As we wind down the year, tech, as measured by the Nasdaq 100 is performing neck and neck with the S&P 500.
That’s a new twist, as tech was outpacing all the averages earlier in the year. But some of that had to do with consumer electronics and online retailers getting a lot of love.
Remember, Amazon.com, Inc (NASDAQ:AMZN) was killing brick-and-mortar retailers and getting into the grocery business. Just those two stories killed a lot of the traditional retail sector enthusiasm.
And the rise of cloud computing and mobile networking boosted chip makers and the companies that make the machines that make the chips. Artificial intelligence has also turned into a big story which weaves itself into smart devices, self-driving cars and Big Data.
Many of these trends will endure, but we’re at the stage in the growth where it’s time to be more selective of winners that have what it takes to play the long game here and not just finish the sprint well.
Below are 10 A-rated tech stocks to grow your returns as all these major trends unfold.
Tech Stocks to Buy: Baidu (BIDU)
Baidu Inc (ADR) (NASDAQ:BIDU) is usually called the Google of China. It’s the most popular search engine that manages about 75% market share. That’s 75% of 731 million people, or about half a billion people.
What’s more, China only has about 38% internet adoption. The U.S., EU and Japan are closer to 80%. That means there’s huge amounts of growth still available in its home market. And given its size, like Google, it’s building a moat simply by its size and reputation.
But not to rest on its search engine and advertising business, BIDU and mobile phone disruptor and electronics firm Xiomi are teaming up to build out IoT (Internet of Things) efforts to create deeper experiences for users. Think of Google and AMZN smart home applications as well as smart cars.
Tech Stocks to Buy: Kulicke & Soffa (KLIC)
Kulicke and Soffa Industries Inc (NASDAQ:KLIC) basically supplies equipment, goods and services to the semiconductor industry.
It’s a relatively small, specialized firm, with a $1.7 billion market cap. But it has been around since 1951, so its assembly solutions are well known in the industry.
KLIC is now headquarted in Singapore, running factories in China, Malaysia and Singapore, for its global client base. Having such a strong presence in Asia is a very nice advantage, since it is one of the fastest growing tech regions in the world.
FYQ4 earnings in mid-November showed why KLIC made this list — sales were up 48% from the same time last year and leadership boosted its December earnings estimate by 27%. The stock is off its highs but still has made 54% this year, yet only trades a price-to-earnings ratio of 15.
Tech Stocks to Buy: Daqo New Energy (DQ)
Daqo New Energy Corp (NYSE:DQ) is a Chinese solar panel maker. For the past couple of years, that hasn’t been a good thing.
When the economic doldrums were sucking the life out of the Chinese economy, and the massive renewable energy infrastructure money was drying up, domestic solar demand was waning.
And exporting to the US wasn’t working since the US was becoming increasingly protectionist to preserve its domestic players and defend against price dumping.
But now both China and the US are in growth mode again. And DQ is benefitting.
Because its market cap is just slightly over $500 million, some growth has big significance for DQ. Add to that the rising cost of silicon prices and its margins and revenues are on the rise again as well.
Up over 180% year to date, this rally has legs.
Tech Stocks to Buy: Paycom (PAYC)
Paycom Software Inc (NYSE:PAYC) is a next-generation human resources software as a service (SaaS) company that specializes in the new field of human capital management (HCM).
Basically that means it provides software that allow companies to track employees from recruitment to retirement and build in analysis and metrics to better manage workflow, administration and performance efforts for its clients.
One of the big shifts in HR is automation. Smaller firms don’t want to manage an HR group if they don’t have to and PAYC is one of several companies that are freeing firms up from having to dedicate space and capital to an in-house HR department, or at least a large on-site HR department.
PAYC is up 75% year to date and continues to beat estimates and raise its guidance quarter after quarter.
Tech Stocks to Buy: DXC Technology (DXC)
The stock is up more than 50% year to date, as earnings during the fiscal year after a merger can help boost earnings. Beyond this fiscal year, DXC is looking to spin off some of its divisions and focus on its global business services.
There are some valuable assets in this firm, and after this fiscal year, it will be interesting to see how well they can execute the strategy. But bear in mind this is merger of two very good companies and there is a lot of talent here that is now unfettered by corporate bloat. That could mean very exciting things.
Tech Stocks to Buy: Alibaba (BABA)
Alibaba Group Holding Ltd (NASDAQ:BABA) has a nearly $460 billion market cap and is up 100% year to date yet trading at a current P/E of 50.
Its U.S. counterpart (more or less), Amazon, has a market cap of $565 billion and is trading at P/E of nearly 300. Amazon is up 56% year to date.
Given that internet penetration in China is still rising rapidly and the country’s economy is beginning to heat up again, any bullish story you want to tell about AMZN is certainly applicable to BABA in multiples.
Perhaps investors are worried that it’s a Chinese company with less visibility than a US firm. Maybe it’s because US investors don’t use BABA or have any context for its cultural popularity.
Regardless, this is a big-cap, liquid online retailer with a massive market penetration in a huge consumer market ripe for years of growth.
Tech Stocks to Buy: Arista Networks (ANET)
Arista Networks Inc (NYSE:ANET) is a relatively new firm that specializes in cloud-based networking equipment.
It makes the equipment that allows the server farms to move the data around quickly and accurately between users and clients. It works with new state-of-the-art servers as well as legacy servers to improve performance.
Cloud computing is the next big step for the realization of driverless cars, smart houses and 5G mobile telecommunications.
ANET stock is up 138% year to date, but has come off its highs in recent days. This is simply a consolidation as it prepares for another leg up. There is plenty of life left in one.
Tech Stocks to Buy: Nvidia (NVDA)
Nvidia Corporation (NASDAQ:NVDA) makes the top graphical processing units (GPUs) in the market.
And that means a lot more than graphics boards that make gaming more realistic and enjoyable.
NVDA equipment is embedded in the next generation of smart cars, buildings and houses. It’s in Big Data analysis tools. It’s in biotech labs to image drug interactions. And it’s all about massive new technologies like virtual reality and augmented reality as well as driverless cars.
Up 85% year to date, NVDA still trades at a P/E below 50. And it has miles of growth left in it.
Tech Stocks to Buy: Advanced Energy Industries (AEIS)
Advanced Energy Industries Inc (NASDAQ:AEIS) is one of those firms that most people don’t even think about. But once you realize its niche, it makes perfect sense.
Essentially, AEIS makes power conversion equipment. That means it takes raw electricity from a utility and converts it into reliable and customized power applications for a factory or other location.
It also uses its expertise in industries like solar panels, where electricity needs to be converted from DC to AC to be put onto the grid or used for machinery or equipment.
Our digital world is becoming increasingly dependent upon electricity for everything from charging our phones to running cloud computing server farms. AEIS is an integral part of that demand growth.
Tech Stocks to Buy: Solaredge (SEDG)
Solaredge Technologies Inc (NASDAQ:SEDG) builds inverters for the solar industry.
When solar panels generate electricity, as with wind, it comes from the energy source as direct current, or DC power. Homes, businesses and automobiles run on alternating current, or AC power.
An inverter changes the DC to AC so it can be used or sent back to the grid. As renewables grow, so will demand for residential and commercial inverters.
Also, SEDG is picking up business from SolarCity, which has dialed back its full-service integrated solar operations. That has allowed SEDG to grab a large chunk of that inverter business and more market share.
Up 184% year to date, it’s still trading at a P/E of 21 and has plenty of upside ahead.
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.