iQ Technology Model
Technology stocks have impacted the American equity market for nearly a century. Long before the market mania of 1998 through March of 2000, the “new economy” and technological advances of the 1920s foreshadowed the tech bubble of modern times. But the high flying technology stocks back then were Eastman Kodak, General Electric, RCA and AT&T. With technology stocks, investors are seeking rapid growth. But with that potential upside comes a good deal of volatility.
RULES-BASED SELECTION PROCESS
The iQ Technology Model employs the following unemotional rules-based process:
Start with the largest 150 domestically-traded companies from the Technology sector
Select the 50 companies with the highest 5-Year risk-adjusted Seasonal Relative Strength.
Screen by Price to Cash Flow and select the bottom 20.
Screen by Price Momentum and select the top 10.
This model reconstitutes every February, May, August and November
Why invest in technology stocks
Investing in technology stocks can provide several potential benefits, including:
1. Growth potential: Technology companies often operate in high-growth industries and have the potential to deliver above-average earnings growth. As technology continues to play an increasingly important role in our lives, the demand for innovative technologies and services is likely to continue to grow.
2. Innovation: Technology companies are often at the forefront of innovation, and investing in these companies can provide exposure to new and disruptive technologies that have the potential to revolutionize industries.
3. Diversification: Technology companies operate in a range of industries, including software, hardware, telecommunications, and e-commerce, among others. Investing in technology stocks can provide diversification benefits for a portfolio and can help to reduce overall risk.
4. Resilience: Technology companies have demonstrated resilience in the face of economic downturns and other challenges. The COVID-19 pandemic, for example, highlighted the importance of technology in enabling remote work and e-commerce, and many technology companies have benefited from this trend.
5. Exposure to global markets: Technology companies often have a global presence and generate revenue from a range of markets. Investing in technology stocks can provide exposure to international markets and can help to diversify a portfolio across different regions.
It's important to note that investing in technology stocks also comes with potential risks, including the potential for volatility and rapid shifts in market sentiment. Additionally, some technology companies may be more susceptible to regulatory or legal challenges.
Investing in technology stocks involves risks and may not be suitable for all investors. The rapid pace of technological advancements can lead to market volatility and uncertainty. Technology companies may be subject to intense competition, regulatory changes, and risks related to cybersecurity and data privacy. Additionally, technology stocks can experience significant price fluctuations and may be sensitive to economic conditions and global events.