[Editor’s note: “7 Tech Stocks to Buy That Are Also Perfect for Retirement” was previously published in November 2019. It has since been updated to include the most relevant information available.]
If you’re like many people, when you think about the best stocks to buy in the technology sector, you immediately conjure up growth names. More to the point, you’re dialing up speculative upstarts.
These publicly-traded companies could change the world as we know it. Or, they could end up like so many poorly planned cryptocurrency-related projects.
I’m not just speaking subjectively or through narrow, anecdotal examples. For example, the average employee age in some of the top companies in Silicon Valley is 30 years or younger.
This dynamic doesn’t give a lot of room or time for people to break into this industry. Thus, many sector investments are marketed as stocks to buy now. After all, who knows what’s going to happen tomorrow with these “opportunities.”
At the same time, tech is such a broad market. While the sexy, flash-in-the-pan stuff grabs headlines, those with longer-term outlooks (such as retirees) have many options here. In fact, some of the best stocks to buy now are intricately tied with technology.
Sure, you can go with the more traditional names associated with retirement strategies. However, tech firms appeal as some of the best stocks in the markets because they’ll likely be relevant. For instance, I’m not 100% sure that car manufacturers will represent a good investment 20 years down the line. But companies that specialize in automotive sensors and optics? That’s a no-brainer!
So with that, let’s take a look at the seven best stocks to buy in tech that are also perfect for retirement.
International Business Machines (IBM)
Peruse the internet and you’ll come across several ideas pitching best stocks to buy in tech. International Business Machines (NYSE:IBM), despite its legacy as a top-tier innovator, doesn’t rank highly today. That’s hardly surprising given its troubles competing with younger rivals. Also, IBM stock hasn’t exactly inspired prospective buyers.
That said, IBM currently sports a robust 4.45% dividend yield, which certainly catches the eye. The common criticism, though, is about sustainability. To be sure, Big Blue has had difficulty transitioning to the new tech environment. But what I like here is that management isn’t laying down. Instead, they’re embracing the challenge.
Consider the $550 million partnership between IBM and Vodafone (NASDAQ:VOD) to address the wholesale transition to connectivity, the cloud and artificial intelligence. The company already has a head start in the latter segment with its Watson platform. It has evolved from a Jeopardy! gimmick to a full-fledged AI system.
In many ways, telecom giant AT&T (NYSE:T) is emblematic of the U.S.: it’s big, bold and has wide-ranging problems.
Sure, T stock initially attracts investors, particularly those planning for retirement, due to the very generous 5.52% dividend yield. However, like our country, AT&T is saddled with an unprecedented amount of debt.
Most conservative investors look at that and take a beeline for the door. Further adding to the troubles, management has made some business-deal whoppers, and I’m not speaking positively.
As a result, AT&T has ramped up its already massive debt, and due to telecom competitiveness, has few growth opportunities.
But just like America, you wouldn’t choose to live anywhere else. Here’s the bottom line: breaking into the elite levels of telecom is next to impossible. AT&T levers the massive infrastructure necessary to make the technologies of tomorrow possible. Thus, you can trust this company as one of the top tech stocks to buy for retirement.
Digital Realty Trust (DLR)
For some of the best stocks to buy for retirement are real-estate investment trusts like Digital Realty Trust (NYSE:DLR).
By law, these investments are obligated to distribute 90% of taxable income to shareholders. Currently, DLR stock sports a dividend yield of 3.51%.
But what does a REIT have anything to do with tech stocks? The answer is that Digital Reality specializes in housing massive data centers and servers. As our increasingly connected economy moves toward the cloud, the space necessary to store hardware comes at a premium.
Because of this dynamic, DLR really sells itself among tech stocks to buy. Barring extremely unusual circumstances, the digital economy will continue to centralize hardware needs to specialized warehouses. Therefore, we can expect to see increasing demand, making this a safe pick well into the future.
Texas Instruments (TXN)
Tech stocks levered toward the semiconductor industry have generated headlines recently, and for the most part, not the good kind.
Geopolitical pressures with on-again-and-off-again tensions between the U.S. and China have pressured tech firms. Even the usually reliable Texas Instruments (NYSE:TXN) has felt some heat recently.
But if you’ve got a long-term outlook with your stocks to buy, I wouldn’t get discouraged by Texas Instruments. In fact, quite the opposite: Texas Instruments is likely experiencing a temporarily bearish reaction due to the negative print. On their side, though, TXN is straight-up flying, presenting a solid beat for its fourth quarter of fiscal 2018 earnings report.
TXN stock also has a viable path forward once we work out this geopolitical mess. Order volume for its next-generation 5G-network related products is increasing, which is hardly surprising given the company’s sector leadership position.
Iron Mountain (IRM)
Admittedly, Iron Mountain (NYSE:IRM) isn’t the most appealing name among the best stocks to buy in tech. Certainly, it doesn’t attract conservative-minded investors who are seeking companies for retirement-planning purposes.
Over the last few years, IRM stock has gyrated between ecstasy and despair. Generally, though, shares have tilted negatively.
So why mention IRM stock? Fundamentally, the underlying tech firm has an extremely relevant business. Currently, the organization emphasizes its cloud-computing and data-server divisions, in addition to cybersecurity. With high-profile digital data breaches occurring with alarming frequency, it’s not rocket science to understand why IRM is important.
In addition, I think investors tend to overlook its legacy businesses, including physical-document destruction. This seems like an anachronistic sector, yet companies keep paper records for security and as back-ups. When they no longer need these sensitive documents, IRM provides the scale to service this demand efficiently.
Speaking of physical documents, this is a great segue to discuss 3M (NYSE:MMM). Inarguably, 3M’s biggest claim to fame is its ubiquitous Post-it Notes.
Simple and yet shockingly effective, a small piece of paper with a sticky end catapulted this organization to worldwide recognition. And in this dizzying pace of digital innovation, 3M stock is still relevant.
How so? Consider what happens when technology fails. It’s actually alarming how easy it is for our digital networks to collapse on a moment’s notice.
Failure can stem from individual mistakes, such as dropping and breaking a device to infrastructural disasters, such as blackouts. In all these cases, the only alternative is “analog technologies,” which 3M specializes in.
Beyond that, 3M has solutions for a wide range of industries, including electronics, communications, healthcare, even mining. Given this broad coverage, it’s almost impossible for MMM stock not to be relevant in the future. And if you’re still not convinced to put 3M on your list of best stocks to buy, just look at its 3.61% dividend yield.
American Tower (AMT)
American Tower (NYSE:AMT) stands out, both as a viable name in tech, as well as one of the best stocks to buy now. However, on the surface, it doesn’t seem that way.
With the underlying firm specializing in cell towers, AMT stock wouldn’t seem to get much mileage in the 5G era. After all, 5G uses shorter waves that don’t require the company’s hulking behemoths.
But that thinking isn’t quite right. For starters, the 5G rollout won’t begin in earnest until next year. And even then, we’re talking relative baby steps. Businesses and residential communities must transition to the new platform, which requires upgrading physical components. As a result, we’ll still have substantial use for 4G technology. That’s why AMT is one of the stocks to buy now.
But once 5G does start transitioning broadly, AMT is still relevant. Due to its prior-generation wireless projects, the company has valuable real estate to accommodate 5G-specific transmitters. And don’t forget that American Tower has a dominant presence worldwide. Developing nations will take time to catch up, providing more opportunities.
As of this writing, Josh Enomoto was long AT&T stock.