'Investors aren't thinking enough about what can go right in 2023.' Veteran manager offers five stocks to play the biggest tech theme to come.

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Don't turn your back completely on tech, said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments. Tengler highlighted one big tech that she thinks has solid fundamentals and an excellent management team.

While the Nasdaq Composite COMP, -10.23% is up about 5.7% this quarter, that’s after three dismal ones, and a 28% loss for the year so far is steering it towards the worst annual return since 2008.

“I think the theme is more about embracing digitization, the digital revolution of the economy and picking the best in breed of old economy companies that are doing this, and then the companies that are providing the digital solutions,” she said. From the Big Tech batch, Tengler says they’ve been picking up beaten-down shares of Microsoft MSFT, +0.18%. “If the company’s fundamentals are solid, if the management team is excellent, if they are an industry leader and good operators, which Microsoft is, then this has historically proven to be the kind of period where you want to add to names like that,” she said.

“I think maybe investors are not thinking enough about what can go right in 2023,” Tengler said, in a nod to extreme pessimism among investors and institutions this year. “Because when the Fed stops, or if earnings aren’t as bad as expected…we’re in a position for stocks to rally pretty hard and there are a lot of people who are going to be caught.”

Nvidia NVDA, -4.54% revenue came in slightly better than forecast, but earnings were cut in half owing to an inventory charge as data-center demand slowed in China. A record glut in inventories could be a worry for investors.

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