How To Recognize The Right US Tech Stocks To Invest In

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Tech stocks can generate high-end profits if chosen correctly. Besides FAANG, NortonLifeLock, Fastly, CoreLogic, etc., stocks are the best bets of 2020.

The stock market is volatile. But with the advancements of tech industries around the globe, the stock market has seen a surge of tech stocks dominating the US market.

Given the current pandemic situation worldwide, tech stocks have shown a resilient nature even with severe economic downfall. That said, people like to invest in tech stocks as a safer bet. If you are new to investing in the stock market, you may find it challenging to understand all the jargon of AI, cloud computing, cyber-security, etc.

Once you get familiar with all these, you will understand these tech sectors’ dominance and identify strong tech stocks.

Here, we will briefly discuss what to look out for in a tech stock & which tech stocks are safer to invest in.

What Are Tech Stocks?

Tech stocks are those stocks that incorporate software, hardware companies, streaming platforms, cloud computing service providers, wireless connections, and the internet of things, etc. Any organization that sells service or products related to some sort of technology is a tech company.

Tech stocks are one of the most promising sectors to invest in as they generate high returns over an extended period.

Because of the growth of tech industries and related stocks, plenty of financial advisors and researchers provide updates about which stocks to invest in. Jeff Brownstone Research is one such research firm, and you can learn more about their services and credibility from Jeff Brown’s new research service reviewed article.

The Renowned Tech Giants & FAANG Stocks

If you are just beginning to invest, naturally, it will feel safer to invest in safe stocks. Investing in existing established tech giants can be a good option in this case.

The deep economic moats advocate the cause of investing in these tech stocks. Their long time existence also bolsters their credibility and makes it safer to invest in them.

These tech giants are the leaders of cloud computing & software companies. Adobe Inc, Microsoft Corporation, NVIDIA Corporation, etc., are such tech titans that control the share market. Their high-end return over the long haul has made them reach the apex in tech stocks.

Stats show that Adobe & Microsoft has seen a 1479% & 715% increase in share prices over the last decade. After coming into the spotlight in 2000 with GPU manufacturing, NVIDIA has seen a staggering rate of 3960% rise in their stock values.

FAANG are the top five tech stocks that have been ruling the tech sectors for quite a while. These five companies are Facebook, Amazon, Apple, Netflix & Google. These five stocks have maintained their upward trajectory in generating profits constantly.

Investing in these industries, even in this pandemic situation, can be a favorable decision.

Factors To Identify The Right Tech Stocks

While calculating the investment return can be a good idea before investing, you also have to look out for some specific criteria for investing in tech stocks-

P/E Ratio

P/E ratio means price-to-earnings. It is the parameter to evaluate the big tech companies. You need to divide the stock price by per-share earnings to find out the P/E ratio. Renowned tech companies have a higher P/E ratio compared to the S&P 500’s 28 points.

DBNE Rate

Dollar-based-net-expansion (DBNE) value is crucial to measure the younger tech companies’ worth. These companies are still emerging & thus, their P/E ratio won’t be much higher than the tech giants.

That said, for these companies calculating revenue growth is the go-to option.

A 120% DBNE value means people invest 20% more in a particular company than they did last year.

P/S Ratio

P/S ratios are the price-to-sell ratios that determine the startup companies’ worth as they have not started making profits yet but are breaking through the share market & hold a promising future.

Five tech stocks to invest in 2020

As 2020 has not been an excellent time for the share market because of the global pandemic, people are still investing in profitable tech stocks & seeing a gross profit margin that exceeds the share market’s benchmark index.

That said, let’s take a look at which tech stocks have shown resilience to the extreme economic condition of 2020 & come out on top:

1. NortonLifeLock Inc

NortonLifeLock stock offers cybersecurity, ensures online privacy, and protects electronic devices & home networks. With the lockdown situation across the world, people stay more at home & work from home online. That has increased interest in online and cybersecurity. NortonLifeLock’s security policy has gained the trust of millions & seen a 3.3 P/E ratio over the last 12 months.

Besides, school going kids & parents are now more concerned about cyberbullying, online predators, cyber threats & viruses.

2. Salesforce.com Inc

Salesforce is a software company that develops & designs cloud-based enterprise software. The company provides software to the customers & developers to build & run business applications.

Salesforce has seen a whopping 2490% EPS growth for the most recent quarter of this year.

3. CoreLogic Inc

CoreLogic company works based on information analysis. They provide mortgage valuation services along with property tax-related services to the government & business clients. In 2020 the company has reported a 16.2% YOY (year-over-year) net revenue as the income rose astonishingly.

4. Fastly Inc

Fastly is a cloud-computing service provider who works primarily for websites & mobile applications. Their other services are edge computer technology, streaming solutions, image optimization & security. Fastly has received a total of 248.7% total return over the last 12 months.

Besides emerging as one of the most successful stocks of 2020, Fastly has made a joint partnership with Signal Science, primarily a web application security company. By sealing this deal, Fastly can provide strong security tools to its customers, increasing their revenue-generating trajectory.

5. Enphase Energy Inc

Enphase Energy is a solar energy providing company. It distributes solar energy cells & monitory equipment to large installers, homeowners & manufacturers.

They have also managed an astounding figure of 322.3% total return over the last 12 months.

Final Thoughts

Although tech stocks have high aspirations of success, the tricky part is to figure out accurately the growth trajectory of these stocks. Always keep in mind that a good tech stock’s characteristic is to trade at a reasonable valuation, given its growth prospects. Invest in a tech stock when you feel confident about it.