Once the darling of the markets, FANG stocks are suddenly falling fast. Their fate is more or less identical to those of other tech stocks which have suffered a rout since last Friday. This was a consequence of weak earnings guidance offered by LinkedIn Corporation (LNKD - Analyst Report) for the rest of the year.

At this point, it seems that the market is looking very carefully at the valuation of most stocks. Despite their undeniable long-term potential, it may be a good idea to pick undervalued tech stocks in this environment which are likely to mop up gains following a market rebound.

Fate of the FANG

During 2015, these four tech powerhouses provided an average return of around 83%. Given that the S&P 500 closed the year nearly 1% lower, this is a spectacular performance. However, they have suffered grievously this year just like most of the index’s other constituents.

And yet their recent performance on the earnings side has been widely different. Facebook, Inc.’s (FB - Analyst Report) stock spiked to its highest level ever after it exceeded both revenue and earnings estimates. Amazon.com, Inc. (AMZN -Analyst Report) posted disappointing results while Netflix, Inc.’s (NFLX - Analyst Report) U.S. subscriber additions came in below projections. Meanwhile Alphabet Inc. (GOOGL - Analyst Report) became the world’s most valuable company in terms of market capitalization following a short-lived rally.

Yet, all of them are in the red on a year-to-date basis. Amazon, Netflix and Alphabet are down 27.8%, 27.2% and 9.5% year to date. Facebook is relatively better off, having lost only 4.7% so far this year. The tech-heavy Nasdaq has been badly hit as a consequence and has lost 14.5% till now in 2015.  

Valuations Above All?

Several market watchers believe that the FANG decline is part of a phenomenon affecting the broader markets as a whole. The market is going through a process of reevaluating the true value of stocks, viewing those which seem overvalued with great skepticism.

This phenomenon has been triggered by the Chinese slowdown, the oil price slump and the Fed’s uncertainty over rate hikes. No respite on any of these fronts seems likely at present. Of course, this could only be a temporary phase and those companies with strong fundamentals could be in a position to rebound strongly once this happens.

Our Choices

The current decline in stocks presents a good opportunity to pick those up with strong fundamentals at attractive prices. Stocks which are attractively priced relative to their underlying value make for particularly good choices.

This is why it makes good sense to pick up value stocks from the tech sector with strong growth projections. Adding them to your portfolio could provide the benefits of solid growth potential inherent in the sector while holding out the promise of strong gains once the market rebounds.Our selection is also backed by a good Zacks Value Score and Zacks Rank.

We have narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.

NeuStar, Inc. (NSR - Snapshot Report) is a provider of analytics and real time information services on a global basis.

NeuStar holds a Zacks Rank #1 (Strong Buy) and has a Value Style Score of ‘A.’ The stock has a P/E (F1) of 5.26x, compared to the industry average of 11.27. The company’s expected earnings growth for the current year is 17.3%.

CACI International Inc. (CACI - Analyst Report) delivers IT applications and infrastructure to improve communications and secure the integrity of information systems and networks, enhance data collection and analysis, and increase efficiency and mission effectiveness.

CACI International holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘B.’ The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 16.81, lower than the industry average of 17.25. The company’s expected earnings growth for the current year is 33.1%.

Web.com Group, Inc. (WEB - Snapshot Report) is a leading provider of services related to the Internet for small businesses across the U.S., United Kingdom and South America.

Web.com holds a Zacks Rank #2 and has a Value Style Score of ‘A.’ The stock has a P/E (F1) of 7.83x, compared to the industry average of 20.94. The company’s expected earnings growth for the current year is 15%.

Science Applications International Corp. (SAIC - Snapshot Report) is a provider of engineering, technical and enterprise IT services within the U.S.

Science Applications International holds a Zacks Rank #2 and has a Value Style Score of ‘B.’ The stock has a P/E (F1) of 13.76x, compared to the industry average of 23.89. The company’s expected earnings growth for the current year is 10%.