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5 Technology Stocks Still Worth Buying at Fresh Highs
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As the Q2 earnings cycle draws to a close, Technology has emerged as one of the best performing sectors. Based on the quarterly results of 89.2% of the sector’s total market cap in the index that have been declared as of Aug 12, the industry has outperformed rather remarkably.
Total earnings for these companies have dipped 0.8% on 3.1% higher revenues. Despite the bleak year-over-year comparisons, a whopping 82% beat earnings estimates, while 72% exceeded top-line expectations, thanks to the better-than-expected results of sector giants like Facebook , Google’s parent Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) .
The sector’s strong quarterly performance wooed investors, resulting in the Technology Sector SPDR (XLK - Free Report) peaking to a 16-year high recently. Several market watchers believe that the sector may surge even higher backed by strong fundamentals, impressive earnings from the behemoths and prospects of a weaker dollar.
Naturally, investing in the tech space makes perfect sense at this point. However, making the right choices is a tough task.
No matter how disciplined and systematic an investor you are, equity market volatility will always be a concern. Only a few lucky ones would rake in the moolah, while others fall victim to ad hoc strategies.
So, wouldn’t it be a safer bet to invest in stocks that are winning currently and have the potential to gain further?
Here, we will discuss one tried and tested technique – picking stocks near their 52-week highs.
Why 52-Week Highs can be a Good Indicator
Investing in stocks that are trading near their 52-week highs bears the risk of falling fast as the market might consider them overvalued. But there is more on the positive side. There may be a broad set of factors including impressive sales, robust profitability and bullish earnings prospects driving the stocks up. Recent major developments may also send these stocks soaring.
So, investing in stocks near their 52-week high is akin to following the momentum strategy, which is based on the understanding that once a trend is established, it is likely to continue.
Notably, momentum investors strongly believe in “the trend is your friend”, which means stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to retain that direction and will not move against the flow.
Thus, gambling on these stocks might help investors earn higher returns in the short term. However, this is only a speculative strategy and not meant for the faint hearted.
Where to Put Your Money?
Blended with strong earnings growth expectations and great value metrics, we believe that these five tech stocks, all of which are near their 52-week highs, will continue their uptrend for now.
Adobe Systems Incorporated (ADBE - Free Report) is a provider of graphic design, publishing and imaging software for Web and print production. The stock closed at $99.70 yesterday, close to its latest 52-week high of $101.93. Adobe currently sports a Zacks Rank #1 (Strong Buy). The long-term EPS growth estimate is 16.2%, compared with the industry average of 14.7%.
Facebook Inc. operates a social networking website worldwide. The stock closed at $124.37 yesterday, near its last 52-week high of $128.33. Facebook also sports a Zacks Rank #1. The long-term EPS growth estimate is 31.3%, compared with the industry average of 14.7%.
Coherent Inc. (COHR - Free Report) designs, manufactures and supplies electro-optical systems and medical instruments utilizing laser, precision optics and microelectronic technologies. The stock closed trade at $108.96 yesterday, around its recent 52-week high of $110.48. Coherent sports a Zacks Rank #1 as well. The long-term EPS growth estimate for fiscal 2016 is 19.4%, compared with the industry average of 13.6%.
FEI Company is engaged in the design, manufacture, sale and service of products based on focused charged particle beam technology. The stock closed at $106.55 yesterday, close to its latest 52-week high of $108.35. FEI currently carries a Zacks Rank #2 (Buy). The long-term EPS growth estimate for 2016 and 2017 are 7.5% and 11.8%, respectively.
Waters Corporation (WAT - Free Report) operates in the analytical instrument industry, with manufacturing and distribution expertise in three complementary technologies: high-performance liquid chromatography instruments, chromatography columns and other consumables, and related service; mass spectrometry instruments that can be integrated and used along with other analytical instruments; and thermal analysis and rheology instruments.
The stock closed trade at $158.49 yesterday, around its recent 52-week high of $161.22. FEI currently also carries a Zacks Rank #2. The long-term EPS growth estimate for 2016 and 2017 are 11.1% and 9.1%, respectively.
Looking Ahead
These stocks have managed to grab the spotlight with notable performances, supported by solid earnings and impressive growth projections. These factors make us more or less sure that investing in these stocks would yield strong returns for your portfolio in the short term.
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5 Technology Stocks Still Worth Buying at Fresh Highs
As the Q2 earnings cycle draws to a close, Technology has emerged as one of the best performing sectors. Based on the quarterly results of 89.2% of the sector’s total market cap in the index that have been declared as of Aug 12, the industry has outperformed rather remarkably.
Total earnings for these companies have dipped 0.8% on 3.1% higher revenues. Despite the bleak year-over-year comparisons, a whopping 82% beat earnings estimates, while 72% exceeded top-line expectations, thanks to the better-than-expected results of sector giants like Facebook , Google’s parent Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) .
The sector’s strong quarterly performance wooed investors, resulting in the Technology Sector SPDR (XLK - Free Report) peaking to a 16-year high recently. Several market watchers believe that the sector may surge even higher backed by strong fundamentals, impressive earnings from the behemoths and prospects of a weaker dollar.
Naturally, investing in the tech space makes perfect sense at this point. However, making the right choices is a tough task.
No matter how disciplined and systematic an investor you are, equity market volatility will always be a concern. Only a few lucky ones would rake in the moolah, while others fall victim to ad hoc strategies.
So, wouldn’t it be a safer bet to invest in stocks that are winning currently and have the potential to gain further?
Here, we will discuss one tried and tested technique – picking stocks near their 52-week highs.
Why 52-Week Highs can be a Good Indicator
Investing in stocks that are trading near their 52-week highs bears the risk of falling fast as the market might consider them overvalued. But there is more on the positive side. There may be a broad set of factors including impressive sales, robust profitability and bullish earnings prospects driving the stocks up. Recent major developments may also send these stocks soaring.
So, investing in stocks near their 52-week high is akin to following the momentum strategy, which is based on the understanding that once a trend is established, it is likely to continue.
Notably, momentum investors strongly believe in “the trend is your friend”, which means stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to retain that direction and will not move against the flow.
Thus, gambling on these stocks might help investors earn higher returns in the short term. However, this is only a speculative strategy and not meant for the faint hearted.
Where to Put Your Money?
Blended with strong earnings growth expectations and great value metrics, we believe that these five tech stocks, all of which are near their 52-week highs, will continue their uptrend for now.
Adobe Systems Incorporated (ADBE - Free Report) is a provider of graphic design, publishing and imaging software for Web and print production. The stock closed at $99.70 yesterday, close to its latest 52-week high of $101.93. Adobe currently sports a Zacks Rank #1 (Strong Buy). The long-term EPS growth estimate is 16.2%, compared with the industry average of 14.7%.
Facebook Inc. operates a social networking website worldwide. The stock closed at $124.37 yesterday, near its last 52-week high of $128.33. Facebook also sports a Zacks Rank #1. The long-term EPS growth estimate is 31.3%, compared with the industry average of 14.7%.
Coherent Inc. (COHR - Free Report) designs, manufactures and supplies electro-optical systems and medical instruments utilizing laser, precision optics and microelectronic technologies. The stock closed trade at $108.96 yesterday, around its recent 52-week high of $110.48. Coherent sports a Zacks Rank #1 as well. The long-term EPS growth estimate for fiscal 2016 is 19.4%, compared with the industry average of 13.6%.
FEI Company is engaged in the design, manufacture, sale and service of products based on focused charged particle beam technology. The stock closed at $106.55 yesterday, close to its latest 52-week high of $108.35. FEI currently carries a Zacks Rank #2 (Buy). The long-term EPS growth estimate for 2016 and 2017 are 7.5% and 11.8%, respectively.
Waters Corporation (WAT - Free Report) operates in the analytical instrument industry, with manufacturing and distribution expertise in three complementary technologies: high-performance liquid chromatography instruments, chromatography columns and other consumables, and related service; mass spectrometry instruments that can be integrated and used along with other analytical instruments; and thermal analysis and rheology instruments.
The stock closed trade at $158.49 yesterday, around its recent 52-week high of $161.22. FEI currently also carries a Zacks Rank #2. The long-term EPS growth estimate for 2016 and 2017 are 11.1% and 9.1%, respectively.
Looking Ahead
These stocks have managed to grab the spotlight with notable performances, supported by solid earnings and impressive growth projections. These factors make us more or less sure that investing in these stocks would yield strong returns for your portfolio in the short term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>