By watching the latest headlines, it’s easy to whip up a short term investment trend narrative to suit your personal taste. Is the Afghan chaos good or bad for defense companies? Will inflation increase oil stocks or miners? What are the best infrastructure titles for the trillion dollar spending bill?
But here’s the thing: Tactical investing and market timing is incredibly difficult, no matter how good a story you’re telling yourself. So why think too much, especially when the S&P 500 Index
continues to set new records every few days, with the ever-dynamic tech sector continuing to be the source of much of this success?
Read: The S&P 500 is heading towards 5,000, according to UBS. Here’s when and how.
The recent stock performance and recent earnings of these five over $ 20 billion companies prove that this sector remains a massive growth center for Wall Street, regardless of the short-term news cycle. So if you prefer proven profits over an original game based on your personal take on the headlines, here are five tech stocks to consider for their current growth and long-term potential.
In a modern digital economy, the risks of hacking and high technology remain a persistent threat. This creates a constant need for companies like $ 50 billion security giant Fortinet.
to exercise their services, probably for years to come.
The proof of this growth trend does not lie in a hysterical headline about data breaches, but rather tangible growth in profits and sales. Fortinet’s second quarter results on July 29 showed 30% year-over-year revenue growth and record free cash flow. In addition, product sales have exploded by 41% thanks to what is considered a new data center upgrade cycle, which means that these installed products will eventually be delivered via recurring revenue from service and maintenance. maintenance.
Fortinet has been around since the days of dot-coms and is sometimes overlooked by younger, more volatile cyber players who find short-term appeal. But this is not a dormant legacy tech stock; it has 12-month returns of over 140% thanks to impressive fundamentals and the long-term megatrend of cybersecurity growth. In fact, these gains make it the top performing tech stock in the S&P 500 over the past 12 months.
And with $ 3.3 billion in cash on the books and over 1,000 patents issued or pending, it’s not a stock of technology that will be easily disrupted by some of these upstart cyber companies that may also make headlines. newspapers.
This $ 560 billion chipmaking powerhouse is one of Wall Street’s biggest success stories. Nvidia’s stock has grown by more than 1,300% in the past five years. The momentum hasn’t slowed much lately, with gains of over 70% in the past 12 months.
This is because the fundamentals are just too good to ignore. From Nvidia
Second-quarter earnings report, it reported better-than-expected revenue growth of 68% year-on-year to a record $ 6.51 billion in revenue. Profits rose further, with an 89% year-on-year growth rate that also beat analyst estimates.
This follows another sales record in its first quarter report – an impressive performance despite supply chain disruptions and chip shortages that could prevent Nvidia from fully satisfying the market appetite.
Looking ahead, Nvidia still suffers from antitrust scrutiny of its $ 40 billion acquisition plan for Arm Ltd., a costly move that could make this tech stock the leading artificial intelligence company on the planet. It all adds up to a tremendous story of growth that has proven to be sustainable, regardless of the headlines or economic cycles.
Read: Nvidia’s acquisition of ARM stalled, and there’s a deadline with more than $ 1 billion at stake
Shares of the mobile payments giant founded and led by Jack Dorsey have climbed 2,100% over the past five years and continue to outperform with a gain of around 70% over the past 12 months.
And why shouldn’t investors love Square
Stock? Its most recent revenue has shown a thriving ecosystem, split roughly evenly between its point-of-sale technology and its Cash App money transfer tool which had 40 million active customers on transactions. Revenue hit a record high of nearly $ 4.7 billion, more than double the previous year, largely due to this rapid adoption.
As a result, profits have slipped dramatically into positive territory, with profits of 66 cents per share, more than triple the 18 cents a year ago and a sign that this is not a business. in loss of scale, but rather of a real profit. -generative business.
The icing on the cake: Square remains one of the seven most important holdings of the flagship fund ARK Investment managed by Cathie Wood, the ETF Ark Innovation
which currently has 4% of its $ 25 billion in assets in stock. This will provide sustained buzz and buying pressure to support the already impressive run of this title.
The high-tech sensor and analytics company Trimble
isn’t exactly a top tech stock, but with a market value of around $ 24 billion and nearly $ 4 billion in annual revenue, it’s also not a startup that burns money. . In fact, it is a leader in geospatial mapping and tracking, with close relationships with industries such as energy, agriculture, transportation, and defense.
The potential of real-time tracking and GPS related applications is huge, and recent revenues show it. Trimble just reported record second quarter revenue with a 29% year-over-year growth rate that generated 38% growth in profits and record operating cash flow. Going forward, Wall Street expects Trimble to increase sales by 10% over the next year.
Speaking of Wall Street, investors have generally been quite bullish on the stock, based on gains of over 230% from spring 2020 lows and gains of over 40% since the start of the year in 2021.
Granted, Trimble is a quirky tech stock that doesn’t have the massive scale or consumer appeal that some traders like to see. But high-tech mapping and geolocation applications are increasingly important to businesses of all shapes and sizes – and the long-term potential of this high-tech stock of technology is real.
is a mobile sensor and analytics company that brings the old-fashioned striped barcode tracking technologies that gave its name to interactive kiosks and near-field sensor applications. Anyone who has ordered take-out through a touchscreen kiosk or entered a tracking code to see where a package is can immediately understand the applications of this technology for consumers, but the real opportunities for inventory come from companies that have. an eye on the productivity inventory of management or staff.
This potential is evidenced by Zebra’s latest results, which showed 44% revenue growth. It’s pretty impressive, but even more important is the fact that the bottom line has increased 119% in one year.
Zebra quickly brings together related technological players to ensure the sustainability of its activity. The latest deals of note are the acquisition of Fetch Robotics for $ 290 million in July and one for artificial intelligence and asset intelligence firm Antuit.ai this week. This follows machine vision agreements for Adaptive Vision in May and Cortexica Vision Systems in late 2019, as well as the purchase of analytics and machine learning startup Profitech in 2019.
These deals obviously cost money, but they do ensure that Zebra truly evolves into a 21st century business analytics company – a pretty lucrative niche, if its plans come to fruition. And based on the fact that stocks have doubled over the past 12 months and continue to hit new all-time highs like clockwork, Wall Street looks bullish on Zebra’s delivery.
Jeff Reeves is a MarketWatch columnist. He does not own any of the stocks mentioned in this article.
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