Tech stocks could see a 15% correction

Technology stocks could see a 15 percent correction in a few months, one fund manager told CNBC on Thursday, adding that he is selling shares of Apple, Alphabet, and Microsoft because they are "fully priced".

Patrick Armstrong, chief investment officer at Plurimi, said that the companies have reached their "full valuations".

The fund manager said that he will likely own the stocks that he sold again by the summer after a 10 to 15 percent correction takes place. The reason, Armstrong believes this will happen, is because, on a Schiller-adjusted price to earnings ratio, the S&P 500 is trading at 29.3 times. The mean for the S&P 500 is 16.7.

This is a valuation metric which takes real earnings per share over a 10-year timeframe adjusted for inflation, to work out the valuation of an equity index.

Armstrong said that there have only been two other times that U.S. stocks have traded at this level – on Black Tuesday in 1929 when markets crashed, and in 2000 when the dotcom bubble burst.

Tech stocks have seen a rally in recent months. Alphabet shares are up 19.7 percent year-to-date, Apple has rallied 27 percent, while Microsoft has risen 11 percent. The tech-heavy Nasdaq index also recently touched a record high.

Meanwhile, all of these companies have reported their earnings for the fourth quarter of 2017. Apple beat market expectations on earnings per share, but missed on iPhone sales. Microsoft also reported earnings that beat analyst forecasts, but revenue missed. And Alphabet beat expectations on earnings and revenue.

Source: Bloomberg

Junior Trader Stefan Panteleev

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