The Motley Fool

3 TSX Tech Stocks to Handle With Caution

Image source: Getty Images

Growth stocks are coming in for a bashing, as the market stumbled into September. It’s been a glum end to the summer, bringing a veritable bloodbath of red ink. Some pundits have been quick to call the selloff, which began as a limited tech stock correction, a market crash. But while we’re not quite at March levels of fear, the sentiment in the markets has undeniably shifted, as we head into the new season.

Summer’s tech stock trends turn toxic

Facedrive aims to provide a ride-hailing service based on an environmentally friendly fleet. It’s a cute idea and has seen a lot of investor interest. But its momentum — in both directions — is becoming increasingly dangerous. Up by around 650% this year, the name has pulled back sharply of late. Facedrive has ditched about 25% in the last four weeks. And that’s bad news given the week the markets just had.

The gig economy is a precarious investment area at best. It is also one that is rife with questions of an ethical nature. Then came this year’s findings of the Union of Concerned Scientists. The report suggests that the environmental impact of ride-hailing companies is almost 70% worse than traditional transport modes. It estimates that the environmental toll of outfits like Lyft and Uber is significantly greater than from normal travel.

Dye & Durham is a pure play on the digitalization of legal services. It’s climbed 53% in just four weeks. However, this name has ditched 11% this week, making it a dog of a stock. This is one of the rare occasions when it might be worth realizing a loss and taking the hit. This name is unlikely to improve in the current climate. Down 13.9% off its month-long high, Dye & Durham is a liability to a stock portfolio.

In any other recession, speculative growth investing would be deemed inadvisable. And while value opportunities can be found in any downturn, the markets in 2020 have been turning on a dime. Lightspeed POS is down 11.8% this week. For all of the hullabaloo about this stock, Lightspeed has seen an insipid 16% growth year on year. Low-risk investors should look elsewhere.

Expect a rough fourth quarter for tech stocks

Personally, I don’t think any of these names brings anything really radical to the table. Most of this has been done before. Facedrive comes across as a reworked Uber with a “go green” gimmick thrown in. Dye & Durham is an even more vanilla version of Descartes Systems Group. Lightspeed is an uninteresting take on a space better represented by Shopify. In short, there are stronger plays out there in more established names.

In terms of momentum, it’s probably safe to say that the current economic environment does not support the type of growth investing that erupted this year. Investors would be better off looking now towards value stocks, as the long road to a post-pandemic recovery begins. Now is not the time to be risking capital for the sake of a few reworkings of growth trends that are quickly going out of fashion.

Buying quality stocks for retirement? The following report could significantly improve your portfolio.

Motley Fool Canada Makes 5G Buy Alert

5G is one of the greatest arrivals in technology since the birth of the internet. We could see plenty of new wealth-building opportunities in 2020 that would potentially dwarf any that came before them.

5G has the potential to radically change our lives and society as we know it, but if you’re an investor, the implications are even greater — and potentially much more lucrative.

To learn more about it and its revolutionary potential to change the industry — and potentially your bank account — click on the link below to get the full scoop.

Learn More Today!

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends Uber Technologies.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.