NEW YORK, March 14 (Reuters) - Technology stocks continue to be one of the strongest sectors among small and mid-cap stocks, according to a report from Bank of America Merrill Lynch Global Research on Wednesday.
“Since late 2007, we have been overweight information technology in small caps, which has worked out more often than not. In our view the sector continues to exhibit the characteristics for success in 2012, so we remain firmly overweight this group,” said Steven DeSanctis, a small-cap strategist at BofA Merrill Lynch Global Research, in a note to clients.
DeSanctis said the sector is still attractive on both absolute and relative valuations. Earnings growth estimates for 2012 appear conservative relative to other sectors in small caps, and the trend in the earnings-revision ratio has started to improve recently.
He also said merger and acquisition activity was stronger than average for the tech group last year and should continue in 2012.
“One of our issues with small caps is that 2012 estimated growth is too high for the overall size segment at 17.3 percent. This is not the case for information technology in our view, because growth is forecast to be about 6.6 percent,” according to the note.
On Wednesday, the S&P MidCap 400 index dipped 0.8 percent while the S&P SmallCap 600 index fell 0.9 percent. In comparison, the benchmark S&P 500 was down 0.2 percent.
The S&P info technology sector in the small cap sector was down 1.2 percent on Wednesday, but was up 12.2 percent for the year.