2011 – The Year for Tech Stocks
In any market rally, there are sectors that boom and sectors that bust. The coming strength I see in 2011 will not be a rising tide that lifts all boats. It will favor fundamentally strong stocks and tech socks in particular. Mark my words: 2011 is going to be the year for tech stocks.
According to my analysis, small cap tech stocks are the strongest in the market. I’ve looked high and low and at each and every sector, but every time, I come back to tech. So all of the small cap stocks on this list come from the tech industry. These companies are expected to post strong earnings and sales growth when results are released in the next few months.
Polypore International (PPO)
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Polypore International (NYSE: PPO) is a maker of specialty membranes used to separate positive and negative electrodes, in effect controlling the flow of ions in lead-acid and lithium batteries. This makes it a play on the green movement and the next generation of fuel sources for cars and other battery-powered devices.
We know that the technology is commercially viable as the Chevy Volt and Nissan Leaf are already on the market. PPO is leading this trend, which is why shares have been so strong of late, up 50% since September. The strong performance should continue into the fourth-quarter earnings season as this company will likely post another round of spectacular results. Analysts are slowly moving their estimates higher, meaning that an earnings surprise is certainly in the cards for this company.
Buy PPO on pullbacks under $44.
Acme Packet Inc. (APKT)
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Acme Packet Inc. (NASDAQ: APKT) makes session border controllers (SBCs), devices that are used to connect networks operated by service providers to their enterprise customers. The company markets directly and in collaboration with Ericsson and Sonus Networks.
This stock has performed quite well over the past month, and has been gaining steadily since mid-November, with a few minor sell-offs. The only reason for this downward movement is profit-taking, however. Deutsche Bank recently lifted its price target on the stock, citing research suggesting solid product cycle momentum for the company. I expect this strong communications company to continue to move higher over the course of the next several months.
Buy APKT under $64.
Spreadtrum Communications (SPRD)
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Spreadtrum Communications (NASDAQ: SPRD) makes chips for wireless phones. The company sells directly to customers in China through a subsidiary in Shanghai, and its U.S. operations focus on research and development. This is one of the few makers of chips that allow phones to operate with up to three different numbers (a very popular feature in many high-growth markets).
The fourth-quarter earnings season is right around the corner and this stock is slated to report results sometime in February. Right now, analysts are predicting 188% year-over-year sales growth because of the strong sales performance of the company’s three-in-one SIM card. Earnings estimates have also been revised higher.
Buy SPRD under $22.
Radcom (RDCM)
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Radcom (NASDAQ: RDCM) makes test equipment and software that is used to install and maintain corporate networks. Potentially, this company could be a big beneficiary from economy-wide capital spending increases in 2011, which generally focus on upgrading corporate and telecom networks first.
A major 3G operator in South Asia is now incorporating Radcom’s 3G monitoring equipment into its network in order to improve its efficiency and customer service. Additionally, a major Latin American telecommunications company recently signed a $4 million contract with Radcom. I expect to hear more such news in 2011.
Buy RDCM under $13.
Netflix (NFLX)
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Netflix (NASDAQ: NFLX) is a sometimes controversial stock among investors. The company put Blockbuster into bankruptcy by stealing market share with its mail-order business and now with its streaming-video service. There are more than 16 million subscribers, and the company’s streaming service accounts for a significant portion of peak-period bandwidth across the entire Internet. Obviously, Netflix is very popular among consumers; there’s no reason it shouldn’t be popular among investors, as well.
Due to the fact that Google (NASDAQ: GOOG) and Apple’s (NASDAQ: AAPL) TV products are struggling for significant market share, there is increasing chatter that Netflix may become an acquisition target for either of these tech giants. Even if such a deal doesn’t pan out, the bottom line is that Wall Street is continuing to underestimate Netflix’s growth, especially when one considers that the company posted sales that beat analysts’ already high estimates in its most recent quarter. Additionally, at the end of last year, Netflix announced a $300 million stock buyback program that it says it will continue through 2012.
Buy NFLX under $202.
