Tom Lee Believes The Structural Bull Case To Own Semiconductor, Memory Stocks Is Intact: ‘It’s A Buying Opportunity’

During an interview with CNBC, Lee said he believes the unwind in semiconductor and memory stocks could be in its later stages.

• Lee also cited the decline in the Momentum Index and its historical trends as another reason for his optimistic outlook.
• He said that the Momentum Index had fallen 8% over the previous five sessions, which had happened only five times in the past three years, adding that each of those declines marked the bottom of the selloffs.
• Lee thinks that a potentially dovish Federal Reserve, earnings improvement, and mergers and acquisitions are some of the tailwinds for small-cap stocks going forward.

Fundstrat Managing Partner Tom Lee said Thursday that the long-term investment case for semiconductor and memory stocks remains intact despite the recent sell-off, and that the pullback represents a buying opportunity.

During an interview with CNBC, Lee noted there has been a “breakdown” in stocks across the memory and semiconductor sectors, as well as in the broader Momentum Index.

He also said that he remains bullish on technology stocks despite what he called a sizable rotation out of the sector.

Unwind In Semis, Memory Stocks In Later Stages, Lee Believes

Lee added that he believes that the unwind in the semiconductor and memory stocks could be in its later stages. “The structural bull case to own these is intact, so it’s a buying opportunity,” he said.

Lee also cited the decline in the Momentum Index and its historical trends as another reason for his optimistic outlook.

“We published a note yesterday just highlighting that the Momentum Index, which is an ETF, fell 8% over five days, and that’s only happened five times in the last three years,” he said, while adding that each of those declines was the bottom of the sell-offs.

Lee also said that he remains bullish on small-cap stocks, calling it a “multi-year move.”

“What we’ve been highlighting for some time is we’re coming off of almost 12 years of small-cap underperformance and their multiples have re-rated,” he added.

Lee thinks that a potentially dovish Federal Reserve, earnings improvement, and mergers and acquisitions (M&A) activity are among the tailwinds for small-cap stocks going forward.

Lee Looks At Positives From Volatility Fueled By Iran War

Lee also looked at the positives from the volatility fueled by the Iran war, saying that while it may have unsettled investors, it created buying opportunities in equities.

“During that period in February through April, while the war was escalating and markets were tumbling, it ultimately proved to be a good buying opportunity for stocks. I think, for me, that will be the bigger message for viewers,” he said, while adding that the hostilities proved to be good for the U.S. economy as well.

At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.22%; the Invesco QQQ Trust ETF (QQQ) rose 0.78%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) edged lower by 0.06%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bullish’ territory.

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