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The highflying technology sector has been performing the best so far this year, dodging the ills of trade disputes. The rally fizzled out in the past couple of days following disappointing earnings results from the tech and Internet giants like Facebook , Twitter and Intel (INTC - Free Report) .
These major companies saw a free-fall in their stock prices immediately after the earnings releases and pushed many other stocks in the sector lower. As such, the S&P 500 technology index is down 3.6% since the peak reached on Jul 25.
The beaten down prices have provided investors with a solid entry point given the encouraging outlook for the sector. This is especially true as the rapid adoption of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, and artificial intelligence as well as strong corporate earnings is acting as the key catalysts.
In particular, Q2 earnings from 65.5% of the sector’s total market capitalization reported so far are up 35.3% on 12% higher revenues, with 90% of the companies beating on earnings and 87.1% exceeding top-line estimates. Overall, earnings and revenues for Q2 are expected to grow 30.6% and 11.8%, respectively. The tech sector has been the fourth biggest contributor to the S&P 500 earnings growth.
Additionally, the twin tailwinds of Trump’s tax reform plan and a rising interest rate scenario are pushing the stocks higher. Most of the tech titans hoard huge cash overseas and are poised to benefit the most from reduced tax rates. They are also sitting on a huge cash pile and in a position to increase payouts to their shareholders. The cash reserves will ensure that these companies are not plagued by financial woes in a rising interest rate environment.
Adding to the strength is a pickup in the economy and better job prospects that are giving a solid boost to economically sensitive growth sectors like technology, which typically perform well in a maturing economic cycle.
Given the bullish fundamentals, the dip in prices might charge up investors to snap up stocks for outsized gains in the coming weeks.
How to Find Bargain Stocks?
For this, we have used our Zacks Stock Screener and have selected stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of B or better. A top rank suggests rising earnings estimates, which indicate an optimistic view on earnings by analysts and hence higher chances of outperformance. Then we looked for stocks having a lower P/E than the industry average, a double-digit estimated earnings growth rate for this year and a solid Industry Rank in the top 20%.
This company provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. The company is expected to see massive earnings growth of 21.21% for the fiscal year (ending October 2018) and belongs to the top-ranked industry (top 7%). HPQ has a Zacks Rank #2 and VGM Score of A.
This is one of the world's largest semiconductor chip maker that develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications. The stock has an estimated earnings growth rate of 18.21% for this year and belongs to a top-ranked industry (top 1%). It sports a Zacks Rank #1 and has a VGM Score of A.
ON Semiconductor Corporation (ON - Free Report) – P/E Ratio: 13.02 vs 19.22
This is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices. The stock has an estimated earnings growth rate of 21.92% for this year and falls under the top-ranked industry (top 19%). It has a Zacks Rank #2 and VGM Score of B.
This provides various gaming headset solutions to various platforms, including video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices under the Turtle Beach brand. It has an expected growth rate of 625% for this year and falls under a top-ranked industry (top 7%). The stock has a Zacks Rank #1 and a VGM Score of A.
Woodward Inc. (WWD - Free Report) – P/E Ratio: 22.64 vs 23.09
This operates as a designer, manufacturer, and service provider of energy control and optimization solutions used in global infrastructure equipment serving the aerospace, power generation and distribution, and transportation markets. The stock is expected to generate earnings growth of 15.51% for fiscal year (ending September 2018) and belongs to a top-ranked industry (top 19%). It has a Zacks Rank #2 and VGM Score of B.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
5 Incredible Top-Ranked Tech Stocks on Sale
The highflying technology sector has been performing the best so far this year, dodging the ills of trade disputes. The rally fizzled out in the past couple of days following disappointing earnings results from the tech and Internet giants like Facebook , Twitter and Intel (INTC - Free Report) .
These major companies saw a free-fall in their stock prices immediately after the earnings releases and pushed many other stocks in the sector lower. As such, the S&P 500 technology index is down 3.6% since the peak reached on Jul 25.
The beaten down prices have provided investors with a solid entry point given the encouraging outlook for the sector. This is especially true as the rapid adoption of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, and artificial intelligence as well as strong corporate earnings is acting as the key catalysts.
In particular, Q2 earnings from 65.5% of the sector’s total market capitalization reported so far are up 35.3% on 12% higher revenues, with 90% of the companies beating on earnings and 87.1% exceeding top-line estimates. Overall, earnings and revenues for Q2 are expected to grow 30.6% and 11.8%, respectively. The tech sector has been the fourth biggest contributor to the S&P 500 earnings growth.
Additionally, the twin tailwinds of Trump’s tax reform plan and a rising interest rate scenario are pushing the stocks higher. Most of the tech titans hoard huge cash overseas and are poised to benefit the most from reduced tax rates. They are also sitting on a huge cash pile and in a position to increase payouts to their shareholders. The cash reserves will ensure that these companies are not plagued by financial woes in a rising interest rate environment.
Adding to the strength is a pickup in the economy and better job prospects that are giving a solid boost to economically sensitive growth sectors like technology, which typically perform well in a maturing economic cycle.
Given the bullish fundamentals, the dip in prices might charge up investors to snap up stocks for outsized gains in the coming weeks.
How to Find Bargain Stocks?
For this, we have used our Zacks Stock Screener and have selected stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of B or better. A top rank suggests rising earnings estimates, which indicate an optimistic view on earnings by analysts and hence higher chances of outperformance. Then we looked for stocks having a lower P/E than the industry average, a double-digit estimated earnings growth rate for this year and a solid Industry Rank in the top 20%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Finally, we arrive at the five stocks that are cheap and have the potential to deliver higher returns with lower volatility.
HP Inc. (HPQ - Free Report) – P/E Ratio: 11.61 vs 15.06
This company provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. The company is expected to see massive earnings growth of 21.21% for the fiscal year (ending October 2018) and belongs to the top-ranked industry (top 7%). HPQ has a Zacks Rank #2 and VGM Score of A.
Intel Corporation (INTC - Free Report) – P/E Ratio: 11.81 vs 14.52
This is one of the world's largest semiconductor chip maker that develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications. The stock has an estimated earnings growth rate of 18.21% for this year and belongs to a top-ranked industry (top 1%). It sports a Zacks Rank #1 and has a VGM Score of A.
ON Semiconductor Corporation (ON - Free Report) – P/E Ratio: 13.02 vs 19.22
This is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices. The stock has an estimated earnings growth rate of 21.92% for this year and falls under the top-ranked industry (top 19%). It has a Zacks Rank #2 and VGM Score of B.
Turtle Beach Corporation (HEAR - Free Report) – P/E Ratio: 20.91 vs 21.21
This provides various gaming headset solutions to various platforms, including video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices under the Turtle Beach brand. It has an expected growth rate of 625% for this year and falls under a top-ranked industry (top 7%). The stock has a Zacks Rank #1 and a VGM Score of A.
Woodward Inc. (WWD - Free Report) – P/E Ratio: 22.64 vs 23.09
This operates as a designer, manufacturer, and service provider of energy control and optimization solutions used in global infrastructure equipment serving the aerospace, power generation and distribution, and transportation markets. The stock is expected to generate earnings growth of 15.51% for fiscal year (ending September 2018) and belongs to a top-ranked industry (top 19%). It has a Zacks Rank #2 and VGM Score of B.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>