Using Nasdaq as the proxy tech index, technology stocks have outperformed the broader market indices — Dow Jones Industrial Average and S&P 500 — so far this year.
Whether it’s semiconductor and software companies focused on expanding cloud-computer services or video game companies or even the devices that support these industries, the growth in tech stocks is a long-term trend.
The trick in a sector bull market is separating the quality tech stocks to buy from the pretenders. Mutual fund managers, investment banks, and individuals start to buy up tech stories rather than the performance, so as not to miss a triple or quadruple play.
But that type of hedge fund strategy — expect 80% losers and 20% big winners — isn’t the best way to go for individual investors. Finding the best quality companies and getting in on their growth when it’s at its peak is a much more productive strategy.
That’s why I’m talking about the seven best market-beating tech stock to buy below.
Market-Beating Tech Stocks to Buy Right Now: AlarmCom (ALRM)
AlarmCom Hldg Inc (NASDAQ:ALRM) stock has been doing very well this year, up 74% so far. ALRM is kind of firm that shows how fast tech is moving these days. A decade ago, there was little evidence there was even a need for a firm like this. But since it went public two years ago, ALRM has amassed a $2 billion market cap.
The company essentially build the equipment and software for “smart” homes and small to medium-sized businesses. Using ALRM, you can not only operate your security, lights, climate control and other devices remotely or by voice command, you can actually see your energy usage in real time.
These types of smart systems are going to be more and more popular in coming years, and ALRM has a leg up on the competition. Plus, since it’s not focused on major commercial operations, it has far less competition in its market.
Market-Beating Tech Stocks to Buy Right Now: Arista (ANET)
Arista Networks Inc (NYSE:ANET) is part of the new generation of cloud-computing services companies. And its appearance on the scene was perfect timing. Just like the server and switching companies that grew up during the dot-com boom in the late 1990s, cloud computing companies are now growing like kudzu as the next generation of the digital age takes the stage.
There are two key growth factors for ANET. First, because it has come of age with state of the art technology in the cloud-computing space, it has a distinct advantage over the legacy server firms. They offer slightly more than upgrades of their existing equipment, while ANET offers fresher solutions.
Second, ANET isn’t in the server market. It sells systems across the entire cloud computing platform, so it can co-exist with legacy players and not necessarily take them on head-on.
Market-Beating Tech Stocks to Buy Right Now: Lam Research (LRCX)
Lam Research Corporation (NASDAQ:LRCX) has been around since 1980. That means it has seen a few ups and downs in the tech sector and has proven itself not just a survivor, but a success. You can see that in its current performance, now that tech is entering its next generational transformation. After a nearly 80% move so far in 2017, LRCX stock still trades a P/E ratio of 20.
Over the past five years, LRCX stock averaged an annual return near 96%. Lam Research isn’t a young firm, mind you. It’s a 37-year-old company. Considering its age, that’s some impressive growth.
LRCX sticks to its knitting — wafer manufacturing equipment. As long as it keeps up with the changes in tech and the demands of chip makers, LRCX has built a sizable moat around its well-run business.
Market-Beating Tech Stocks to Buy Right Now: Ultra Clean Holdings (UCTT)
Ultra Clean Holdings Inc (NASDAQ:UCTT) was originally a division of Mitsubishi Corporation’s metals division, focused on bringing Japanese ultra-clean manufacturing techniques to the Silicon Valley semiconductor industry. That was in 1991. Since then, UCTT spun itself out of Mitsubishi’s control and has been public since 2004.
Bear in mind, UCTT is still a very niche player and sports a $1 billion market cap. It’s not exactly a heavy hitter. But what it does, it does very well.
Briefly, it’s absolutely crucial that semiconductor manufacturing is done in an ultra-clean environment — from the fuels to the air to the water — to keep as many impurities from the silicon and other chip parts as possible. And this is UCTT’s sole purpose.
Up nearly 240% in the past year, and still trading at a current P/E of 23, UCTT is under the radar … for now.
Market-Beating Tech Stocks to Buy Right Now: Weibo (WB)
Weibo Corp (ADR) (NASDAQ:WB) is a social media company that became famous as the preferred micro-blogging site for Chinese millennials. The nickname “the Chinese Twitter” has stuck to WB, but the company is far more than that.
While people tend to move about in the U.S., it pales in comparison to huge population shifts that have happened in China in the past 2 decades. Aside from the demographic shift of young rural people into big cities, the technology explosion in that time has propelled Weibo into cultural-phenomenon territory.
WB stock, after a stunning 147% run year-to-date, has paused to catch its breath. There was some talk that growing scrutiny by Chinese regulators on social media may have a chilling effect on firms like WB, but WB has been working with authorities already, so it’s in great shape moving forward.
Market-Beating Tech Stocks to Buy Right Now: Activision (ATVI)
Activision Blizzard Inc (NASDAQ:ATVI) is one of, if not the major player in the video gaming world. With a $46 billion market cap, its size gives a good indication of how popular its various games are. The biggest games in the industry, including Grand Theft Auto and Overwatch — are among its portfolio.
With virtual reality (VR) barely scratching the surface of its potential, the gaming industry is only getting warmed up. Augmented reality (AR) products, too, are coming out from every major game maker and then some.
There’s also the huge growth in mobile gaming and MMORPG (massively multiplayer online role-playing games) that continue to develop as bandwidth and tech allow for faster speeds and higher quality.
ATVI stock is up 71% year-to-date, but trades at a P/E of 42, which means earnings are still supporting its price, even after such a big move.
Market-Beating Tech Stocks to Buy Right Now: Universal Display Corp. (OLED)
Universal Display Corporation (NASDAQ:OLED) does one thing, which you can likely guess from its ticker symbol. It’s involved in the research, development and commercialization of organic light emitting diodes (OLEDs). The current tech for both large and small displays (TVs and mobile phones) is liquid crystal displays (LCD) using light emitting diodes (LEDs). The difference between LED and OLED displays comes from how they’re lit. LED screens are backlit to illuminate the crystals. OLEDs produce their own light, so each pixel is individually lit.
OLEDs are superior in performance on small and large scales, but they’re more expensive to produce, which becomes the challenge when selling electronics in the marketplace. OLED is in the business of expanding OLED technology. Right now, the premium mobile phone market is the most promising sector, since the screens are smaller and OLEDs are more energy efficient, so they can build in a better smartphone experience.
Up almost 140% year to date, this trend is just beginning for OLED stock.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.