Smaller tech stocks have been seeing a big rally in 2019

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January 9, 2019 1:17pm NYSE:VB

NYSE:VB | News, Ratings, and Charts

From Annie Pei: It could be in with the new and out with the old when it comes to technology this year.

While many large-cap tech names have started the year off strong, there’s a wave of smaller, more new-age tech stocks that have seen a huge rally. Companies like TwilioEtsySquareRoku and Dropbox have soared, with many up double digits in the first few trading days of 2019.

And Todd Gordon, founder of, said that there are three of those names you want to buy.

The first is Twilio, up 7 percent so far in 2019. Gordon considers the cloud communications company one of his favorites in his portfolio and believes that it’s a good sign that Twilio is “just hanging on right towards the highs” despite all the volatility in the market as of late.

The same applies to Etsy. According to Gordon, there is “a ton of strength” in the e-commerce company based on how the stock has performed relative to the market, and he sees the name possibly pushing through its old highs.

Finally, Gordon believes Square could be set for a breakout. Unlike Twilio and Etsy, Gordon points out that rather than a consolidation, the chart for the payments company seems to have moved in more of a downtrend channel. However, “if you can get more of a pop through there, then Square could do a little catch up on the upside,” Gordon said Tuesday on CNBC’s “Trading Nation.”

Erin Gibbs of S&P Global, however, believes that of the three Square is the best bet. While Gibbs thinks that generally many of these smaller-cap new-age tech names look a little too volatile, she believes that Square’s valuation and its history of beating earnings benefits the stock from a fundamental standpoint.

“[Square’s] valuation is so down, it’s trading at about 33 percent below the Wall Street target price so it’s by far, at least from a fundamental basis, got the most upside,” she said on “Trading Nation.” “[They’ve also] got over two years of beating estimates, and they have a long-term growth estimate of 55 percent, which is one of the highest of any of these stocks.”

Many of these new-age tech names did pull back Wednesday, with Twilio seeing a 2 percent drop.

Disclosure: Todd Gordon has a position in Twilio but does not own Etsy or Square.

The Vanguard Small-Cap ETF (VB) was trading at $139.91 per share on Wednesday afternoon, up $1.30 (+0.94%). Year-to-date, VB has declined -5.05%, versus a -2.73% rise in the benchmark S&P 500 index during the same period.

VB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 41 ETFs in the Small Cap Blend ETFs category.

This article is brought to you courtesy of CNBC.

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