We have seen a significant level of churn in daily price action between value and growth sectors. It is essential to have a well-positioned barbell allocation in your portfolio, with a mix of high-growth tech names as well as consistent & reliable earnings drivers in value sectors, such as banks, industrials, REITs, etc.
High-growth tech has been a relative underperformer in 2021 as investors positioned themselves for impending interest rate hikes. Now that rate expectations are becoming more quantifiable, momentum is driving back into relatively discounted growth plays.
Here I provide well-positioned long-term tech picks for your high-risk, high-reward portfolio allocation. These are prolifically expanding businesses with a controlling market share in their respective spaces and are poised to soar as the 4th Industrial Revolution commences.
CrowdStrike ( CRWD Quick Quote CRWD - Free Report)
Data breaches are becoming increasingly common in the digital remote economy in which we live. Having state-of-the-art cybersecurity has never been more vital than it is today. Digital pirates are infiltrating vulnerabilities in economic hubs like the Colonial Pipeline (the US's most extensive energy distribution line) and JBS (
JBSAY Quick Quote JBSAY - Free Report) (the world's largest meatpacking business).
CrowdStrike is a modern cloud-based solution for the escalating security threats that the internet age has brought. This company leverages AI, cloud computing, and graph databases for its vigilant security software. CrowdStrike's security AI is perpetually improving as it advances from crowdsourcing and economies of scale. CRWD's cloud-based Falcon platform is an intelligent and evolving digital protector that detects and stops breaches in real-time.
CrowdStrike is trusted by top banks like Goldman Sachs (
GS Quick Quote GS - Free Report) and Credit Suisse, who can't afford to lose customer trust.
This business was provided with a tremendous tailwind in 2020 as the enterprise's best-in-class AI-driven cybersecurity platform became arguably the most sought-after in the industry. Business spending is taking off in 2021 as the economy comes out of the Pandemic downturn, and upgrading cybersecurity is on the top of that Cap Ex list for many vulnerable enterprises.
CRWD shares are trading at very rich multiples with no profitability and a forward price to sales of 34x. This lofty valuation is what makes this investment so risky, but its incredible proven revenue growth makes CRWD worth the cost as a long-term play.
CrowdStrike has produced year-over-year top-line growth figures of more than 70% every quarter since it hit the exchanges last June. The business is swiftly headed towards profitability, with CRWD notching its first positive EBITDA in Q3 2020, and this has accelerated over the past few quarters. Analysts are forecasting accelerating annual EPS for the next 3 years.
CRWD traded sideways from the beginning of the year into June but has since taken off as analysts and investors get increasingly excited about its potential in the new normal. Cyber-threats aren't going away, and CrowdStrike's unmatched AI-powered technology will be a data protection staple for our digital economy over the next decade.
Taiwan Semi ( TSM Quick Quote TSM - Free Report)
TSMC is the largest semiconductor manufacturer globally, producing 56% of the world's chips, with cutting-edge capabilities that are unmatched in the space. Amid this global chip shortage, TSM is the best-positioned fabricator in the global economy.
The most trusted tech giants turn to the most reliable semiconductor foundry for their manufacturing and innovative needs. TSMC's customers include companies like Apple (
AAPL Quick Quote AAPL - Free Report) , Nvidia ( NVDA Quick Quote NVDA - Free Report) , Broadcom ( AVGO Quick Quote AVGO - Free Report) , Qualcomm ( QCOM Quick Quote QCOM - Free Report) , and even Intel ( INTC Quick Quote INTC - Free Report) , which has been unable to keep up with the innovative curve in chip fabrication, which TSMC continues to push higher. TSMC US Operations
This enterprise has started constructing a $12 billion factory in Arizona to manufacture leading-edge 5-nm transistors chips as soon as 2024. An atom is 0.1 to 0.5 nanometers, only about 10 to 20 times smaller than these transistors. So TSMC is literally working on the atomic scale.
TSMC has 5 more Arizona facilities in the pipeline, which are a part of a 10 to 15-year plan to ramp up US production. With China at Taiwan's doorstep, the US is more than anxious to get this company's highly esteemed operation and facilities on its soil. I have a strong feeling that a sizable portion of the US's $54 billion chip subsidy (when passed) will go to TSMC to do so.
TSMC is the future of semiconductor manufacturing, with its closest competitors being 10+ years behind the curve they have set. TSM shares are over 20% off their mid-February highs and poised to explode in this rapidly digitalizing world where the appetite for new tech is insatiable.
Splunk ( SPLK Quick Quote SPLK - Free Report)
Splunk's real-time data management and analytics leadership spans across many growing business applications with massive addressable markets. The company's primary revenue drivers now are security information and event management (SEIM) and IT operation management. With companies operating remotely, security threats are heightened, and Splunk's best-in-class SEIM platform will become even more of a necessity. Splunk's ability to automate IT workflows is also increasingly attractive for companies cutting human capital.
These two applications are just the tip of the iceberg for the eminence functionality that Splunk is capable of. The firm is pioneering real-time business analytics that will take structured and unstructured machine data from almost any source and turn it into actionable insight. The internet of things (IoT) is about to hit an inflection point with the 5G technology rollout. 5G is going to connect almost everything around us. The ability to analyze and make decisions on real-time data will give Splunk's clients a leg up on its competition. Some analysts are putting its total addressable market at close to $40 billion, more than 16x its current annual revenue. The future opportunity for SPLK is enormous, especially considering there are no close competitors in the space.
The firm is in the process of transitioning its entire platform to the cloud for scalability. This vital business shift has been causing short-term margin pressures, and following several earnings misses, SPLK took a 50% haircut from its October highs to its low in early June. Now it is gaining enormous momentum to the upside after bouncing off a $110 support level. Global private equity powerhouse Silver Lake, with $75 billion under management, just invested a sizable $1 billion in SPLK at its currently discounted price.
Remember that these are all high-risk, high-reward investments that may be subject to short-term volatility. When assessing these investments, look at them as long-term holds for the next decade of digital acceleration.
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