It is no secret that the information technology sector has been one of the favorites with investors. The sector has been leading the market higher and strong revenue and earnings growth rates from IT continue to draw attention. Investors are still hungry to make a profit in tech, but one could get a nose bleed as many stocks are reaching all time highs. Tech shares have outperformed other sectors by a large margin, adding value to an otherwise unexciting market. Investors put $4.7 billion into ETFs that track technology in May alone, part of a $10.2 billion influx for the year according to Jeff Cox of CNBC.
According to Stephen Grocer of the New York Times, “the rally [in IT] has come as the global economy shows signs of strain. Fears of a trade war have made investors anxious”. Investors have looked to tech stocks to be consistent money makers.
As of June 8th, Dow Jones Indices reports that IT is up 13.56% vs. the S&P 500 up 3.94% year-to-date. Many investors are becoming weary of chasing stocks after such a rally. The goal to earning a profit is to buy low and sell high. Investors often find it difficult to spot the stocks with fair prices that have great value. For investors that want to find fairly priced stocks in tech, we have listed some of the best valued opportunities. In our opinion, these stocks can still produce a notable profit. They have attractive values and should outperform both the market and peer stocks in the IT sector.
The foundation of our recommendations is to identify companies that perform best and worst on the collective basis of value, growth, EPS revisions, profitability, and LT momentum. The CressCap systematic trading model gathers data daily on 6,500 companies globally and assigns academic grades (A – F) for each financial metric. These grades are scored relative to its region/sector.
Alphabet Inc. (GOOGL-US)
It may be hard to believe, but Alphabet Inc., the parent company of google, has only edged slightly higher than the S&P 500 over the last 52 weeks, outperforming by 16.76% vs. 14.19% respectively. Google is in the business of internet-related products and services which include advertising, managing applications, and sales of digital content and hardware products. We still believe the company is a good buy in the technology sector. CressCap has a value grade on the stock of A-. Specifically, P/CF ratio at .03x compared to the sector at .25x shows the stock is inexpensive. In addition, profitability looks promising with a CressCap ranking of A+ for ROE and A for operating margin. The price action of the stock has not been stellar compared to the sector. The stock’s CressCap momentum grade is C. Largely, this could be a result of the possible 11 billion dollar fine by the EU regarding its Android Operating System. This stock is on our buy list as it possesses strong EPS revisions, holds good value, and is profitable. We view this as an opportunity to investors.