• The volatile stock markets likely have investors on edge, and many are worried that a recession is imminent.
  • But Colin Sebastian, an analyst with Baird Equity Research, is optimistic that the recent sell-off in the markets represents just a correction, not a sign of an economic downturn.
  • If so, that could be a good sign for tech stocks; they’ve tended to post strong gains in rebounds after corrections, according to Sebastian’s data.
  • But some stocks have done better than others, and Sebastian has three top suggestions on which to pick.

With the stock markets facing turbulent times, many investors are likely wondering where to invest.

Colin Sebastian has some suggestions.

Although talk of recession is increasingly in the air, Sebastian, a financial analyst who covers internet and technology stocks for Baird Equity Research, is betting that the stock sell-off in recent months is simply a market correction, not the advent of an economic downturn. If that’s the case, the internet and video game software sectors should be poised for a big rebound, he said.

“We think it is reasonable to consider a more optimistic outcome” than a recession, Sebastian said in a research report issued Wednesday.

Colin Sebastian, a financial analyst with Baird Equity Research, in an appearance on CNBC on December 11, 2018.
Baird Equity Research analyst Colin Sebastian studied how tech stocks performed after market corrections.
CNBC/YouTube

That would have been a remarkable statement after the huge sell-off investors saw in recent weeks and have seen in recent months. But he may be on to something, given the market’s rebound on Wednesday.

To figure out what investors could expect in the case of a rebound, and where they should place their bets, Sebastian took a look at how the companies he follows performed after the four most recent market corrections.

On average, the internet companies he covers saw their stocks rise 11% in the six months after those corrections. The video game companies did slightly better, rising 12%.

But those averages mask a lot of variation among the different companies.

Among the 15 companies he studied, just three traded higher six months after each of the four corrections on which he focused: Google parent Alphabet, Facebook, and Activision Blizzard. All three were also the best performers when it came to volatility — they each posted the lowest variance from their average price during those rebound periods.

But that doesn’t mean he think each one of those companies is a good bet this time around. Instead, here are his top picks:

1/5

Alphabet

Alphabet
Larry Page, Alphabet’s CEO
Jeff Chiu/AP

Alphabet’s stock hasn’t been…