The tech heavy Nasdaq 100 just broke through to a new high recently, but don’t be fooled! This doesn’t mean there’s a secular bull market in tech. Far from it.
Big tech is thriving, yet small tech is in the midst of capitalism’s “creative destruction.” Some new companies are trying to survive in dynamic markets; older companies are collapsing under the weight of new competition; some sectors have too many players and the herd needs to be culled.
As far as your portfolio is concerned, not all tech stocks are created equal. Just as there are big winners, there are also big losers. So instead of telling what to buy this week, I think it’s a better time to share with you seven tech stocks that will eat away at your portfolio from the inside.
If you own these stocks, sell them. If you don’t, stay away. These aren’t bottom fishing opportunities. Although many have suffered already, there’s still more pain awaiting them.
Tech Stocks to Sell: Spi Energy (SPI)
Spi Energy Co Ltd (ADR) (NASDAQ:SPI) got its foothold in the Chinese renewable energy boom. It’s a solar company that manages projects and trades PV components … but it doesn’t make solar panels.
It’s a financing company for the solar industry, which we all know is not a great market to be in. SPI also diversified operations — it has projects in the U.S., the U.K., Greece, Japan and Italy. The thing to notice here is that all these countries aren’t in the position to be launching a great deal of projects right now. Some of these countries can barely keep the lights on.
Also, the brewing trade war between the U.S. and China will certainly give potential U.S. customers pause before moving ahead with a Chinese partner.
The stock launched in the U.S. in September 2016 and since then has dropped nearly 70%. And there’s more downside than upside even now.
Tech Stocks to Sell: Infosys Ltd (INFY)
Infosys Ltd ADR (NASDAQ:INFY) went public during the dot-com craze of the 1990s. And like many of those companies, INFY stock was just getting wind under its wings when the crash came.
INFY is headquartered in Bangalore, India and was a pioneer in getting highly skilled tech workers in India to work with companies around the world on their tech support service challenges. For many U.S. firms just entering into the digital age, having a skilled partner to help build out its tech infrastructure at significantly lower costs than U.S. firms, was a great idea.
The problem is, what INFY did is no longer as unique or expensive. There are plenty of competitors at this point, all over the world. And the U.S. market, still its biggest revenue source is now getting harder to work in, considering the immigration issues of the new administration in Washington.
There’s just too much risk here right now and there are plenty of other stocks with less baggage.
Tech Stocks to Sell: Ericsson (ERIC)
Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) is another hot shot telecom firm from the dot-com era. Ericsson was a big player building telecom networks, developing wireless telecom solutions for government and businesses around the world. It also had a very strong mobile phone division.
But all that changed after the bubble burst. The mobile phone market became more and more challenging as competitors entered the arena and phone demand soared. The demand side was great, but designing phones and features was more of a side business than the real core business of telecom infrastructure.
The markets still loved telecom and that kept ERIC aloft for a while, even after it sold off its phone division. It was the leading telecom firm in China and other parts of Asia. It was growing in key emerging markets.
But the financial meltdown in 2008 hammered ERIC again and it still hasn’t recovered. And there’s no point betting money that it will.
Tech Stocks to Sell: Sabre Corp (SABR)
Sabre Corp (NASDAQ:SABR) is the key software for the travel industry. Back in the old days of actual human travel agents, Sabre was one of two systems that were available to find out flight information.
Even in the new online travel agency (OTA) world, SABR is basically the middleman between the OTAs and the customers. The airlines list their flights on SABR’s system and then that is shared with the OTAs.
The problem is, nobody’s happy about paying SABR as a middleman. And the internet is not the kind of environment where middlemen last long. Information is simply too easy to get and share.
Also, considering the tight margins the airlines operate with, paying a fee to SABR for bookings is getting old fast. SABR is fighting to stay relevant and time is not on its side.
Tech Stocks to Sell: First Solar (FSLR)
First Solar, Inc. (NASDAQ:FSLR) is one of the biggest pure plays in the solar panel market.
During its heyday, it was a juggernaut in the renewables sector, trading above $300 a share in May 2008. The problem is, those days are long gone. FLSR now trades at one-tenth its all-time highs and even that ground is a bit shaky.
The financial crisis and the ensuing collapse in the renewables sector didn’t help. The Chinese dumping solar panels on the global market also hurt. And now that solar is everywhere, FSLR has a lot of competition, even for big projects.
If there was one thing FSLR had going for it was its size – after all the hard times, it still has a market cap of more than $3 billion. But now technology has helped developed new generations of solar panels that are more efficient and cheaper. That means more competition and lower margins.
Tech Stocks to Sell: Fitbit (FIT)
Fitbit Inc (NYSE:FIT) needs no introduction. It was one of the pioneers of the fitness band craze that hit a few years back.
And they’re certainly popular items. Not a day goes without seeing people checking their step counter or calorie counter on their Fitbit. Companies and institutions have subsidized Fitbits for their employees to encourage them to exercise more.
The problem is, once you have one, there’s no real point in upgrading. It’s design and quality have been the architect of FIT’s own demise. It’s very good at what it does, but once you have one, unless you break it or lose it, there’s little reason to keep buying them.
That’s tough for a publicly traded business, since investors want growth. This explains why, since its launch in June 2015 the stock is off 82%.
Buy the Fitbit if you haven’t already, but don’t buy the stock.
Tech Stocks to Sell: Diebold Nixdorf (DBD)
Diebold Nixdorf Inc (NYSE:DBD) has two significant lines of business. It’s one of the leading manufacturers of ATMs around the world. The other is, it makes voting machines.
Both could be considered secure boxes that need to be durable, reliable and impenetrable. And while these technologies were very valuable for decades, DBD’s business model is under threat by the next wave in technology.
Its ATM business is slowly (for now) drying up because cashless alternatives — like buying things with your phone at checkout counters — are growing. It is attempting to pivot, but it’s looking more like old wine in a new bottle.
As for voting machines, there’s so much concern with hacking electronic machines and other irregularities that many states are reevaluating their use of digital machines. Plus, it’s another two years before there are significant national elections, so this business isn’t really booming now anyway.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.