Over the past decade, technology (tech) stocks have meant high returns for long-term portfolios. Shares of many tech businesses have done exceptionally well in the volatile days of 2020, too. Today, we will introduce seven of the long-term stocks to buy in the coming weeks.
Recent research by Stefano Ramelli and Alexander F. Wagner at the Centre for Economic Policy Research, London, U.K., on stock price reactions during the pandemic highlights, “the Telecom industry did relatively well, as the demand for services supporting work at home has skyrocketed. Pharma & Biotech and Semiconductors also performed relatively well.”
November has brought positive news from Pfizer (NYSE:PFE), BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA) on the vaccine front. There may be even more such news from other companies in the coming weeks. As a result, past several trading sessions have seen a rotation from tech darlings into cyclical stocks that would benefit as the economy improves.
Yet we can still expect robust tech shares to charge ahead in 2021. The low interest rate environment should also continue to support share prices. When analyzing a given tech stock, it would be important for investors to appreciate what creates value in the stock. Although, it is not necessarily an easy question to answer, it is an important one that helps separate hype from reality.
With that said, here are seven diverse long-term stocks with a focus on technology:
- First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR)
- O’Shares Global Internet Giants ETF (NYSEARCA:OGIG)
- PayPal (NASDAQ:PYPL)
- Roku (NASDAQ:ROKU)
- Qualcomm (NASDAQ:QCOM)
- SPDR S&P Semiconductors (NYSE:XSD)
- Twitter (NYSE:TWTR)
Long-term stocks: First Trust NASDAQ Cybersecurity ETF (CIBR)
- 52-Week range: $20.87 – $37.85
- Year-to-date (YTD) change: Up 24.35%
- Expense ratio: 0.60%
Our first choice for today is First Trust NASDAQ Cybersecurity ETF. The exchange-traded fund (ETF) provides access to firms that focus on cybersecurity, a high growth segment. CIBR stock started trading in 2015.
Recent numbers from Fortune Business Insights suggest that “the global cyber security market value stood at $112.01 billion in 2019 and is projected to reach $281.74 billion by 2027,” for a CAGR of 12.6%.
Such businesses build, implement or manage security protocols applied to private and public networks, computers and mobile devices. Without their products or services, the integrity of data and network operations could easily be compromised.
CIBR, which has 41 holdings, tracks the Nasdaq CTA Cybersecurity index. CTA stands for the Consumer Technology Association (CTA), a trade body representing the domestic consumer technology industry.
The top 10 holdings make up around 45% of net assets of $2.42 billion. CrowdStrike Holdings (NASDAQ:CRWD), Okta (NASDAQ:OKTA), Accenture (NYSE:ACN), Zscaler (NASDAQ:ZS), and Cisco (NASDAQ:CSCO) lead the names in the ETF.
Price-to-book and price-to-sales ratios are 6.43x and 3.40x, respectively. A potential decline toward $35 would improve the risk/return profile for long-term investors. Most companies in the fund will continue to push ahead with high revenue growth rates in the coming quarters, too.
O’Shares Global Internet Giants ETF (OGIG)
- 52-Week range: $20.48 – $50.38
- YTD change: Up 89.09%
- Expense ratio: 0.48%
The next discussion also centers around an ETF, namely the O’Shares Global Internet Giants ETF. The fund gives exposure to global businesses whose revenue mostly comes from the internet and e-commerce sectors. OGIG stock started trading in 2018 and total assets stand at $550 million.
OGIG, which has 75 holdings, tracks the O’Shares Global Internet Giants Index. Some 55% of the holdings are in the Top 10 stocks. In terms of sectoral allocation, Information Technology has the largest weight (37.69%), followed by Communication Services (31.17%), and Consumer Discretionary (31.09%). Amazon (NASDAQ:AMZN), Alibaba (NYSE:BABA), Tencent (OTCMKTS:TCEHY), Alphabet (NASDAQ:GOOGL), and Facebook (NASDAQ:FB) are the top the names in the fund.
In terms of country allocation, 61.07% of the firms are based in the U.S., followed by China (22.13%), Germany (6.45%) and Canada (2.0%), among others.
As the global digital transformation accelerates, robust companies with proactive management are adopting technology and moving operations online to sell to more customers directly. The past year has seen many grow revenues and expand margins fast.
If you believe the trend is likely to continue well into the future, then OGIG and the names in the fund deserve to be on your radar.
- 52-Week range: $82.07 – $215.83
- YTD % change: Up 78.12%
San Jose-based payments platform PayPal enables digital and mobile payments on behalf of consumers and merchants. Many InvestorPlace.com readers would be familiar with its range of payment solutions, such as PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant. The company was founded in 1998.
On Nov. 2, PayPal released strong Q3 results. Revenue was $5.46 billion, an increase of 25% YoY. Total Payment Volume (TPV) came at $247 billion, growing 38%. Analysts noted the metrics meant the strongest growth in revenue and total payment volume in the company’s history.
Net income was $1.02 billion, a 121% increase YoY. Non-GAAP EPS were $1.07, up 41% compared to the same period of the previous year. Free cash flow totaled $3.97 billion, growing 43% YoY.
CEO Dan Schulman said, “Going forward, we are investing to create the most compelling and expansive digital wallet that embraces all forms of digital currencies and payments, and operates seamlessly in both the physical and online worlds.”
PYPL stock’s forward P/E and P/S ratios are 43.10 and 11.26, respectively. Spending patterns during the pandemic have provided tailwinds to the company. Its diversified platform, top-line momentum, and earnings power are here to stay.
- 52-Week range: $58.22 – $265.97
- YTD % change: Up 96.52%
Our next company is also San Jose, California-headquartered. Television streaming platform operator Roku connects users to personalized streaming content, where content publishers monetize audiences and advertisers engage consumers. It has become a platform synonymous with replacing cable television.
In early November, Roku released Q3 results. Revenue totaled $452 million, increase of 73% YoY. The company reports revenue in two segments — platform and player.
Net income of $12.95 million translated into diluted EPS of 9 cents. A year ago, the metrics had been net loss of $25.16 million net loss and net loss per share of 22 cents.
CEO Anthony Wood said, “We added 2.9 million incremental active accounts in Q3 and ended the quarter with 46 million active accounts, up 43% year over year. Engagement on the platform continues to grow with Roku users streaming 14.8 billion hours in the quarter, up 54% year over year. Gross profit grew faster than revenue, up an impressive 81% year over year in Q3, to $215 million.”
ROKU’s P/S and P/B ratios are 20.82 and 27.46, respectively. The metrics show that the stock price of the leading platform stateside is not cheap. A potential decline toward $240 would offer a better margin of safety. Over the long-run, the company’s growth trajectory is intact.
- 52-Week range: $ 58.00 – $153.33
- YTD change: Up 65.51%
- Dividend yield: 1.78%
Do you own a smartphone? Then you may also want to own our next stock, San Diego-based Qualcomm. Its highly-regarded and patented technologies enable the mobile ecosystem and are found in most 3G, 4G and 5G smartphones. The group is expected to benefit from the move to 5G greatly.
Qualcomm reported FY20 Q4 and fiscal 2020 results in early November. Non-GAAP, quarterly revenue came at $$6,50 billion, up 35% YoY. Non-GAAP fiscal 2020 revenue was $21.65 billion, up 12%.
Non-GAAP diluted EPS for the fourth quarter was $1.45, up 86%. Fiscal 2020 non-GAAP EPS was $4.19 and increased 18%.
CEO Steve Mollenkopf said, “Our fiscal fourth quarter results demonstrate that our investments in 5G are coming to fruition and showing benefits in our licensing and product businesses … We concluded the year with exceptional fourth quarter results and are well positioned for growth in 2021 and beyond. As the pace of disruption in wireless technology accelerates, we will continue to drive growth and scale across our RF front-end, Automotive and IoT adjacencies.”
QCOM stock’s Forward P/E and P/S ratios are 21.19 and 7.13, respectively. Investors have been excited about the company’s results and prospects on the 5G front. We would look to buy the dips in shares. Future revenues and profits are likely to be impressive.
SPDR S&P Semiconductors ETF (XSD)
- 52-Week range: $68.95 – $152.58
- YTD change: 41.78%
- Expense ratio: 0.35%
Our next choice is another ETF, SPDR S&P Semiconductors ETF which provides exposure to U.S. chip businesses. XSD stock started trading in 2006 and has $685 million under management.
Earlier in July, the Semiconductor Industry Association (SIA) noted that global semiconductor sales increased 5.8% YoY in May with annual sales projected to increase 3.3% this year and 6.2% next year.
SIA also highlighted that the sector is “one of America’s top export industries, and a key driver of America’s economic strength, national security, and global competitiveness.” The performance of chip stocks has been the crucial catalyst behind the bull market of the past decade.
XSD, which has 37 holdings, follows the S&P Semiconductor Select Industry index. The top 10 firms comprise about 35% of the fund. SunPower (NASDAQ:SPWR), Lattice Semiconductor (NASDAQ:LSCC), Inphi (NASDAQ:IPHI), Cree (NASDAQ:CREE), and Xilinx (NASDAQ:XLNX) lead the names in the ETF.
Trailing P/E and P/B ratios are 28.48 and 5.11. Valuation metrics tend to be high in the sector and the industry is a cyclical one. In other words, our economy as well as global trends influence the fortunes of stocks in this space. Yet, the market can possibly expect robust average returns from most companies in the fund.
We’d be buyers of XSD stock in the case of a potential decline toward $120.
- 52-Week range: $20.00 – $52.93
- YTD % change: Up 39.41%
Our last stock is the San Francisco-based social media platform Twitter. A diverse range of users visit the well-known Twitter platform for self-expression and conversation in real-time. The company also owns the live streaming platform Periscope.
Twitter released Q3 results in late October. Revenue totaled $936 million, an increase of 14% YoY. Net income was $29 million, a 21% decrease. Diluted EPS slipped to 4 cents, compared to 5 cents a year ago.
Jack Dorsey, Twitter’s CEO, said, “We have grown our daily audience by 42 million in the last year as people all around the world come to Twitter to find out about the topics and events they care about most. I’m pleased mDAU (Average Monetizable Daily Active Usage) grew 29% year over year to 187 million, driven by global conversation around current events and product improvements.”
EVP and CFO Amy Hood also added, “Demand for our cloud offerings drove a strong start to the fiscal year with our commercial cloud revenue generating $15.2 billion, up 31% year over year.”
Forward P/E and P/S ratios are 49.75 and 10.23, respectively. Investors who expect digital ad spending levels to grow should add TWTR stock to their radar screen.
We would regard any short-term decline toward $40 as good opportunity to go long the shares. In terms of fundamental valuation, Twitter is possibly the cheapest name in the social media.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.