How Our Tech Stock Picks Fared in 2021—and What’s Worth Buying Now

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This column was bullish on shares of Amazon.com throughout the year. The stock has underperformed in 2021, but it’s likely to still do well in the long term.

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With the year drawing to a close, the time has come to take credit for Tech Trader’s good calls, ’fess up to the misses, and most importantly, assess whether the advice still holds up. Let’s start with the whiffs.

Throughout the year, I wrote bullishly about Amazon.com (ticker: AMZN). In a Feb. 8 column, I said investors were overthinking the CEO change, as AWS chief Andy Jassy took over for founder Jeff Bezos. I wrote at least three more bullish takes over the course of the year. But Amazon is up just 5% year to date, underperforming the S&P 500 by 20 percentage points. The stock has been hampered by a slowdown in the growth of its flagship e-commerce arm as the world began to emerge from the worst of the pandemic and shifted some spending back to physical stores.

But Amazon always plays the long game, willing to sacrifice near-term profits for longer-term growth, and investors need to think the same way about the stock. Amazon’s cloud-computing, logistics, and advertising businesses are all growing aggressively—AWS is now probably more important to Amazon than its online store. While the bullish call wasn’t a huge winner last year, I think I’ll be right over time. On this one, I’m just early.

I wrote three bullish columns about Netflix (NFLX), which has been an underachiever in 2021, up about 13%, 11 percentage points behind the S&P 500. That’s the stock’s smallest gain since 2016, but it follows a 67% run in 2020, when Covid turned streaming video into the world’s most popular pastime. Netflix is now an underappreciated juggernaut. By year end, Netflix will have increased its subscriber base by about a third since the end of 2019, to more than 220 million worldwide. It continues to produce content in huge volume and variety—and often stunning quality. (I recommend both Passing and The Power of the Dog, which seem likely to scoop up Oscar nominations.) I advise you to hold on—the story is as strong as ever.

My Aug. 23 bull case for Palantir Technologies (PLTR) hasn’t worked out, so far—the stock has dropped about 25%. I’m still intrigued by Palantir, but the company has serious quirks. Some analysts are put off by a series of SPAC-related investments in some of its own customers, for instance. Palantir is a speculative bet, but the opportunity for adding actionable analytics on top of large data sets will keep growing more or less forever. Maybe not for the risk-averse, but I still see long-term opportunity there.

Then there a few duds where I was more wrong than early. My March 15 column highlighted the newly public Korean e-commerce company Coupang (CPNG), which turned out to be a bad call. The stock is down 42%. Investors have soured on Asian stocks amid China’s crackdown on tech companies. My May 17 column highlighted online used-car dealers Carvana (CVNA), Vroom (VRM), and Shift Technologies (SFT). That was a terrible idea—all three are substantially lower, hurt by a shortage of used cars, among other things. The June 28 column had a wrongheadedly bullish item about Just East Takeaway.com (GRUB)—the food delivery stock is down about 39% since, in part due to lost market share in the U.S. for its Grubhub business.

Now for some big wins. In my Feb. 1 column, I made the case for both Apple (AAPL) and Microsoft (MSFT) shares. I hope you listened—Apple is up about 27% since then, and Microsoft is up 34%. I remain bullish on both. In Apple’s case, 2022 is shaping up to be a year of deafening buzz, thanks to the iPhone 14, the potential launch of a virtual- and augmented-reality headset, and maybe even an Apple car. As for Microsoft, it’s a precision software machine, generating double-digit top-line growth with the Azure cloud business as the engine.

Another stock I touched on repeatedly this year was Cisco Systems (CSCO). I first waxed bullish on Cisco in late May. The stock is up about 18% since then and 37% year to date. I still see the networking giant as a great pick-and-shovel play on cloud computing, expanded enterprise spending, and the growth of networking overall.

On several occasions this year, I warned readers about the risk of high-multiple growth stocks, and those warnings have proved prescient. My Feb. 21 column included a list of 15 of the most expensive tech stocks, all trading for more than 35 times 2021 sales estimates. That group of stocks has fallen an average of 19% since then, with six of them down more 50%, including Zoom Video Communications (ZM), Coupa Software (COUP), Fiverr International (FVRR), Appian (APPN), Lemonade (LMND), and C3.ai (AI).

Finally, a confession: I didn’t write enough about semiconductors in the past 12 months, a fantastic period for chip stocks. Both semi makers and the related names in the semi-equipment sector have been huge beneficiaries of the shortages that have plagued the tech business this year, but that’s only part of the story.

The chip industry produces the building blocks for every tech trend—5G phones, electric and automated vehicles, cloud computing, artificial intelligence, cryptocurrency, the Internet of Things, virtual reality, and, yes, even the metaverse. In last week’s column, I did cite portfolio managers who remain bullish on both chip and equipment stocks, and I think they are dead on. In any case, I vow to pick up the pace on chips in 2022.

Happy 2022. Here’s hoping it’s a little happier, and much healthier, than 2021.

Write to Eric J. Savitz at eric.savitz@barrons.com