They say that anyone who bought tech stocks right before the dot-com bust is well-familiar with the perils of diving into technology. But you don’t have to have roots that far back to understand the potential for pain.
Investors are sure to remember the hype behind Zynga Inc (NASDAQ:ZNGA) and Groupon Inc (NASDAQ:GRPN) several years back, only to be followed by disappointment. Companies like Fitbit Inc (NYSE:FIT) and GoPro Inc (NASDAQ:GPRO) were the darlings of Wall Street in just the past couple years, but now, they’re educating investors fresh and experienced alike on the potential for pain in the sector.
So, how do you determine what tech stocks will outperform the market, not just for a few months on a momentum swing, but for many years to come?
A good starting point: Look at the addressable market.
Any company that’s going to grow needs to have a market it can grow into. What’s the point of coming up with, say, the next great tablet for people with 11 fingers? You want to make sure there’s a market opportunity (usually in the billions of dollars), and you want to make sure there are catalysts that can help new players get an outsize piece of the action.
You also need to get a sense of the technology itself. That doesn’t mean you have to know whether it works — but if you can determine whether the company uses the latest approaches and excels in a field with inherent barriers to entry, you have yourself a winner!
These things are tough to gauge, but I’m here to guide you.
Today, we’ll look at seven tech stocks that have many of the qualities listed above. This list has a number of stocks you probably haven’t heard of or paid much attention to, but it also includes a couple of companies that many long-term investors would avoid, (incorrectly) thinking the easy money is well behind. All of these picks, though, should lead to juicy, market-beating gains in 2017, 2018, 2019 and beyond.