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4 Technology Stocks Still Worth Buying at Fresh Highs
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Markets ended 2016 on a positive note, recovering significantly from a dismal 2015.A rebounding U.S. economy, as evident from the recently released improved economic data for GDP, and a favorable Consumer Confidence Index, unemployment rate and factory activity data have all contributed to the recovery.
In 2016, Dow Jones Industrial Average (DJI), NASDAQ Composite (IXIC) and S&P 500 (GSPC) gained 13.4%, 7.5% and 9.5%, respectively. We note that in 2015, the Dow Jones index’s return had fallen 2.2%, while the S&P 500 index ended the year on a more-or-less flat note. However, the Nasdaq fared better, with the tech-laden index having gained 5.7% in 2015.
Among the various sectors, technology continued to perform well with the Technology Select Sector SPDR ETF (XLK - Free Report) registering a return of 12.9% in the last year. In 2015, the ETF had gained just a meager 3.6%.
Launched in Dec 1998, XLK is a passively managed fund designed to deliver the returns of the U.S. technology stocks. The fund, before expenses, is expected to remain on par with the returns and characteristics of the S&P Technology Select Sector Index.
Tech Stocks Poised for Further Growth
The technology sector is likely to grow further in 2017, as evident from the recent forecast provided by Gartner Inc. (IT - Free Report) on worldwide IT spending. The latest report from the independent research firm projects global IT spending to reach $3.5 trillion next year, representing an increase of 2.9% from $3.4 trillion anticipated in 2016.
The technology space continues to be investors’ favorite due to its dynamic nature. It is expected to grow faster than ever before as evident from Gartner’s latest forecasts as well as improving U.S. economic data.
Naturally, investing in the tech space makes perfect sense at this point. However, making the right choices is a tough task.
No matter how disciplined and systematic an investor you are, equity market volatility will always be a concern. Only a few lucky ones would rake in the moolah, while others fall victim to ad hoc strategies.
So, wouldn’t it be a safer bet to invest in stocks that are winning currently and have the potential to gain further?
Here, we will discuss one tried and tested technique – picking stocks near their 52-week highs.
Why Stocks Near 52-Week Highs Are Good Bets
Investing in stocks near their 52-week high is akin to following the momentum strategy, which is based on the understanding that once a trend is established, it is likely to continue. The surge is driven by a broad set of factors including impressive sales, robust profitability and bullish earnings prospects. Major developments may also send stocks soaring.
However, stocks that are trading near their 52-week highs bear the risk of falling fast as the market might consider them overvalued. But the positives seem to outweigh the drawbacks.
Notably, momentum investors strongly believe in “the trend is your friend,” which means stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to retain that direction and will not move against the flow.
Thus, gambling on these stocks might help investors earn higher returns in the short term. However, this is only a speculative strategy and not meant for the faint hearted.
Where to Put Your Money?
Given their strong earnings history and great value metrics, we believe these four tech stocks, all of which are near their 52-week highs, will continue their uptrend for now. The stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) and have a Momentum Style Score of “A” or “B.”
NVIDIA Corporation (NVDA - Free Report) designs, develops and markets a family of award-winning 3D graphics processors, graphics processing units and related software. The stock has a Momentum Style Score of “A” and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has delivered positive earnings surprises in the last four quarters, with an average beat of 24.93%. The long-term expected earnings growth rate for NVIDIA is 10.3%. Closing at $106.6 on Dec 30, 2016, the stock gained 223.8% in 2016. It touched a 52-week high of $119.93.
Broadcom Limited (AVGO - Free Report) is a designer, developer and supplier of analog and digital semiconductor connectivity solutions. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “A.” The company has delivered positive earnings surprises in the last four quarters, with an average beat of 6.36%.
The long-term expected earnings growth rate for Broadcom is 13.6%. Closing at $176.8 on Dec 30, 2016, the stock gained 21.8% in 2016 and is near to its 52-week high of $183.99.
Science Applications International Corp. (SAIC - Free Report) is engaged in transaction, technical, engineering and enterprise IT services business. The stock carries a Zacks Rank #2 and has a Momentum Style Score of “B.” The company has delivered positive earnings surprises in the last four quarters, with an average beat of 9.20%.
The long-term expected earnings growth rate for Science Applications is 5%. Closing at $84.81 on Dec 30, 2016, the stock gained 85.3% in 2016 and is close to its 52-week high of $89.25.
ePlus Inc. (PLUS - Free Report) offers information technology products and services, flexible leasing and financing solutions, and enterprise supply management in the United States. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “B.” The company has delivered positive earnings surprises in three out of the last four quarters, with an average beat of 8.30%.
The long-term expected earnings growth rate for ePlus is 5%. Closing at $115.20 on Dec 30, 2016, the stock gained 23.6% in 2016 and is near to its 52-week high of $119.35.
Looking Ahead
These stocks have managed to grab the spotlight with notable performances, supported by solid earnings and impressive growth projections. These factors make us more or less sure that investing in these stocks will yield strong returns for your portfolio in the short term.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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4 Technology Stocks Still Worth Buying at Fresh Highs
Markets ended 2016 on a positive note, recovering significantly from a dismal 2015.A rebounding U.S. economy, as evident from the recently released improved economic data for GDP, and a favorable Consumer Confidence Index, unemployment rate and factory activity data have all contributed to the recovery.
In 2016, Dow Jones Industrial Average (DJI), NASDAQ Composite (IXIC) and S&P 500 (GSPC) gained 13.4%, 7.5% and 9.5%, respectively. We note that in 2015, the Dow Jones index’s return had fallen 2.2%, while the S&P 500 index ended the year on a more-or-less flat note. However, the Nasdaq fared better, with the tech-laden index having gained 5.7% in 2015.
Among the various sectors, technology continued to perform well with the Technology Select Sector SPDR ETF (XLK - Free Report) registering a return of 12.9% in the last year. In 2015, the ETF had gained just a meager 3.6%.
Launched in Dec 1998, XLK is a passively managed fund designed to deliver the returns of the U.S. technology stocks. The fund, before expenses, is expected to remain on par with the returns and characteristics of the S&P Technology Select Sector Index.
Tech Stocks Poised for Further Growth
The technology sector is likely to grow further in 2017, as evident from the recent forecast provided by Gartner Inc. (IT - Free Report) on worldwide IT spending. The latest report from the independent research firm projects global IT spending to reach $3.5 trillion next year, representing an increase of 2.9% from $3.4 trillion anticipated in 2016.
The technology space continues to be investors’ favorite due to its dynamic nature. It is expected to grow faster than ever before as evident from Gartner’s latest forecasts as well as improving U.S. economic data.
Naturally, investing in the tech space makes perfect sense at this point. However, making the right choices is a tough task.
No matter how disciplined and systematic an investor you are, equity market volatility will always be a concern. Only a few lucky ones would rake in the moolah, while others fall victim to ad hoc strategies.
So, wouldn’t it be a safer bet to invest in stocks that are winning currently and have the potential to gain further?
Here, we will discuss one tried and tested technique – picking stocks near their 52-week highs.
Why Stocks Near 52-Week Highs Are Good Bets
Investing in stocks near their 52-week high is akin to following the momentum strategy, which is based on the understanding that once a trend is established, it is likely to continue. The surge is driven by a broad set of factors including impressive sales, robust profitability and bullish earnings prospects. Major developments may also send stocks soaring.
However, stocks that are trading near their 52-week highs bear the risk of falling fast as the market might consider them overvalued. But the positives seem to outweigh the drawbacks.
Notably, momentum investors strongly believe in “the trend is your friend,” which means stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to retain that direction and will not move against the flow.
Thus, gambling on these stocks might help investors earn higher returns in the short term. However, this is only a speculative strategy and not meant for the faint hearted.
Where to Put Your Money?
Given their strong earnings history and great value metrics, we believe these four tech stocks, all of which are near their 52-week highs, will continue their uptrend for now. The stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) and have a Momentum Style Score of “A” or “B.”
NVIDIA Corporation (NVDA - Free Report) designs, develops and markets a family of award-winning 3D graphics processors, graphics processing units and related software. The stock has a Momentum Style Score of “A” and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has delivered positive earnings surprises in the last four quarters, with an average beat of 24.93%. The long-term expected earnings growth rate for NVIDIA is 10.3%. Closing at $106.6 on Dec 30, 2016, the stock gained 223.8% in 2016. It touched a 52-week high of $119.93.
Broadcom Limited (AVGO - Free Report) is a designer, developer and supplier of analog and digital semiconductor connectivity solutions. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “A.” The company has delivered positive earnings surprises in the last four quarters, with an average beat of 6.36%.
The long-term expected earnings growth rate for Broadcom is 13.6%. Closing at $176.8 on Dec 30, 2016, the stock gained 21.8% in 2016 and is near to its 52-week high of $183.99.
Science Applications International Corp. (SAIC - Free Report) is engaged in transaction, technical, engineering and enterprise IT services business. The stock carries a Zacks Rank #2 and has a Momentum Style Score of “B.” The company has delivered positive earnings surprises in the last four quarters, with an average beat of 9.20%.
The long-term expected earnings growth rate for Science Applications is 5%. Closing at $84.81 on Dec 30, 2016, the stock gained 85.3% in 2016 and is close to its 52-week high of $89.25.
ePlus Inc. (PLUS - Free Report) offers information technology products and services, flexible leasing and financing solutions, and enterprise supply management in the United States. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “B.” The company has delivered positive earnings surprises in three out of the last four quarters, with an average beat of 8.30%.
The long-term expected earnings growth rate for ePlus is 5%. Closing at $115.20 on Dec 30, 2016, the stock gained 23.6% in 2016 and is near to its 52-week high of $119.35.
Looking Ahead
These stocks have managed to grab the spotlight with notable performances, supported by solid earnings and impressive growth projections. These factors make us more or less sure that investing in these stocks will yield strong returns for your portfolio in the short term.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>