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Nasdaq Composite is Green YTD: 5 Top Picks to Tap the Rally

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The Nasdaq Composite has become the first out of the three major stock indexes of Wall Street to rebound to the positive territory after these indexes entered in red zone due to the coronavirus-induced market assault. On May 7, the tech-laden index closed at 8979.66, marking a four-day winning streak. This is the first time the index has closed in the green year over  year since Feb 25.

Nasdaq's Robust Rally in Past One and Half Months

The Nasdaq Composite started rallying since the beginning of 2020 after finishing an impressive 2019 rally of 35.2%. Since then, the index had a dream run attaining fresh highs almost every day. On Feb 19, the tech-laden index reached its all-time high of 9,838.37 after which its took a backward bend on the verge of the coronavirus outbreak.

The index entered into negative territory on Feb 25 and then fell in bear market (characterized as decline of 20% or more from recent high) on Mar 12. The downtrend continued till Mar 23.

However, from Mar 24, the Nasdaq Composite started moving upward along with both the Dow and the S&P 500. The index has rallied a fabulous 30.9% so far. Despite this bull run, the Nasdaq Composite is still 9.6% away from its all-time high recorded on Feb 19. On Apr 14, it finally exited the bear market territory.

Nasdaq Sails Through the Tech Sector's Rally

Since the Nasdaq Composite is a tech-heavy index, its performance is directly related to the technology sector. This sector is benefiting from continued strong digital transformation. Rising demand for technologically superior products has been a silver lining for this sector in an otherwise tough environment.

The last few years witnessed a series of breakthroughs in cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, which have set the stage for robust growth. In this regard, large-scale commercial deployment of 5G wireless network has boosted the overall technology sector.

Notably, the Technology Select Sector SPDR (XLK), is the only sector among the 11 broad sectors of the market's benchmark S&P 500 index, which is in positive territory year to date. The XLK has gained 1.9% so far this year. Among the other 10 sectors, five have suffered a double-digit decline year to date.

Our Top Picks

Consequently, it will be prudent to invest in Nasdaq Composite stocks with a favorable Zacks Rank. We have narrowed down our search to five such stocks that have strong growth potential for 2020 and robust EPS estimate revisions. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (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 month.

 

Bandwidth Inc. (BAND - Free Report) operates as a cloud-based software-powered communications platform-as-a-service (CPaaS) provider in the United States. It operates in two segments, CPaaS and Other. The Zacks Rank #1 company has an expected earnings growth rate of 108.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 108.3% over the past 7 days. The stock has jumped 40.4% in the past month.

Logitech International S.A. (LOGI - Free Report) designs, manufactures and markets products that allow people to connect through music, gaming, video, computing and other digital platforms worldwide. The Zacks Rank #1 company has an expected earnings growth rate of 7.6% for the current year (ending March 2021). The Zacks Consensus Estimate for current-year earnings has improved by 3.7% over the past 7 days. The stock has appreciated 12% in the past month.

BlackLine Inc. (BL - Free Report) provides financial accounting close solutions delivered primarily as Software as a Service in the United States and internationally. The Zacks Rank #2 company has an expected earnings growth rate of 16.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 4.9% over the past 7 days. The stock has surged 16.9% in the past month.

Microsoft Corp. (MSFT - Free Report) is one of the largest broad-based technology providers in the world. It dominates the PC software market with more than 80% share for operating systems. It is also one of the two public cloud providers that can deliver a wide variety of infrastructure-as-a-service and platform-as-a-service  solutions. The Zacks Rank #2 company has an expected earnings growth rate of 19.8% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved by 0.4% over the past 7 days. The stock has advanced 11.2% in the past month.

Mercury Systems Inc. (MRCY - Free Report) provides sensor and safety critical mission processing subsystems for various critical aerospace, commercial aviation, defence, and intelligence programs in the United States, Europe and the Asia Pacific. The Zacks Rank #2 company has an expected earnings growth rate of 17.4% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved by 1.9% over the past 30 days. The stock has climbed 17.4% in the past month.

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