After the 2008-2009 financial crisis, the technology sector has staged a strong comeback, becoming the best sector of a decade without a shadow of doubt. This is especially true as the S&P 500 information technology index, comprising 70 stocks, is up 360% over the past decade, almost double the 196% gain for the S&P 500 Index.
An improving economy and better job prospects are giving a solid boost to the economically sensitive growth sectors like technology that typically perform well in a maturing economic cycle. In fact, the S&P 500 information technology index is heading toward the best year in a decade, having gained more than 48% so far in 2019. The solid rally was powered by the trade optimism as tech companies, especially chipmakers have a lot of exposure to China. They derive a large portion of their revenues from China since it is the world’s biggest chip market and have supply chains in the country.
Semiconductors have been the most important drivers of the overall technology growth given their requirement in day-to-day life from cars, electronic gadgets to planes and weapons. Chipmakers power much of the world’s technology with their innovation and set the stage for digitization in various corners like healthcare, transport, financial systems, defense, agriculture, retail and many others.
Robust demand for memory chips and other semiconductor products owing to the rapid adoption of cloud, Internet of Things, autonomous cars, gaming, wearables, VR headsets, drones, virtual reality devices, artificial intelligence, cryptocurrencies, and other advanced information technologies are fueling growth in the space. Additionally, the deployment of 5G (fifth-generation) technology — the next wireless revolution — is creating further opportunities. The wave of mergers and acquisitions provides further impetus to the broader space.
Further, global economic conditions have improved, leading to an increase in IT spending. Recession fear has dissipated, global composite PMIs (purchasing managers’ indices) have shown signs of stabilization, and central banks have resorted to easing policies across the globe. The combination is pushing the technology sector higher.
That said, investors might want to tap the space with the top-performing tech stocks of a decade. For them, we have presented the ones that have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and could be compelling choices for 2020 as well. Also, we have provided charts of a decade and compared them with the respective Zacks industries.
Netflix Inc. (NFLX - Free Report) : Up 4081.6%
This California-based company is the world's leading Internet television (streaming services) and DVD-rental services. With a market cap of $144.1 billion, the stock has expected earnings growth of 30% for the next five years. It has a Zacks Rank #3 and Momentum Score of A.
Abiomed Inc. (ABMD - Free Report) : Up 1838.9%
This Massachusetts-based company is engaged in the research, development and sale of medical devices to assist or replace the pumping function of the failing heart. Its estimated earnings growth for the next 5 years is pegged at 26%. Abiomed has a market cap of $7.6 billion. The stock has a Zacks Rank #3 and Growth Score of A.
Broadcom Inc. (AVGO - Free Report) – Up 1630.7%
This California-based company designs, develops and supplies a range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. With a market cap of $125.9 billion, the stock has expected earnings growth of 10.7% for the next five years. It has a Zacks Rank #3 and Growth Score of B.
Align Technology Inc. (ALGN - Free Report) – Up 1458.1%
This California-based company manufactures and markets a system of clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services used in dentistry, orthodontics, and dental records storage. It has an estimated earnings growth of 22.1% for the next five years and has a market cap of $21.9 billion. The stock has a Zacks Rank #2 (Buy) and Growth Score of A. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Amazon.com, Inc. (AMZN - Free Report) – Up 1290%
With a market cap of $927 billion, this Washington-based Amazon.com is one of the largest online retailers, with extensive operations in North America, now spreading across the globe. The stock has estimated earnings growth of 27.5% for the next five years. It has a Zacks Rank #3 and Growth Score of A
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?
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