The onset of the new coronavirus strain has caused panic among investors across the globe. This panic has raised uncertainties for businesses again as the new virus variant could lead to more restrictions and possible shutdowns.
Some tech companies benefited from the work-from-home culture amid the lockdown period earlier this year. This triggered a buying spree in their stocks on TSX. Such tech firms might benefit from the rising uncertainties again — making their shares soar further in the coming months. But are you afraid of buying tech stocks? Let’s learn something from the king of the investing world.
Warren Buffett on tech stocks
Warren Buffett is considered one of the best investors ever. His investment portfolio consistently performs much better than the broader market. More importantly, he’s flexible enough to keep adjusting his investment philosophy according to changing market dynamics.
For example, Buffett has never been a big fan of tech companies. In the late 1990s, when everyone talked about the emerging tech boom, he was busy investing in traditional businesses that he always understood well. That’s how he managed to steer clear from the dot-com bubble.
Buffett’s changing views
Buffett’s investment approach has seemingly changed a lot in the last few years, however. In 2016, his investment firm Berkshire Hathaway surprised everyone by buying $1 billion worth of Apple shares.
Similarly, Berkshire Hathaway has made big bets in Jeff Bezos led Amazon.com in the last couple of years. These moves reflect Buffett’s rising confidence in the tech sector.
Buy these tech stocks on TSX
Shopify Inc. (TSX:SHOP)(NYSE:SHOP) is the top gainer stock this year on the S&P/TSX60 Index with its solid 220% year-to-date gains. The Canadian subscription solutions and merchant solutions company saw massive growth in 2020. As the COVID-19 driven shutdowns forced more businesses to build their online presence, Shopify saw exponential growth in its sales and bottom line.
Its profitability has immensely improved this year as the company reported an 18.4% adjusted net profit margin in the September 2020 quarter. It was much higher compared to its net profit margin of 9.9% a year ago.
While Lightspeed’s gross margin improved in the last couple of quarters, its total sales continued to rise. In the September quarter, the company’s total revenue rose by 62% year-over-year to a record US$45.5 million.
Analysts expect this SAAS giant’s quarterly sales to continue rising for the next couple of years. With the growing demand for its services, Lightspeed’s management is focusing on expanding its customer base. At the end of September 2020, it had a customer base of over 80,000 locations compared to 57,000 locations a year ago.
The new coronavirus variant and fears of more restrictions are likely to further accelerate these tech companies’ financial growth. Just like Warren Buffett, we must keep on updating our investment strategy with changing market dynamics.
Buffett is also known for picking undervalued stocks for investing, and his strategies could help you smoothly swim through these tough times of uncertainties. If you buy such undervalued stocks today, the move could brighten your next Christmas by yielding handsome returns by then.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon and Apple. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Shopify, and Shopify. The Motley Fool owns shares of Lightspeed POS Inc and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, short January 2021 $200 puts on Berkshire Hathaway (B shares), and long January 2021 $200 calls on Berkshire Hathaway (B shares). Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.