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Buffett's Bet on Apple Sparks Tech Rally: 5 Solid Buys
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Tech has hit a purple patch, largely backed by Apple Inc. (AAPL - Free Report) . Apple’s shares recorded the biggest weekly gain in six-and-a-half years and also the highest five-day price gain in its history on May 4 after Warren Buffett’s company loaded up on the iPhone maker.
Given the tech rally sparked by Buffett’s purchase of Apple shares, investing in sound tech companies seems judicious. Also, tech companies are well positioned to register double-digit growth this earnings season which makes it a great bargain.
Apple Ends at a Record After Buffett Raises Stake
Warren Buffett’s Berkshire Hathaway Inc. (BRK.B - Free Report) bought 75 million shares of Apple in the first quarter. This was in addition to the 165.3 million Apple shares that Berkshire owned at the end of last year. The recent buyout puts Apple among Berkshire’s largest holding, surpassing its stake in Wells Fargo.
Buffett told CNBC that “Apple is an unbelievable company” and he thinksthat “it earns almost twice as much as the second most profitable company in the United States.” He added, “over the last year we’ve bought more Apple than anything else.”
Apple had reported net income of $13.8 billion in the fiscal second quarter, up from $11 billion a year ago. Chief Executive Tim Cook further added that revenues in all four geographical regions have improved, with more than 20% growth in Greater China and Japan.
The Cupertino-based tech giant’s shares popped 3.9% following Buffett’s bet on Apple, bringing its week-to-date advance to 13.3%, the biggest five-day percentage gain since October 2011. Such stellar gains have helped the iPhone maker outperform the Computer - Mini computers industry so far this year (+8.6% vs +8.4%).
Apple Powers Tech Gains
Buffett’s stake raise in the iPhone maker lent momentum to tech stocks. In fact, the bellwether tech name led the broader tech rally. The Technology Select Sector SPDR (XLK) jumped 1.9% on May 4, the highest among all the S&P 500 sectors. The tech-heavy Nasdaq finished in the positive territory for the week, up 1.3%.
The recent tax cut has already given the much needed windfall to tech earnings, while cloud computing, artificial intelligence and big data remain growth areas. Tech earnings in the first quarter, largely, continue to be stronger than expected, with total earnings till now up 29.6% from the same period last year on 12% higher revenues. Notably, 90.9% has beat EPS estimates and 93.2% revenue estimates (read more: Is the Earnings Picture Really That Strong?).
Tech is Having a Great Earnings Season
And if you look at the tech behemoths, they have put up a spectacular show. Facebook made more ad money from each customer despite the uproar over its user data fiasco. The company posted first-quarter profits of $4.99 billion that topped analysts’ estimate of $4.01 billion, while the social media giant added 70 million users in the same period despite numerous public calls against the social media app.
Microsoft’s quarterly sales got a push from its cloud computing and related cloud software. The Redmond-based company posted revenues of $26.82 billion and earnings of 95 cents per share, both of which have topped the consensus estimate.
Netflix subscriber growth, in the meanwhile, breezed past estimates and Google somehow managed to stay afloat — thanks to a change in accounting policy. But, it’s the e-commerce giant Amazon that smashed earnings by increasing the value of its Prime membership (read more: FAAMNG Stocks Pack a Punch in Q1 Earnings).
5 Top Picks
Given the aforesaid bullishness, investors should double down on the hottest tech stocks. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Arrow Electronics, Inc. (ARW - Free Report) provides products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The stock currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings rose 3.7% in the last 60 days. Arrow Electronics’ projected earnings growth rate for the current year is 16.1%, compared with the Electronics - Parts Distribution industry’s estimated gain of 14%.
ASGN Incorporated (ASGN - Free Report) provides IT and professional services in the technology, digital, creative, healthcare technology, engineering, life sciences, and government sectors. The stock currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings climbed 4.6% in the last 60 days. ASGN’s projected earnings growth rate for the current year is 34.4%, compared with the Computers - IT Services industry’s expected gain of 19.2%.
Nanometrics Incorporated provides process control metrology and inspection systems for use primarily in the fabrication of semiconductors and other solid-state devices. Currently, the stock has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings soared 36.1% in the last 60 days. Nanometrics’ projected earnings growth rate for the current year is 83.7%, compared with the Instruments - Control industry’s estimated gain of 19.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CACI International Inc (CACI - Free Report) provides information solutions and services. The stock currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 12.1% in the last 60 days. CACI International’s estimated earnings growth rate for the current year is 74.9%, compared with the Computer - Services industry’s expected gain of 21%.
Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The stock currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 6.4% in the last 60 days. Lam Research’s projected earnings growth rate for the current year is 75.8%, compared with the Semiconductor Equipment - Wafer Fabrication industry’s estimated gain of 27.8%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Buffett's Bet on Apple Sparks Tech Rally: 5 Solid Buys
Tech has hit a purple patch, largely backed by Apple Inc. (AAPL - Free Report) . Apple’s shares recorded the biggest weekly gain in six-and-a-half years and also the highest five-day price gain in its history on May 4 after Warren Buffett’s company loaded up on the iPhone maker.
Given the tech rally sparked by Buffett’s purchase of Apple shares, investing in sound tech companies seems judicious. Also, tech companies are well positioned to register double-digit growth this earnings season which makes it a great bargain.
Apple Ends at a Record After Buffett Raises Stake
Warren Buffett’s Berkshire Hathaway Inc. (BRK.B - Free Report) bought 75 million shares of Apple in the first quarter. This was in addition to the 165.3 million Apple shares that Berkshire owned at the end of last year. The recent buyout puts Apple among Berkshire’s largest holding, surpassing its stake in Wells Fargo.
Buffett told CNBC that “Apple is an unbelievable company” and he thinksthat “it earns almost twice as much as the second most profitable company in the United States.” He added, “over the last year we’ve bought more Apple than anything else.”
Apple had reported net income of $13.8 billion in the fiscal second quarter, up from $11 billion a year ago. Chief Executive Tim Cook further added that revenues in all four geographical regions have improved, with more than 20% growth in Greater China and Japan.
The Cupertino-based tech giant’s shares popped 3.9% following Buffett’s bet on Apple, bringing its week-to-date advance to 13.3%, the biggest five-day percentage gain since October 2011. Such stellar gains have helped the iPhone maker outperform the Computer - Mini computers industry so far this year (+8.6% vs +8.4%).
Apple Powers Tech Gains
Buffett’s stake raise in the iPhone maker lent momentum to tech stocks. In fact, the bellwether tech name led the broader tech rally. The Technology Select Sector SPDR (XLK) jumped 1.9% on May 4, the highest among all the S&P 500 sectors. The tech-heavy Nasdaq finished in the positive territory for the week, up 1.3%.
The recent tax cut has already given the much needed windfall to tech earnings, while cloud computing, artificial intelligence and big data remain growth areas. Tech earnings in the first quarter, largely, continue to be stronger than expected, with total earnings till now up 29.6% from the same period last year on 12% higher revenues. Notably, 90.9% has beat EPS estimates and 93.2% revenue estimates (read more: Is the Earnings Picture Really That Strong?).
Tech is Having a Great Earnings Season
And if you look at the tech behemoths, they have put up a spectacular show. Facebook made more ad money from each customer despite the uproar over its user data fiasco. The company posted first-quarter profits of $4.99 billion that topped analysts’ estimate of $4.01 billion, while the social media giant added 70 million users in the same period despite numerous public calls against the social media app.
Microsoft’s quarterly sales got a push from its cloud computing and related cloud software. The Redmond-based company posted revenues of $26.82 billion and earnings of 95 cents per share, both of which have topped the consensus estimate.
Netflix subscriber growth, in the meanwhile, breezed past estimates and Google somehow managed to stay afloat — thanks to a change in accounting policy. But, it’s the e-commerce giant Amazon that smashed earnings by increasing the value of its Prime membership (read more: FAAMNG Stocks Pack a Punch in Q1 Earnings).
5 Top Picks
Given the aforesaid bullishness, investors should double down on the hottest tech stocks. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Arrow Electronics, Inc. (ARW - Free Report) provides products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The stock currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings rose 3.7% in the last 60 days. Arrow Electronics’ projected earnings growth rate for the current year is 16.1%, compared with the Electronics - Parts Distribution industry’s estimated gain of 14%.
ASGN Incorporated (ASGN - Free Report) provides IT and professional services in the technology, digital, creative, healthcare technology, engineering, life sciences, and government sectors. The stock currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings climbed 4.6% in the last 60 days. ASGN’s projected earnings growth rate for the current year is 34.4%, compared with the Computers - IT Services industry’s expected gain of 19.2%.
Nanometrics Incorporated provides process control metrology and inspection systems for use primarily in the fabrication of semiconductors and other solid-state devices. Currently, the stock has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings soared 36.1% in the last 60 days. Nanometrics’ projected earnings growth rate for the current year is 83.7%, compared with the Instruments - Control industry’s estimated gain of 19.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CACI International Inc (CACI - Free Report) provides information solutions and services. The stock currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 12.1% in the last 60 days. CACI International’s estimated earnings growth rate for the current year is 74.9%, compared with the Computer - Services industry’s expected gain of 21%.
Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The stock currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 6.4% in the last 60 days. Lam Research’s projected earnings growth rate for the current year is 75.8%, compared with the Semiconductor Equipment - Wafer Fabrication industry’s estimated gain of 27.8%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>