The bull run of the past decade has been headed by a large number of growth stocks. Our markets offer plenty of robust growth names, and most investors typically first look at the Nasdaq stock exchange for such companies. Nasdaq-listed assets represent a wide range of market sectors, including technology, finance, health care, utilities, as well as exchange-traded funds (ETFs). Therefore, today, we will introduce three Nasdaq stocks to buy in long-term portfolios.
Many analysts concur robust names from the exchange have the best prospects for outperformance. The Nasdaq Composite comprises almost all stocks listed on the Nasdaq. To be included in the composite index, a stock must be listed exclusively on the Nasdaq stock market. It should also be a common stock (i.e., not a preferred stock). ETFs are not included in the composite, which currently hovers around 12,500 and is up about 40% year-to-date (YTD).
Another index that gets daily attention is the Nasdaq-100, which comprises shares of 100 of the largest non-financial companies listed on the Nasdaq stock exchange. YTD, it is up about 44%.
By comparison, three other indices that are widely followed are the Dow Jones Industrial Average (up 6% YTD), the S&P 500 (up 14% YTD) and the Russell 2000 (up 17% YTD).
With that information, here are three of the top Nasdaq stocks to own in 2021:
- Activision Blizzard (NASDAQ:ATVI)
- Nasdaq (NASDAQ:NDAQ)
- VictoryShares Nasdaq Next 50 ETF (NASDAQ:QQQN)
Nasdaq Stocks: Activision Blizzard (ATVI)
52-week range: $50.51 – $87.73
YTD % change: 45.64%
Dividend yield: 0.48%
Santa Monica, California-based Activision Blizzard is one of the leading developers and publishers of interactive entertainment content, such as games and e-sports. The company operates under three main segments — Activision Publishing (Activision), Blizzard Entertainment (Blizzard) and King Digital Entertainment (King).
In late October, the group released Q3 metrics. GAAP net revenues were $1.95 billion, compared to $1.28 billion in 2019. Investors noted the increase in revenue from digital channels, which were $1.75 billion. A year ago, they had been $1.01 billion. The group credited content launches and high levels of audience reach and engagement for the overall increase in revenue.
For instance, revenues in the Activision segment were up 270% year-over-year, thanks to its franchises, including Call of Duty: Modern Warfare, Call of Duty: Warzone and Tony Hawk’s Pro Skater.
GAAP earnings per diluted share (EPS) were 78 cents, showing a considerable increase from 26 cents a year ago. Management raised full-year EPS guidance to $3.08 on revenue of $7.68 billion. The previous outlook had been $2.87 EPS on $7.3 billion revenue.
Activision pays attention to three strategic growth drivers: audience reach, engagement and player investment. Analysts were pleased to see that they all contributed to robust metrics. As more people stayed at home during the year, the company benefited from the shift to the “entertainment-at-home” trend.
CEO Bobby Kotick cited, “Today, we’re in a position to deliver sustained and significant long-term expansion across our portfolio of fully owned franchises. As we execute against our content pipeline, extend our key franchises to mobile, introduce new free-to-play experiences and continue to optimize in-game operations, we are positioned to continue converting our growing agent into consistent and long-term revenue and earnings growth.”
ATVI stock’s forward price per earnings (P/E) and price per share (P/S) ratios are 24.57 and 8.48, respectively. Given the recent run up in price as well as the relatively overstretched valuation metrics, short-term profit-taking is likely in the shares. Potential investors could eye $77 as a potential entry point that would offer a better risk/return profile.
52-week range: $71.66 – $139.50
YTD % change: 19.28%
Dividend yield: 1.58%
Our next stock is the stock exchange itself, which provides a range of trading, clearing, data and public company services. Nasdaq started operating in 1971, as the world’s first electronic stock market.
In October, the exchange operator announced Q3 results. Net revenues were $715 million, an increase of 13% YoY. Revenues in the non-trading segments went up by 12%, while market services revenues increased 15%, mainly due to increased trading volumes in U.S. equities and options.
Non-GAAP net income was $256 million, compared to $212 million in 2019. Furthermore, non-GAAP diluted EPS was $1.53, up 20% from $1.27 in Q3 a year ago. As of Sept. 30, Nasdaq’s cash and equivalents stood at $584 million and total debt was $3.6 million.
Michael Ptasznik, executive vice president and chief financial officer, said, “we continue to execute on our capital plan, including investing in infrastructure, deploying capital in attractive long term opportunities as well as delivering on our dividend growth and share repurchase objectives through the return of $425 million to shareholders during the first nine months of 2020.”
In fact, in Q3, Nasdaq returned $115 million to shareholders through share repurchases and dividends. NDAQ stock’s forward P/E and P/S ratios are 20.58 and 4.01, respectively. Investors should look to buy the dips in this important and innovative stock exchange.
VictoryShares Nasdaq Next 50 ETF (QQQN)
52-week range: $24.87 – $30.40
YTD % change (since Sept. 10): 22.01%
Expense ratio: 0.18%, or $18 annually on a $10,000 investment
Our final discussion centers around an exchange-traded fund — the VictoryShares Nasdaq Next 50 ETF. The fund, which started trading in early September 2020, gives access to 50 stocks that are next in line for inclusion in the Nasdaq-100 index. In other words, there are no financial companies included. The fund regards its holdings to be at the forefront of technological development and innovation that will likely impact our lives in the coming years.
The top 10 names make up around 32% of net assets, which total more than $104 million. Trade Desk (NASDAQ:TTD), Roku (NASDAQ:ROKU), CrowdStrike (NASDAQ:CRWD), Okta (NASDAQ:OKTA), Atlassian (NASDAQ:TEAM), Marvell Technology (NASDAQ:MRVL) and Peloton (NASDAQ:PTON) are among the leading names in the ETF.
In terms of sectoral allocation, information technology, health care, industrials and consumer discretionary are included. As a young fund with limited trading history, QQQN deserves to be on your radar. We are likely to hear the names of many of these firms increasingly more in the coming quarters.
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.