Electronics are gaining from growing proliferation of advanced instruments, electronic testing equipment solutions, thermal management systems, electrical connectors, motors, wearables, electronic design, metrology solutions across all major sectors worldwide.
Additionally, emergence of software-enabled testing instruments and devices is driving the electronics industry. Moreover, IoT supported industrial automation and evolution of smart cars & autonomous vehicles are expected to become mainstream in 2020. Further, growing installation of collaborative robots, which add efficiency to the production process by working with the production workers, will continue to benefit the electronics industry. Further, rapid adoption of consumer-focused IoT devices like smart speakers, smart watches and home security solutions, smart TVs with 8K resolution, dual-screen laptops, high graphics performance gaming PCs, is fueling demand for the products offered by electronics solution providers. These factors positively impacted growth in 2019 and they are likely to aid electronics stocks maintain their rally in 2020. Year-to-Date Price Performance Expanding Growth Avenues Ongoing technical advancement in the telecommunication sector, backed by strong efforts toward modification in Internet infrastructure, remains a tailwind. Moreover, accelerated deployment of 5G technology is expected to drive the electronics companies in 2020. Further, healthcare presents immense prospects for the electronics stocks. Fitness and wellness trackers that require flat-panel display technology have opened up new avenues for the electronics stocks. Moreover, increasing usage of electrical instruments and software in the interrogation of biological properties of molecules and cells in clinical and medical science research work is driving growth. Rising demand for security and surveillance system, and satellites in the aerospace and defense sector is fueling demand for electronic testing solutions. Additionally, growing adoption of precision motion control solutions and automatic test systems in motion control devices in the aerospace and military markets is a major positive. Electronics companies are also gaining traction in the transportation sector backed by growing need for vehicle tracking systems, fleet management solutions and other private fleet applications in commercial motor vehicles. Semiconductor Space Holds Promise Despite Trade War The U.S.-China trade war has created an uncertain environment that is not conducive to investments, particularly in the semiconductor manufacturers. However, the semiconductor space still holds promise for the electronics companies owing to chip miniaturization. Moreover, rising demand for electronic components in the wafer fabrication and etching processes is a major positive. Additionally, completion of the phase one deal between the United States and China should improve business sentiments. This is expected to serve as a fundamental catalyst for technology stocks moving into 2020. Equity markets are expected to nudge higher owing to the deal, which would better position the global economy for growth next year. This is also expected to boost electronics stocks. Winning Criteria Here we pick five electronics stocks that either flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. To narrow down the list further, we have selected those that have a VGM Score of A or B. Per the Zacks’ proprietary methodology, stocks with this favorable combination offer good investment opportunities. Moreover, these stocks have market capital above $1 billion and have outperformed composite S&P 500 index on a year-to-date basis. Amkor Technology AMKR based in Tempe, AZ is one of the largest providers of semiconductor packaging and test services. • Zacks Rank #1 • VGM Score of B • Market cap of $3.11 billion • The Zacks Consensus Estimate for 2020 earnings has moved up 33.4% to 80 cents per share over the past 60 days. Plexus PLXS based in Neenah, WI is a leading provider of electronic contract manufacturing services to original equipment manufacturers (OEM). • Zacks Rank #1 • VGM Score of B • Market cap of $2.31 billion • The Zacks Consensus Estimate for fiscal 2020 earnings has moved up 4.3% to $4.09 per share over the past 60 days. Liberty Lake, WA-based Itron ITRI is a global supplier of a wide range of standard, advanced and smart meters and meter communication systems. • Zacks Rank #2 • VGM Score of B • Market cap of $3.35 billion • The Zacks Consensus Estimate for 2020 earnings has moved north by 1.7% to $3.61 per share over the past 60 days. San Jose, CA-based KLA Corporation ( KLAC Quick Quote KLAC - Free Report) is an OEM of process diagnostics and control equipment and yield management solutions required for the fabrication of semiconductor integrated circuits or chips. • Zacks Rank #2 • VGM Score of B • Market cap of $27.66 billion • The Zacks Consensus Estimate for fiscal 2020 earnings has been revised upward by 4% to $9.88 per share over the past 60 days. Diodes DIOD based in Plano, TX is a manufacturer and supplier of application-specific standard products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. • Zacks Rank #2 • VGM Score of B • Market cap of $2.64 billion Zacks Top 10 Stocks for 2020 In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020? These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. 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