It’s the million-dollar question on investors’ minds after the technology sector’s red-hot start to 2023: should I ride the hot tech-savvy momentum plays on the way up, or settle for the Steady Eddie and stay out of the way of the next potential pullback?
Indeed, nobody knows what’s next for Mr. Market. It has reacted with a bullish surprise this year for many of last year’s biggest duds. With the painful implosion in speculative tech plays in 2022, there is no question that some of the more value-conscious investors are looking at the latest tech run with a dose of skepticism. And they’re right to, as some look to brave the market rally, seemingly forgetting the bear that brought forth the pains of last year.
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Run with the bulls in tech or buy the dip in defensive dividend stocks?
Indeed, the bear is in the rearview mirror at this point. And as we get a glimpse of the new bull market, many investors may be wondering if it’s a more profitable move to go with the flow or against the grain. There’s no easy answer.
Ultimately, your personal risk tolerance should be carefully considered before you even think about buying a name like Shopify (TSX:SHOP) after it delivered a whopping 77% in gains year to date.
Meanwhile, it’s hard not to love the unloved shares of Fortis (TSX:FTS) after moving just shy of 4% higher year to date. Fortis stock is a great defensive bet to batten down the hatches before a potential economic downturn. However, it seems increasingly likely that central banks may actually land the economy without so much as a rocky landing. Yes, rate hikes have been hard to digest for many. But it may not be as bitter as expected once all is said and done.
Even a defensive like Fortis can have some wind taken off its back at the hands of a “higher for longer” rate world. In any case, high rates still seem to be the toughest on the high-tech innovators like Shopify. At this juncture, inflation is steadily becoming tamer, potentially setting the stage for a descending rate environment at some point down the road.
Better buy: Shopify stock or Fortis shares?
At this market crossroads, I’m more inclined to go against the grain with Fortis than run with the bulls in Shopify stock. What goes up quickly can come down quickly. Even if Fortis continues to deliver modest results, there’s always the 4.03% dividend yield to keep patient investors happy.
Understandably, Shopify stock is nowhere close to hitting new highs. With plenty of growth (and artificial intelligence potential) in the tank, though, I see a long-term trajectory higher. When it comes to the future of e-commerce, it’s not hard to envision Shopify as a top player, even over the likes of its much larger rivals that have made a splash in logistics and beyond.
Just because I like Shopify stock longer term doesn’t mean I want to get in here at $86 and change, especially after Thursday’s slip in markets. The tech scene seems a tad overbought and overdue for a correction. Should Shopify come in further, I’ll be ready to reconsider my stance. For now, I’m content with a dividend payer like Fortis, as it tackles its own slate of issues.
