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Can Nasdaq Composite Hold Its Momentum in 2021: 5 Top Picks

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The coronavirus-stricken 2020 had turned out as one of the most successful years for Nasdaq Composite. The tech-laden index was the largest gainer last year among the major indexes across the world. Nasdaq Composite's rally of 43.6% in 2020 marked the index's best yearly performance since 2009 when it had jumped 43.9%, marginally higher than 2020.

The Nasdaq Composite is likely to maintain its momentum in the long-term primarily owing to its tech-heavy characteristics. The technology sector is indispensable for the long-term  growth of the global stock markets. At this stage, it will be prudent to invest in Nasdaq Composite listed top-ranked stocks with strong long-term growth potential.

The New Safe Haven

Notably, in 2019, which recorded the best performance of Wall Street in six years, technology stocks drove the overall market. In 2020, it was the same technology sector that had helped Wall Street to exit a coronavirus-induced short bear market to form a new bull market.

Technology is generally recognized as a growth-oriented sector. In this regard, the sector should have borne the maximum brunt of the global economic devastation caused by an unprecedented health hazard — the novel coronavirus.

In reality, technology was the predominant force behind Wall Street's unprecedented recovery after falling to the coronavirus-induced bear market trough on Mar 23. The Nasdaq Composite soared 94.4% from Mar 23 to Dec 31.

The Technology Select Sector SPDR (XLK), one of the 11 broad sectors of the S&P 500 Index, has rallied 43.6% year to date while the benchmark itself is up 16.3%. The sector has soared 90.9% from its recent trough recorded from Mar 23 to Dec 31.

This overwhelming performance prompted several economists and financial experts to comment that the technology sector is the new safe haven for investors.

Technology Sector is Indispensable

Several economists and financial experts believe that market participants' preferences will gradually shift toward the cyclical sector or reopening stocks like consumer discretionary, materials, transportations, industrials and financials with the approval of COVID-19 vaccines and a fresh round of fiscal stimulus.

This logic may be true for a short period of time but in the long term, technology stocks will remain the best bets.  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.

The thrust for digitization is likely to come from two sides. Individuals who enjoyed immense benefits of digital platforms during the coronavirus-induced lockdowns last year, 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 AI to establish smooth supply chain systems.  

Our Top Picks

We have narrowed down our search to five Nasdaq Composite listed technology stocks based on four selection criteria. First, we have selected large-cap (market cap > $10 billion) tech stocks as these companies have a stable business model. Second, these stocks witnessed solid earnings estimate revisions for 2021 within the last 60 days.

Third, these stocks skyrocketed in the past six months and still have strong upside left reflected by a long-term (3-5 years) growth rate of more than 10% compared with the S&P 500's estimated long-term growth rate of 8.9%. Fourth, each of these stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past six months.


NVIDIA Corp. (NVDA - Free Report) is gaining a decent market share among gaming service providers. The strong line-up of advanced graphics cards has made it a favorite graphics card provider among PC makers. Its foray into the autonomous vehicles space is a major positive. NVIDIA’s GPUs are rapidly gaining from the proliferation of artificial intelligence.

The company has a long-term growth rate of 18.3%. The Zacks Consensus Estimate for its next-year (ending January 2022) earnings has improved 0.4% over the last 30 days. The stock price has surged 33.3% in the past six months.

Micron Technology Inc. (MU - Free Report) designs, manufactures and sells memory and storage products worldwide. It operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit.

The company has a long-term growth rate of 12.3%. The Zacks Consensus Estimate for its current-year (ending August 2021) earnings has improved 17.7% over the last 30 days. The stock price has jumped 45.4% in the past six months.

Qorvo Inc. (QRVO - Free Report) develops and commercializes technologies and products for wireless and wired connectivity worldwide. It operates in two segments, Mobile Products, and Infrastructure and Defense Products.

The company has a long-term growth rate of 15.8%. The Zacks Consensus Estimate for current-year (ending March 2021) earnings has improved 0.3% over the last 30 days. The stock has climbed 44.9% in the past six months.

NetApp Inc. (NTAP - Free Report) provides a full range of hybrid cloud data services that simplify management of applications and data across cloud and on-premises environments to accelerate digital transformation.

The company has a long-term growth rate of 11.9%. The Zacks Consensus Estimate for current-year (ending April 2021) earnings has improved 6.6% over the last 30 days. The stock has rallied 44% in the past six months.

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 company has a long-term growth rate of 25%. The Zacks Consensus Estimate for current-year (ending April 2021) earnings has improved 58.4% over the last 60 days. The stock has soared 73% in the past six months.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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