When you look around the market trying to find the best stocks to add to your portfolio, it’s difficult enough to try to get through all of the noise of daily headlines.
The headache gets even stronger when you realize you don’t want to invest in something that just looks good now, but will be an attractive holding for years down the road.
Then try to do that with tech stocks without screaming.
Technology companies face a host of hurdles, and sure-thing stocks can turn into sure duds quicker than in almost any other industry. Remember: There was a time at which BlackBerry Ltd (NASDAQ:BBRY) and Nokia Corp (ADR) (NYSE:NOK) seemed invincible.
Still, if you want to win big in tech stocks, you need to consider the long-term, and that means thinking about megatrends. Trends like the rise of e-commerce would’ve served you well with Amazon.com, Inc. (AMZN), and Facebook Inc (FB) has been a lucrative way to play the explosion of social media.
The following are seven of the best tech stocks to buy for some long-term success, each one of them chosen because mega-trends will push them in the right direction:
The Best Tech Stocks of 2020: Paypal (PYPL)
The mobile payments industry isn’t going to slow down any time soon. According to eMarketer, U.S. volume alone is forecast to jump from $8.71 billion in 2015 to a whopping $210.45 billion by 2019.
Paypal Holdings Inc (PYPL) is already one of the biggest beneficiaries of the e-payment megatrend. PYPL boasts some major competitive advantages, such as 184 million active accounts and more than 14 million merchants — pretty impressive given how young the space is. For millions of people across the world, PayPal is a critical part of their everyday lives.
Meanwhile, growth looks good — in the latest quarter, payment volume shot up by 39% — and margins are fantastic, as evidenced by the 73% surge in free cash flow (to $605 million) in Q1.
PayPal also has the financial resources to continue to invest aggressively in R&D and pull off smart acquisitions, such as Venmo. Venmo has become popular with the hard-to-get millennial demographic, with the service growing payment volume by more than 150% during the past year. There’s also promise in Xoom, a fast-growing international remittances business.
While a variety of companies are gunning for the mobile payments category — including Apple Inc. (AAPL) – PayPal should be able to maintain its leadership, given its massive user base, strong global platform and trusted brand.
And, of course, PYPL is the purest of plays in the fast-growing mobile payments business.
The Best Tech Stocks of 2020: NetSuite (N)
Why? It’s because the technology services mission-critical functions like financials, inventory & supply management, and human resources. Thus, customers are willing to pay premium rates, and keep paying for the long haul — because moving to another ERP solution can be highly disruptive.
All these factors play into the bull case for NetSuite Inc (N), a cloud-based player in the space that has been able to leverage its ERP platform by adding key applications for customer relationship management and e-commerce.
But perhaps the best reason for Netsuite’s success is its cloud expertise. Costs tend to be lower because there’s less of a need to hire consultants, plus there are the advantages of a centralized database, which allows for real-time analytics.
To date, NetSuite claims that it has snagged more than 10,000 customers that run over 30,000 subsidaries and entities across the world. And even that just scratches the surface of this opportunity. According to NetSuite, the mid-market and enterprise sector has more than 5 million organizations.
Want more hope for growth? According to Gartner, the revenue opportunity for the ERP market is expected to keep shooting higher — from $27 billion in 2015 to $35 billion in 2019.
The Best Tech Stocks of 2020: Benefitfocus (BNFT)
Companies often complain about the complexities and costs of healthcare benefits.
Those companies haven’t called Benefitfocus Inc (BNFT) yet.
For 15 years and going, Benefitfocus has been building technologies to help make things much, much better by providing cloud platforms and mobile apps to deliver sophisticated benefit analytics.
Benefitfocus has been reaping the benefits, growing revenues year after year, including a 28% increase in revenues to $54.8 million in its most recently reported quarter. And this could accelerate as BNFT gains traction with larger employers. In Q1, Benefitfocus saw a 54% increase in revenues for the large-employer segment, bringing its total to
For the most part, the strategy has been paying off. In the latest quarter, Benefitfocus reported a 28% increase in revenues to $54.8 million. Although, this could accelerate as the company has been getting more traction with larger employers. In fact, there was a 54% increase in revenues for this segment in Q1, and BNFT brought its customer count here to 741.
Sounds impressive … but what should really get you excited is the fact that there are more than 18,000 large employers in the U.S.
Other major drivers that should help Benefitfocus include a general shift toward cloud systems, and the fact that companies have to deal with new regulations, such as those tied to the Affordable Care Act.
BNFT also has been aggressive with product innovation. To this end, the company’s next-generation enterprise platform allows for comprehensive mobile-based open enrollment and also advanced content management, which allows customers to better meet employee needs. Analytics help employers find ways to reduce costs, too — nothing anyone will sneeze at when it comes to healthcare benefits.
The Best Tech Stocks of 2020: Criteo (CRTO)
The founders of Criteo SA (ADR) (CRTO) initially focused on building sophisticated technology to help make predictions. Interestingly enough, the target market was movie recommends, which worked fairly well … but it was too small an opportunity.
Criteo’s answer was leveraging its system for online advertising. But it went a step further by developing a business model based on performance — namely, they only got paid when sales occurred. This was a radical idea in the adtech world, since many players charged (and still charge) for fuzzier metrics like clicks and views.
This strategy has fueled enormous top-line growth, including 34% revenue improvement last year, and 41% growth in the company’s latest quarter.
And unlike many other dot-coms, Criteo also produces on the bottom line, with EBITDA margins sitting at 56%.
Given the massive size of the Internet and mobile, digital advertising will continue gobbling up more and more budget, which will spur demand for tools like Criteo’s. In fact, according to eMarketer, the total amount of spending will exceed TV next year, hitting $77.37 billion, before rocketing up to $106.21 billion by 2020.
The Best Tech Stocks of 2020: Mobileye (MBLY)
The auto industry is at the cusp of revolutionary change. You only have to look at the breathtaking success of Tesla Motors Inc (NASDAQ:TSLA) to see that.
Much of the attention is going to self-driving cars. According to research from Boston Consulting, the market for this technology is forecast to reach a whopping $42 billion by 2025.
How can investors play that mega-trend, considering it doesn’t quite exist yet?
One interesting option is Mobileye NV (MBLY), the leading innovator of collision-avoidance systems thanks to advanced algorithms, systems on a chip and visual processing. In all, Mobileye has agreements with 20 automakers, including TSLA, to implement its solutions in 237 car models by the end of this year.
The next step is to develop a system for self-driving cars. Which makes sense, given the company’s core technologies combined with its experience in dealing with onerous regulations.
Just this week, MBLY announced agreements with two yet-to-be-named automakers to develop fully autonomous cars by 2019.
By 2020, Mobileye could be shooting through the moon.
The Best Tech Stocks of 2020: Everyday Health (EVDY)
Everyday Health Inc (EVDY) hasn’t been too healthy for investors so far in its short publicly traded life, with shares currently 57% below their IPO price.
This is yet another broken IPO … but one that actually could become a great opportunity for longer-term investors.
Everyday Health operates a platform of online and mobile properties for both consumers and healthcare professionals. As should be no surprise, the majority of the revenues come from ad sales to pharma companies. One of the strongest areas for EVDY is the orphan/rare disease market (these target patient populations under 200,000), which account for nearly half of FDA drug approvals.
And Everyday’s digital approach has been much more effective than TV as a marketing channel.
The company has other interesting segments, too. For example, Everyday Health Professional has an audience of more than 700,000 practicing U.S. physicians, and it provides specialized content and tools to help make better clinical decisions. It also offers services centered around medical research, certifications and continuing education.
The overall market opportunity for EVDY is massive, as healthcare marketing spending is about $30 billion in the U.S. The company has to figure out how to pare its losses, but the growth is there; revenues were up 34% in the latest quarter, and they grew 26% across last year.
The Best Tech Stocks of 2020: Expedia (EXPE)
The travel industry has had to deal with some serious headwinds of late, including European terrorism, slowing global growth and the emerging threat of the Zika virus.
And yet, the long-term trends are actually encouraging.
The world population is aging, which should lead to more leisure travel, plus the space should get some aid from growing affluence in Asia.
All this is good news for Expedia Inc (EXPE), which has a tremendous platform itself, but also a broad portfolio of other top-notch travel brands including Hotels.com, Trivago, Travelocity, Hotwire and CheapTickets. It supports a thriving mobile ecosystem, too — one in which one in every four room nights were booked on a mobile device.
Expedia also should see a nice boost in growth from the recent acquisition of HomeAway. While the business is primarily focused on the listings of vacation rentals, it also looks like the real value will be to gun for the fast-growing “sharing economy,” which currently is dominated by Airbnb. This business essentially allows people to rent out their homes to travelers.
In the case of Airbnb, estimated bookings for 2015 came to $7.2 billion, and this is expected to jump to $12.3 billion this year.
HomeAway now has the benefit of the tremendous technical and financial resources of EXPE as well as the synergy with the other brands, so this really does have the chance to be a viable Airbnb competitor.
In the meantime, don’t expect EXPE to slow down. Expedia still is posting nearly 40% revenue growth, and there’s tons of market to gobble still, as only about 56% of travel in the U.S. is booked digitally, just 35% in Asia and 25% in Latin America.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.