When it comes to investment, millennials do exhibit some specific characteristics. With age on their side, they have a long-time horizon for investment. This allows them to take risks and focus more on capital appreciation rather than dividend income. They like stocks that have potential for upside.
They also have a tendency to turn to sectors that they are familiar with and companies whose products or services are part and parcel of their lives. Probably that’s why their preferred sectors include technology, internet commerce, auto and fitness.
It’s not surprising, then, that companies on millennials’ portfolio are mostly the popular ones.
How Important is this Demography?
Gone are those days when millennials were considered dependent on parents and unlikely to have surplus cash to invest in the stock market. This demography is a significant part of the U.S. population and their stock purchase behavior has considerable impact on the market.
Their attention and involvement are expected to increase in the years to come.
Tech, E-commerce Close to their Hearts
Millennials have witnessed changing technological trends and are considered the first generation of the digital population. They have a penchant for the latest electronic and digital gadgets – smart home appliances, Android phones, laptops and digicams to name a few.
Technology stocks are among their favorites not only because these match their selection criteria but also because of their awareness about the space.
Next up is Internet commerce. Millennials are fond of brands that offer maximum convenience at minimum cost and probably this is the reason behind the success of e-commerce giants like Amazon, eBay and Alibaba.
Busy lives and somewhat unhealthy food habits require them to focus on fitness. This explains the rise in popularity of fitness trackers and related gear.
4 Technology Stocks They Should Consider
Facebook, Inc. (FB - Free Report) : The company is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. Facebook’s user base continues to grow at a significant pace driven by new features and tools that improve engagement.
The company has also witnessed significant traction in online and mobile advertising spending in a short span of time. Facebook is aggressively working on boosting ad revenues through “Live” and Instagram, and monetizing opportunities presented by Messenger, WhatsApp and Oculus.
These efforts, backed by strong cash flow generation, create ample opportunities for growth.
Facebook currently holds a Zacks Rank #3 (Hold) and a Growth Style Score of A. Back-tested results show that stocks with a Growth Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 handily beat other stocks.
The stock has appreciated a noteworthy 48.4%, significantly outperforming its industry’s gain of 21.4%. Long-term expected earnings per share (EPS) growth rate for the company is 26.5%.
Facebook, Inc. Price, Consensus and EPS Surprise
VMware, Inc. (VMW - Free Report) : The company pioneered the development of core x86 server virtualization software solutions. VMWare already caters to about two-third of the total server virtualization market.
Virtualization software allows IT companies to run multiple software applications on a single server. The company’s product strategy is based on the “one cloud, any application, any device” framework. With innovative virtualization products and cloud suite solutions, VMware continues to witness robust growth in the virtualization market, which has grown in double-digits.
The company is now gradually expanding its virtualization expertise from just servers to networking and storage. The future of server virtualization will most likely be centered on functionality beyond base virtualization provided by the hypervisor, wherein the company has been gaining a lot of traction.
VMware has placed itself well to benefit from the increasing adoption of cloud-based solutions, given the company’s enhanced focus on partnerships (that with Amazon and IBM) and product diversification.
This Zacks Rank #2 (Buy) company has a Growth Score of A and long-term expected EPS growth rate of 11%. The stock has rallied 36% year to date, significantly outperforming its industry’s gain of 24.6%.
Vmware, Inc. Price, Consensus and EPS Surprise
Lam Research Corporation (LRCX - Free Report) : Lam Research has high exposure to the memory segment, which is likely to see tremendous growth over the next few years. The strength is driven by cloud computing, big data, mobile devices and IoT.
The company is doing well and expects success in areas such as device architecture, process flow and advanced packaging technology inflections.
Lam Research continues to see increased adoption rates for 3D NAND technology, FinFETs and multi-patterning. The company has undertaken cost-reduction activities and density scaling for 3D NAND and new memory technologies.
Shares of Lam Research have gained a massive 55.2% year to date, outperforming the industry’s 41.2% rally. Long-term expected EPS growth rate for the company is 17.2%.
The company currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lam Research Corporation Price, Consensus and EPS Surprise
Alibaba Group Holding Limited (BABA - Free Report) : The company is trying to build its business as an ecosystem of retail, cloud and artificial intelligence. Alibaba is banking on artificial intelligence and machine learning for much of its future growth.
The company expects staggering revenue growth of 45–49% in the current fiscal, or revenues of around $34.3 billion. Alibaba is bullish on its revenue prospects and so are investors, given its solid expansion in e-commerce, cloud computing, and strong media and entertainment businesses.
Shares of Alibaba have gained a massive 93.5% year to date, substantially outperforming the industry’s 48.3% rally. Long-term expected EPS growth for the company is 30.3%. The company currently holds a Zacks Rank #3 and Growth Score of A.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise
The abovementioned companies are keen on diversification and we are optimistic about their growth.
While technology stocks are and will remain favorites of millennials, it is always a wise decision to keep a portfolio diversified so as to hedge against uncertainty.
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