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Can Nasdaq Exceed 2019 Returns Amid Pandemic? 7 Top Picks

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The year 2020 is likely to remain coronavirus-stricken despite the fact that at least one vaccine is lined up for regulatory approval this month. Meanwhile, let's take a look at the performance of the Nasdaq Composite year to date to trace any impact of the COVID-19 outbreak that resulted in lockdowns and significant devastations in global economies, including the United States.

Impressive Performance by Nasdaq Composite

The Nasdaq Composite had ended 2019 with 35.2% return — its best performance in six years. The tech-laden index started 2020 from where it ended last year. Barring a cornavirus-induced short bear market and market turmoil in September and October, the index maintained its north-bound trajectory.

On Dec 7, the Nasdaq Composite gained 0.5% to close at 12,519.95, recording a fresh closing high. In intraday trading, the index registered a new all-time high at 12,538.23. Year to date, the tech-heavy index is up 39.5%. With just 17 days of trading has left to close 2020, Nasdaq Composite can easily surpass last year's returns if it can hold this level.  

The index continued its upward journey from the beginning of this year to Feb 19, after which it succumbed to the coronavirus-led market mayhem and reached its trough at 6,631.42 on Mar 23. Since Mar 24, the tech-heavy index witnessed an astonishing rally of 88.8% till Dec 7.

Technology Sector Becomes Safe Haven

Wall Street has stayed in the positive territory so far this year despite the pandemic. The predominant force behind Wall Street's impressive recovery from the short coronavirus-induced bear market  was the technology sector. The Technology Select Sector SPDR (XLK), one of the 11 broad sectors of the S&P 500 Index, is the best performer rallying 37.9% year to date. The benchmark itself has gained 14.5% only.

Notably, last year, which recorded the best performance of Wall Street in six years, technology stocks drove the overall market. This year, the technology sector is again leading the recovery from the unprecedented health-hazard-led economic devastation.

With respect to the second and third quarter 2020 corporate earnings, the technology sector has performed relatively better when most of the other sectors have suffered significantly due to COVID related restrictions.

Tech Momentum Likely to Continue

In the long term, the technology sector will be a force to reckon with in the market. We must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, have boosted the overall space.

As social distancing is keeping near and dear ones away, people, especially the citizens of the emerging and less-developed countries, are reaching out more than ever with smartphones, tablets or notebooks.

The thrust for digitization is likely to come from two sides. Individuals who enjoy immense benefits of digital platforms are less likely to go back to their old habits. The new way of connecting has opened up a new world for them. Also, business entities will be more interested in cloud computing, automation and artificial intelligence to establish smooth supply chain systems.  

Our Top Picks

We have narrowed down our search to seven large-cap (market capital > $10 billion) Nasdaq Composite stocks that popped more than 50% year to date. These stocks have strong growth potential and robust earnings estimate revisions in the last 7 to 60 days, indicating the strength of their business model. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our seven picks year to date.

 

The Trade Desk Inc. (TTD - Free Report) offers a technology platform for advertising. Ad buyers create, manage and optimize data-driven digital advertising campaigns using its cloud-based technology platform.

The Zacks Rank #1 company has an expected earnings growth rate of 20.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7% over the last 7 days. The stock has soared 251.3% year to date.

NVIDIA Corp. (NVDA - Free Report) is gaining decent market share among the gaming service providers. The strong line up of advanced graphics cards has made it a favorite graphics card provider among PC makers. Datacenter presents solid growth opportunity for the company. NVIDIA’s GPUs are rapidly gaining from the proliferation of artificial intelligence.

The Zacks Rank #2 company has an expected earnings growth rate of 66.4% for the current year (ending January 2021). The Zacks Consensus Estimate for the current year has improved 5.8% over the last 30 days. The stock price has jumped 131.3% year to date.

Lam Research Corp. (LRCX - Free Report) supplies wafer fabrication equipment and services to the semiconductor industry. Its products are utilized by semiconductor manufacturers in front-end and WLP processes, creating memory, microprocessors, and other logic integrated circuits.

The Zacks Rank #2 company has an expected earnings growth rate of 39.9% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 7.9% over the last 60 days. The stock has rallied 73.9% year to date.

Synopsys Inc. (SNPS - Free Report) is a leading vendor of electronic design automation software offering a full suite of products used in the logic synthesis and functional verification phases of chip design, including a broad array of reusable design building blocks.

The Zacks Rank #2 company has an expected earnings growth rate of 13% for the current year (ending October 2021). The Zacks Consensus Estimate for the current year has improved 1.3% over the last 7 days. The stock has climbed 71.8% year to date.

Teradyne Inc. (TER - Free Report) designs, develops, manufactures, sells and supports automatic test equipment worldwide. It operates through Semiconductor Test, System Test, Industrial Automation, and Wireless Test segments.

The Zacks Rank #2 company has an expected earnings growth rate of 57% for the current year. The Zacks Consensus Estimate for the current year has improved 16% over the last 60 days. The stock has surged 71.8% year to date.

Cadence Design Systems Inc. (CDNS - Free Report) offers products and tools that help customers to design electronic products. Through System Design Enablement strategy it offers software, hardware, and services and reusable IC design blocks to electronic systems and semiconductor customers.

The Zacks Rank #2 company has an expected earnings growth rate of 22.7% for the current year. The Zacks Consensus Estimate for the current year has improved 5.9% over the last 60 days. The stock has appreciated 71.6% year to date.

Trimble Inc. (TRMB - Free Report) provides technology solutions that enable professionals and field mobile workers to improve or transform their work processes worldwide. It operates through four segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.

The Zacks Rank #2 company has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for the current year has improved 7.5% over the last 30 days. The stock has advanced 51.3% year to date.

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