As we head into 2021, some sectors will grow (electric vehicles), some will shrink (petroleum stocks) and some are rock solid (the fabulous writer sector, where one hot property sports the initials LC. Hint, hint … HINT!)
Yet when considering the best tech stocks to buy, we enter a sector where the sea changes will float a whole lot of investor boats. And no wonder. Tech nerds have held forth that so far, the novel coronavirus pandemic has packed years of adoption and advances into nine short months.
Who stands to gain as a new year begins and high tech continues its march towards artificial intelligence and automated everything? Here we offer these eight best tech stocks to buy:
- Microsoft (NASDAQ:MSFT)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Oracle (NYSE:ORCL)
- Amazon (NASDAQ:AMZN)
- Advanced Micro Devices (NASDAQ:AMD)
- Apple (NASDAQ:AAPL)
- Zoom Video Communications (NASDAQ:ZM)
- Fortinet (NASDAQ:FTNT)
You’ll notice some very familiar and relatively unknown names in this roll call. But when it comes to the potential for investor gains, they all compute.
Best Tech Stocks to Buy: Microsoft (MSFT)
Remember when Microsoft’s Steve Ballmer was bumbling his way to the crown of world’s worst CEO? Back then, MSFT stock was about as cool as owing a slide rule and cheap plastic protractor.
Things couldn’t be more different today. After six years under the capable leadership of Satya Nadella, MSFT stock is once again a high-tech darling. It finished 2020 up 40%, which has added another chapter to a most remarkable feat. That is, MSFT stock has had an uninterrupted run upwards for at least five years.
There’s hardly any reason to expect the trend will stop. With MSFT’s aggressive movement into cloud computing and a year’s worth of earnings beats behind it, analysts are gleeful in their enthusiasm. An astounding 28 of 32 call MSFT stock a buy, with two more calling it overweight.
One caution surrounds GOOGL stock heading into 2021 and that centers on possible antitrust action by the federal government. Yet so far those amount to just rumblings. It’s Facebook (NASDAQ:FB) that sits in the crosshairs of the Federal Trade Commission as of Dec. 9, and my guess is that the D.C. suits will want to win that big case before seeking other high-tech targets.
Yes, Alphabet is gargantuan. For a brief spell it was the world’s most valuable company and the current market capitalization of $1.2 trillion is simply incomprehensible. Is it really one of the best tech stocks to buy? Look at it this way. If co-founders Larry Page and Sergey Brin stood on a street corner and gave out as many $100 bills as they possibly could, they’d need several dozen lifetimes to do it.
The 25% share price gain in 2020 actually makes GOOGL stock look a tad stodgy alongside some of the year’s upstart tech success stories. But over the long haul, few companies on Earth (or Google Earth for that matter) can say they’ve been seen their stock go up for 15 out of 16 years. The curve looks like a mountain slope, people. Why not join your Mountain View, Calif. besties on the climb?
Oracle co-founder Larry Ellison owns his own Hawaiian island. Will those who hold ORCL stock fair even a fraction as well? I believe so. In 2020, Oracle shares jumped 20%. That’s quite the way to celebrate a move to Austin, Texas, which the company announced in December.
As an old-school name in Silicon Valley tech, Oracle has proven its staying power. But it’s tasked with showing it can keep up with a sector where change has accelerated at unprecedented rates. To that end, Oracle shifted its business model in 2020 from database software licensing and maintenance to a subscription-based software model linked to cloud computing.
That it performed so impressively during the restructuring speaks volumes. Oracle has beaten analyst projections on earnings per share for each of the last four quarters. Earnings per share for ORCL stock are also expected to jump 28% over the next two quarterly reports.
At this point, putting AMZN stock among the best tech stocks to buy puts me in the running for the “InvestorPlace Stating the Obvious award.” But as this piece spotlights the best, I must put my best foot forward, lest I put it in my mouth for betting on some less deserving upstart. Here’s salient fact No. 1: Amazon benefitted from the novel coronavirus pandemic in ways that only advanced its formidable grip on e-commerce. And yes, Amazon is a tech company as well given the ascendance of Amazon Web Services.
Fact No. 2: Amazon has a market capitalization of $1.6 trillion. That surpasses Alphabet. Percentage-wise, it’s not all that far behind Apple, the world’s most valuable company at $2.26 trillion. Third: AMZN stock soared 71% in 2020, a fabulous achievement for a company that’s grown so big. So what does 2021 hold that even Prime can’t deliver?
Plenty. More that 85% percent of analysts covering Amazon — 42 out of 49 — call AMZN stock a buy. In December, the company also announced that had inked a multi-year deal with ViacomCBS (NASDAQ:VIAC) to put its entire global broadcast TV operations into the Amazon Web Services cloud. If Jeff Bezos were to laugh all the way to the bank, he’d die laughing.
Advanced Micro Devices (AMD)
It would be fitting to think of Advanced Micro Devices as the little brother to Intel (NASDAQ:INTC). The founders of both companies left the legendary Fairchild Semiconductor to launch their enterprises in the late 1960s. But in 2021, these chips off the Fairchild block couldn’t stand on more dissimilar turf.
Intel may be huge, but so are dinosaurs. Its shares stumbled to a 17% loss in 2020, while the S&P 500 finished up 16%. AMD stock, by contrast, went up 90% By contrast? That’s a big honking contrast.
No doubt that AMD stock ranks among the best tech stocks to buy because of a helping hand from a 200-ton gorilla. Amazon, through its AWS arm, expanded its AMD offerings with the new graphics-focused Amazon Elastic Compute Cloud. Elastic fantastic for AMD shareholders, you might say.
As the world’s most valuable company, Apple can do pretty much anything it wants. AAPL stock is unstoppable. With its $2.2 trillion value, I believe that even if it announced the start of a subsidiary with the express purpose of losing money, investors would get excited enough to help it make money and make themselves money in the process. Yup. That’s what I think. Care to take the opposite side?
For its fiscal fourth quarter 2020 ending Sept. 26, Apple set all-time records for Mac revenue and services. In conjunction with the Q4 earnings report, CFO Luca Maestri noted that Apple finished its fiscal year with “new all-time records for revenue, earnings per share, and free cash flow.”
Yes, AAPL stock is one of the best tech stocks to buy. Ever. Its iPhone and MacBook Pro products, which you’d have thought would’ve bored consumers long ago, continue to sell as fast as they’re made. (Current backorders on the latest 13-inch MacBook Pros, with Apple’s new M1 chip, have extended for two months or more.)
Zoom Video Communications (ZM)
Maybe that brain-sucking phenomenon known as “Zoom fatigue” set in on ZM stock investors, too. After a nothing-but-uphill run in 2020, Wall Street set the bear loose and shares fell a whopping, walloping 41% between Oct. 19 and Jan. 1. If you ask me, two forces worked against the company: profit taking and investor sentiment that videoconferencing would collapse once the novel coronavirus was licked. And that’s about to happen, huh, eh, uhm, errr … any day now?
Nope. And here’s what else to “nope” about: Even if the rosiest projections were met and Covid-19 came under control by mid-2021, that’s not about to stop the move many companies have made to use video meetings in lieu of, say, spending untold thousands on prime office space, hefty utilities and bad break room coffee. Zoom is here to stay. It’s profitable. And ZM stock deserves a place on the best tech stocks to buy list because it killed it with analyst projections for all of 2020.
Once investors have realized they overreacted, the stock will come back. Not all analysts are convinced, but it remains firmly overweight and with a consensus share price target of about $490. If ZM stock hits that mark, it will rise 40%. Not something to dismiss — even if you want to stay off screens for a week.
Brash hackers across the globe are leading our IT heroes on an endless game of Whac-A-Mole. Witness the recent massive software breach by Russia on multiple U.S. government agencies. Cybersecurity companies will be more vital that ever in the new year and among them, Fortinet has the stuff of a white-hat winner. That makes FTNT stock one to watch and worth a place on our best tech stocks to buy list.
With shares up by a third in 2020, Fortinet had an easy go of it beating analyst forecasts all year long. A fourth quarter 2020 earnings report, expected on Feb. 4, could go a long way to cementing FTNT stock’s solid performance. The consensus earnings-per-share target is 24% higher than that for Q3, so it could be a tough one to hit. That said, nothing seems to stand in the way of that achievement.
FTNT stock also deserves consideration in light of its sector. It’s difficult to appreciate just how much changes in terms of cybersecurity needs. It has become a daily reality, with permanent acceleration a fact of life as cyber-thieves become more relentless and resourceful. If it helps, consider that Gartner just rated Fortinet one of its top “Magic Quadrant” leaders in a technology called SD-WAN (an acronym for software-defined networking in a wide area network). Investor magic should soon follow.
On the date of publication, Lou Carlozo held long positions in ZM and AMD.