While the market has been pretty choppy so far this year, with the S&P 500 index barely in the green since January, the tech-heavy Nasdaq has tacked on gains of more than 6% and tech-focused ETFs like the Vanguard Information Technology ETF (VGT) are up about 4%.
That’s because while certain stocks are struggling in this economic environment — with a strong dollar and turmoil in both Europe and China weighing on international operations — a select group of high-growth tech stocks are putting up market-beating gains that can’t be held back by a troublesome macro picture.
All of the stocks here share this kind of powerful growth, which transcends both broader-market sentiment and cyclical trends in consumer spending. They are powerful tech stocks that can’t lose, based on brand power and industry dominance that can’t be rivaled.
These kinds of stocks are a safe bet in any environment, and often continue to soar even after big moves.
And here’s why I think all seven tech stocks are strong buys right now:
Tech Stocks That Can’t Lose: Google (GOOGL)
Google (GOOG, GOOGL) has a ton to offer investors after great earnings recently that trounced analyst expectations. Unlike some high-growth tech stocks out there with problems turning a profit, Google remains a beacon of earnings growth, with EPS of $6.99 beating estimates of just $6.70 per share.
Furthermore, GOOG stock saw double-digit growth on the top line and roughly $70 billion in cash and investments on the books to fuel continued growth and acquisitions.
It’s no surprise, then, that Google stock soared about 20% in short order after its quarterly report. But even so, I’d have confidence buying Google here despite this big short-term pop.
Here are a few reasons why:
- Mobile Might: Google’s Android OS is the most dominant smartphone platform in the world, beating out Apple (AAPL) and its iPhone in regards to total users. And beyond its own smartphone reach, so-called “cost per click” metrics finally moved higher on smartphone and tablet advertisements across all platforms.
- YouTube: Engagement with Google’s flagship video property remains incredibly impressive, with “watch time” up 60% year-over-year as users consume ever-increasing amounts of YouTube videos. Actual revenue metrics are murky, but married with a more successful mobile ad strategy you can be sure that all those pre-roll video advertisements are starting to add up big-time for Google in the age of cord-cutting.
- Dividend Hopes? This quarter was the first for newly minted CFO Ruth Porat, and she was incredibly deft on her debut call with analysts. Not only did she highlight the right numbers, but she also struck the right tone by talking about the potential for dividend and buyback spending in the near future. That’s great for investors looking to GOOG stock to finally return some of its cash stockpile to shareholders.
All in all, there’s a lot to like about Google and a lot of reasons to expect the recent surge to continue through year’s end.
Tech Stocks That Can’t Lose: Accenture (ACN)
Accenture Plc (ACN) isn’t regularly talked about with the same bullishness as sexy Silicon Valley “disruptors” … but the technology consulting firm that has simply been on a tear in the last year or so, rising 25% in the last 12 months to dwarf the roughly 5% return for the S&P 500 in the same period.
Why? Well for starters, in June, Accenture earnings impressed Wall Street with better margins and a growing top line in the face of currency headwinds. Furthermore, ACN pays a nice dividend of 2% — placing it in the sweet spot between no-growth tech behemoths like Cisco (CSCO) and smaller players that don’t offer any payouts. And lastly, there are hopes of a continued recovery in enterprise tech spending across 2015 as businesses invest in themselves — and hire consulting firm Accenture to get their high-tech houses in order.
The bottom line is that Accenture is still a growth company and a tech stock with lots of potential, but is priced like a bargain play — creating a lot of value for investors right now.
Part of this pricing is because of the negative associations with other lumbering large caps in the space like the aforementioned Cisco and IBM (IBM), which have been dead money, and part of it is just doubt over the global IT environment. But savvy investors should take comfort in the strong track record of Accenture of the inevitability of tech spending as businesses continue to do more with less and use firms like ACN to guide them in this challenging environment.
Look at a long-term chart of Accenture, and you’ll see that outperformance is a habit with this unsung tech player.
Tech Stocks That Can’t Lose: Amazon (AMZN)
Of course, while Accenture is unsung, Amazon.com (AMZN) is one of the most obvious tech stocks out there right now.
AMZN stock is up 70% year-to-date, with much of that coming in April after a strong earnings report that also included much-sought-after details about its cloud computing arm, Amazon Web Services. AWS remains a huge growth engine for the stock, with roughly 50% growth year-over-year for the division and an overall business that should tally well more than $6 billion annually at its current pace.
As if that wasn’t enough, Amazon.com followed up a strong Q1 report with another doozy in July. Most notably, Amazon finally put its money where its mouth is with significant profitability even as it continued to grow its top line and spend on funky new growth efforts at a brisk pace.
The result is not just a surge in Amazon’s stock, but also a total market value that now easily surpasses retail giant Walmart (WMT). And as I wrote recently, this move is not just symbolic, but a validation that AMZN is light years ahead of the brick-and-mortar retailer. Sure, WMT stock is trading for a “bargain” P/E here … but considering the chronic underperformance of shares and constant pressure on its top line, there’s a reason it’s trading for a respective discount to other blue chips right now.
If you want growth, there are few better stocks out there than AMZN. It’s a behemoth in retail, it’s forging ahead with AWS and its subscription-based Amazon Prime business is adding a built-in revenue stream to an already impressive operation.
Yes, Amazon is in a way a cyclical retail stock. But AWS and other efforts continue to make this innovator an attractive tech stock that is much more than just a play on consumer spending.
Tech Stocks That Can’t Lose: Fortinet (FTNT)
Fortinet (FTNT) is one of my favorite tech plays, up about 50% since Jan. 1, and up more than 80% in the last 12 months thanks to an increased focus on cybersecurity.
But while some of that pop can undoubtedly be attributed to the rising tide seen across all cybersecurity stocks, FTNT stock will surely hang on to these gains because of superior operations and a sound balance sheet that puts peers to shame.
A mid-cap player with a market size of about $8 billion, the network-security provider is still a serious player both in its own right and as a potential acquisition target. That makes it the perfect “Goldilocks stock” that is neither too small and volatile to survive, nor too big and lumbering to tap into the fast-paced growth potential of the sector.
And best of all, Fortinet has seen impressive top-line growth married with a comfortably profitable operation that isn’t in cash-burn mode. 2014 revenue hit $770 million, up almost 80% from $433 million in 2011 — an impressive growth rate, and the company has been turning a profit to boot. Contrast that with some players like FireEye (FEYE) or Palo Alto Networks (PANW) that are still operating significantly in the red and it’s easy to see why FTNT stock has staying power.
On top of profitable operations, Fortinet is well-capitalized, with $1.1 billion in cash and investments — all over zero debt. That’s a recipe for long-term stability no matter what the short-term sentiment is regarding cybersecurity stocks.
Tech Stocks That Can’t Lose: Netflix (NFLX)
Netflix (NFLX), the undisputed king of streaming television, has been on an impressive tear in 2015. NFLX is up roughly 120% year-to-date, and up about 730% since the beginning of 2013.
NFLX is the epitome of a tech investor’s perfect pick, with unbridled momentum and huge returns to shareholders. But can it keep this up?
I think it can.
With nearly $3 billion in cash and investments and both projected earnings and revenue growth rates of over 20% across the next year, it’s no wonder NFLX stock continues to set all-time highs. And beyond the medium-term prospects of significant improvement in sales and profits, Netflix continues to dominate the Internet TV arena when it comes to brand power — much to the dismay of traditional cable and satellite providers such as Comcast (CMCSA) and DirecTV (DTV), and much to the joy of shareholders.
Streaming video is here to stay, with recent Netflix earnings showing more than 65 million subscribers Consider that CMCSA has a market cap of $150 billion and serves 22.3 million television (video) customers worldwide and only 27 million customer relationships in total as of June 30. Meanwhile, Netflix has a market cap of only $40 billion and serves 60 million customers worldwide — and that number is growing fast!
Netflix continues to excel is original content creation through award-winning programming including House of Card, Daredevil and Orange Is the New Black, making NFLX a legitimate competitor vs. premium channels such as HBO — and well worth the current $7.99 per month price tag.
Netflix is still unprofitable overseas, but it’s growing the top line rapidly and narrowing its loss. Furthermore, NFLX is making deft moves to keep down the price of programming and maintain margins even as it continually expands its video library.
The earnings multiple and sky-high run may give some traders pause, but there are worse things in life than a fast-growing cult stock that continues to wow analysts. If you’re gonna pay a premium for earnings, make sure you do it in a mega momentum stock you can buy high and sell higher — just like Netflix.
Tech Stocks That Can’t Lose: Fitbit (FIT)
Fitbit (FIT) wowed Wall Street this summer, with FIT stock offering at $20 a share in June and then opening at about $30 or so for an immediate 50% pop after its IPO.
The party hasn’t stopped, either, as shares have pushed higher to over $40 — double the IPO price and clear sign that Wall Street is very optimistic about this fitness wearables company.
The argument for FIT stock is pretty simple: This is a fast-growing company in a fast-growing part of the consumer tech market. And unlike other startups that go public with only hopes and dreams, Fitbit stock is soundly profitable right now and actually seeing earnings per share accelerate faster than revenues, based on Q1 numbers.
Specifically, the Fitbit S-1 filing reveals revenue growth that’s roughly threefold year-over-year in Q1 2015, from $109 million to $337 million … while EPS soared almost 6x, from 6 cents to 33 cents.
Analysts have been gaga over FIT stock from the get-go, with RBC Capital coming out as the the first big-name Wall Street research firm to take a position; RBC initiated coverage with an “outperform” rating and a $45 price target.
But it’s important to note that as a newly issued stock, Fitbit is still largely under the radar, with just 12 analysts covering the stock. When you take this lack of coverage with a strong history of growth, the deck seems stacked for blowout earnings surprises as Fitbit continues to maintain its strong brand in the wearables space.
There is competition from the Apple Watch and other gadgets, but Fitbit remains the gold standard. If investors want to jump into the next consumer tech trend, FIT stock is the way to go now that the company has successfully pulled off its IPO.
Tech Stocks That Can’t Lose: Tesla Motors (TSLA)
Tesla Motors (TSLA) continues to prove naysayers wrong, with TSLA stock sitting on a 14% gain year-to-date despite talk of overblown valuations and production bottlenecks.
Sure, a downgrade from Deutsche Bank from “buy” to “hold” on fears that most of the success is baked into shares is worrisome … but concurrent with that downgrade, DB raised its target from $245 to $280 and expressed optimism over Tesla’s battery technology. So it wasn’t all bad.
The million-dollar question for traders, then, isn’t whether TSLA will see volatility or continue to be branded as overvalued — because, like Amazon, that’s pretty much a given for this highflying stock given what it is.
The real question is whether sentiment is still strong enough to push TSLA stock higher even amid the doubts, and I think that the answer is “yes.”
Absurdly, the fact that analysts are downgrading Tesla stock — including not just DB but also Pacific Crest, which had its own valuation concerns – shows that the market is not just blindly optimistic and bidding TSLA higher no matter what. Furthermore, despite concerns about valuation you will be hard pressed to find a fundamental metric that is not attractive. With robust profit margins, strong customer support and a big order backlog, Tesla is living up to the hype in many ways.
Tesla’s latest filing anticipated that production will only reach 2,000 units per week by year’s end, or just over 100,000 annually. That’s admittedly just about a third of the 300,000-plus Fusion sedans sold last year by Ford (F), but remember that Tesla’s Model S sedan and anticipated Model X SUV are both luxury vehicles with healthy margins — neither are intended to be mass-market vehicles. Fewer cars at better margins is the right way to go.
Beyond cars, too, there is the ambitious Gigafactory to provide fuel cells and batteries to third parties as well as the Powerwall home battery unit that will begin deliveries this summer. Both go far beyond the idea of electric vehicles and address the notion of sustainable energy use in many areas of life — a growth industry where Tesla has intellectual capital, brand cache and a grand vision.
There are few stocks that embody the high-growth potential of tech better than Tesla. While a risky and volatile play, it certainly has been a profitable one lately — and should be going forward, too.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
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