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Tech stocks: The new safe havens?

February 6, 2014: 1:27 PM ET
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Investors are scared of risk. But some big tech stocks have escaped the carnage due to strong earnings.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Even though stocks are enjoying a nice little rally today, green on the screen has been the exception rather than the rule in 2014. The Dow is still down about 6% so far this year.

But as my colleague Stephen Gandel from Fortune pointed out Wednesday, tech stocks have held up better during the recent tumult. The Nasdaq is down just 3%. CNNMoney's new Tech 30 index has also outperformed the broader market. It's off by only 2.7%.

It may seem a bit odd that tech stocks are not getting crushed more than the overall market. After all, the Nasdaq was the top index in 2013. It surged 38%, compared with a 26% gain for the Dow and 30% pop for the S&P 500.

Related: Investors should stop freaking out

Still, it makes sense that techs are now safe havens. Or at least some of them. Why? Earnings. Plain and simple.

Look at the stocks that are actually up sharply this year. You'll notice that many of them are tech companies that have reported solid results.

Juniper Networks (JNPR) and F5 Networks (FFIV), two competitors to Cisco (CSCO), are the fourth and fifth top gainers in the S&P 500 this year. Each stock is up more than 15% so far. And both companies reported earnings last month that topped forecasts.

Content delivery network company Akamai (AKAM) is the third-best performer in the S&P 500, up nearly 20%. And nearly all of that move came on Thursday, after Akamai blew away forecasts for earnings and revenue and gave bullish guidance.

Before the solid results, investors had been worrying that Apple (AAPL) was planning to build its own CDN to compete with Akamai. But this earnings report seems to put those fears to rest. For now.

Video game developer Electronic Arts (EA) is the seventh-best gainer in the S&P 500 this year. The Madden maker also posted earnings that beat estimates. And Facebook (FB) is the ninth-best performing stock in the S&P 500, up nearly 15%. It's no secret why. Facebook's growth in mobile users and ad revenue was phenomenal.

Related: No Terrible Twos for Facebook stock

Both of those companies are in CNNMoney's Tech 30. Two other standouts in our index that are up this year thanks to strong financial results are Netflix (NFLX) and Google (GOOG).

This all goes to show that investors shouldn't always obsess about the macro picture. Sure, emerging market fears and worries about the U.S. economy may be dragging down the market broadly.

But concerns about the Fragile Five don't appear to be having any impact on advertising growth at Facebook. I doubt that anyone canceled their Netflix streaming subscription because of this week's tepid ISM manufacturing number ... especially with season 2 of "House of Cards" just eight days away!

In this passively managed ETF world we live in, investors often forget that the market is a collection of individual stocks. And guess what? There is still value in doing fundamental analysis.

Of course, there are risks to stock-picking. Twitter (TWTR) fans aren't too pleased after its outlook underwhelmed.

And other stocks in the Tech 30 that have lagged the market this year also have had either disappointing earnings or weak guidance, most notably ARM Holdings (ARMH), Amazon (AMZN) and Yahoo (YHOO).

Related: Slower smartphone growth hits ARM sales ... and stock

Trying to identify winners and losers is not easy. You have to do your homework. Valuation matters too.

It's simpler to just plop some money down in the SPY, QQQ or other ETFs ... like GLD perhaps? Gold, after all, has outperformed stocks this year!

But maybe that's a column for next week.

Reader Comment of the Week ... pour it in my hand for a dime! I tweeted on Wednesday about how a sales miss at Buffalo Wild Wings (BWLD) had investors crying fowl. (Sorry!)

One reader brought to mind a hilarious scene from the late 80s parody classic "I'm Gonna Git You Sucka." The scene featured a then-relatively unknown comic by the name of  Chris Rock. I'd embed the clip. But there is an F-bomb. And this is still a family column.

You got change for a hundred? Congratulations, LifeSciencesMkt! (What is your real name, pray tell?) This is your second RCOTW win already this year. Does @BostonBroker33 have some competition for first-ballot induction in the Buzz Reader Hall of Fame?

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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