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Tech stocks: Strategist warns of risky names – CNBC

External View of the Apple store on Fifth Avenue on August 19, 2020 in New York City.

VIEW press | Corbis News | Getty Images

As investors cycle back into growth stocks, one market strategist warns against certain technology names he believes are high risk.

Growth stocks are shares of companies expected to grow at a faster rate than the rest of the market. However, these names are typically riskier and more volatile than the average stock.

Adam Parker, former Morgan Stanley chief U.S. equity strategist and founder of Trivariate Research, said the time is right to buy growth shares, but investors should be cautious of a few.

“We think that portfolio managers should be buying growth stocks again, focusing on positive free cash flow and margin expansion, not earnings-based valuation,” Parker said in a note released Wednesday.

Trivariate Research used a number of criteria to identify risky stocks, including low or negative correlation to inflation, high correlation to the economic reopening and high levels of company insiders selling their shares. The research firm then identified the eight riskiest names based on those measures.

“Our view is that these are among the riskiest stocks to own today, so investors who own these names should have disproportionate upside to their base cases to compensate them for these risks,” Parker said.

Take a look at five of the riskiest technology stocks, according to Trivariate.