We laid out our argument against holding Apple Inc. (AAPL) stock in the coming year as the technology giant appears ready to take another year off from performance.
For a number of reasons, Apple stock appears ready to be a follower — not a leader — among tech stocks.
Serious questions regarding Apple’s product line, flagging technicals and trendlines with overly optimistic sentiment all adds up to a bearish outlook for AAPL stock, with our models forecasting a price target of $90 that may be lowered as the year progresses.
So, if Apple, the world’s largest tech stock, isn’t going to provide performance for your portfolio in 2016 … well, just what tech stocks should you buy to rev up your returns?
Here’s a look at our top five tech stocks for 2016.
Tech Stocks to Buy: Amazon.com, Inc. (AMZN)
Believe it or not, it’s hard to include a stock that returned more than 120% in a list of companies to hold in 2016, but Amazon (AMZN) is one tech stock that doesn’t look ready to quit.
The casual observer might think that Amazon stock gets its boost from online retailing, but that’s just eye candy. AMZN’s not-so-secret profit machine is Amazon Web Services, their cloud computing business, which is now generating more than $7 billion in revenue and is growing by leaps and bounds.
At last check, revenue from Amazon Web Services alone overshadowed combined revenue for cloud services from its top four competitors, Salesforce (CRM), Microsoft (MSFT), IBM (IBM) and Alphabet (GOOG, GOOGL).
Watch for this business to continue serving Amazon stock well through 2016.
Tech Stocks to Buy: Intel Corporation (INTC)
We’ve been pretty outspoken on Intel’s (INTC) ability to lead tech stocks higher in 2016 over the past month or so. Growing strength on the fundamental side of business has resulted in a surge in Intel’s stock price.
The technical trends are pointing to a positive 2016 as a lot of pessimistic sentiment is beginning to unwind in the form of buying interest for Intel stock. The potential for upgrades alone to drive INTC 20% higher is real, with only 47% of the analysts covering the stock rating it a “buy.”
Make no mistake: Intel will lead the tech sector in 2016.
Tech Stocks to Buy: Palo Alto Networks Inc (PANW)
Remember, you don’t make money by following the crowd — you make it by finding the undiscovered performers. Palo Alto Networks (PANW) falls into that category. The company is on a revenue-growing tear, with an average year-over-year revenue growth of 55% for each quarter since January 2013.
Palo Alto Networks is widely seen as the Cisco (CSCO) of the 1990s as their networking and security products are an integral part to the current infrastructure updates as we prepare for even more digital consumption.
We like the shares to follow up this year’s 45% gains with another similar year in 2016.
Tech Stocks to Buy: Cree, Inc. (CREE)
We just covered this stock as a short squeeze candidate a few days ago, but it’s so much more than that. Cree (CREE) develops LED lighting and semiconductor products, two things that will be very much a large part of the Internet of Things in the coming years.
Two things stand out on Cree:
First, the long-term chart which shows a definite range between $20 and $70. We love charts like this, especially when we’re sitting at the low end of the range.
Second, as one of the leading LED light manufacturers, we’re interested to see Cree potentially emerge in the development of Li-Fi networks — something that is currently on the technical horizon. Early detection of a development like this often leads to blockbuster performance.
This, of course is speculation … but speculation drives the market, too!
Tech Stocks to Buy: Microsoft Corporation (MSFT)
We would have been remiss to leave Microsoft (MSFT) off our list of Apple stock substitutes. MSFT is finding itself a leader among tech stocks again as its CEO has pared the company’s product lines and focused on revenue-generating businesses like cloud computing, the Surface tablet and a profitable search engine product in Bing. (Finally!)
Look for another 25%-plus year from Microsoft stock as the 41% of analysts that don’t have the stock ranked a “buy” figure out that they’re wrong and begin to upgrade the stock early in the year.
As of this writing, Chris Johnson was long CREE.
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