As big tech earnings get ready to dominate Wall Street this week, Institutional Investor hall of famer Richard Bernstein has a warning for investors: Cut your tech exposure or get burned.
According to Bernstein, too many investors are getting caught up in a losing trade.
“It looks like profits are going to decelerate in 2019 and 2020,” the Richard Bernstein Advisors CEO said Monday on CNBC’s “Trading Nation.” “Tech should be one of the sectors that feels that deceleration of corporate profits.”
On Tuesday, Twitter reported first-quarter earnings that crushed expectations, sending the stock surging in premarket trading.
So far this year, the tech-heavy Nasdaq is up more than 20 percent. Despite the sharp rally along with the recent rush of tech IPOs, he believes the stage is set for pain.
“You have to realize that when companies become public, it’s usually when there is enough interest in them. It’s not like they want to share with you the great fortune,” said Bernstein. “Number two, there is a lot of academic research that shows through time, that IPOs in general tend to underperform.”
Bernstein, a CNBC contributor and a long-time bull, predicts the trouble will last longer than a quarter or two.
“As you go ’19 into ’20, the business is probably not going to be as good,” he said.