the inflection point for the market’s years-long bull run. Still, a continued slide could present an excellent opportunity to buy into hot tech stocks when they’re feeling the market’s pressure.
Today, we’re going to think about how that slide has affected software.
American entertainment software companies, for example, have all been brick-walled at the peaks of three-year runs.
Video gaming companies Glu Mobile (NASDAQ: GLUU), Electronic Arts (NASDAQ: EA), Activision Blizzard, Inc. (NASDAQ: ATVI), and Take-Two Interactive (NASDAQ: TTWO) all have the same pattern since 2013: a huge, slow climb with a sudden sell-off at the top. If you’re looking for a buying opportunity, don’t look there just yet.
Financial software company Intuit (NASDAQ: INTU), meanwhile, suffered a double-barreled blast and lost its 2015 gains on Friday, dropping by more than 13%. After a long, seven-year rise, the company announced plans to sell off its popular consumer finance program Quicken to become a software-as-a-service vendor. The company’s share value took a plunge at the same time as the market was falling.
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I don’t typically advocate investing in consumer-facing tech companies, anyway. But here’s one that I’m extremely bullish on…
Enterprise software vendor Red Hat (NYSE: RHT) took a nearly 4% tumble on Friday, yet the company is still a major powerhouse that is worth watching if the tech sector slides into a full-blown correction.
Red Hat specializes in providing open-source software for big companies, and it claims nearly 90% of the Fortune 500 as its clients. The company’s revenue has increased by 34% over the last eight quarters, and it does more than $1.8 billion in business by offering solutions that capitalize on big data and cloud trends.
When the cold comes rushing in, that’s where I’ll be.
Good Investing,
Tim Conneally
For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.
