The U.S. stock market has now officially entered the bear territory, as all the three major indices — the Dow Jones, the Nasdaq, and the S&P 500 — have fallen over 20% from their recent highs. The stock market witnessed sharp sell-off in recent weeks, as investors fear the financial implications of the rapidly spreading coronavirus.
Amid the COVID-19 crisis, which has increased volatility in the stock market, investors are preferring holding on to cash and their propensity to invest has reduced significantly.
Nevertheless, we believe the panic sell-off has created opportunities and investors should try to capitalize on them as several stocks are now in the oversold territory. Therefore, we opine that investors should utilize their cash pile-ups to build a long-term portfolio that can generate handsome returns once the coronavirus impact cools-off.
Here, we have selected a few stocks in the technology sector, which boast a solid balance sheet to weather any economic uncertainties. Simultaneously, these stocks have strong fundamentals that support their growth prospects.
Why Invest in Tech Stocks?
We believe that the U.S. tech sector has been more resilient compared with the other sectors. The Technology Select Sector SPDR Fund (XLK) is down 18.2% from its-52-week high, while Energy Select Sector SPDR Fund, Financial Select Sector SPDR Fund, and Industrial Select Sector SPDR Fund have declined 53.2%, 26.5%, and 26.2%, respectively.
The sector’s resiliency can be attributed to the massive long-term growth prospects of tech companies. The sector remains attractive owing to continuous digital transformation. Rapid adoption of cloud computing, along with ongoing integration of AI and machine learning, has been a major growth driver.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Moreover, blockchain, IoT, autonomous vehicles, AR/VR, and wearables also offer significant growth opportunities.
Additionally, tech companies are cash rich, which provides a cushion to remain afloat amid adverse business environment. Per their latest quarterly results, the FAAMG stocks (Facebook, Amazon, Apple, Microsoft, and Alphabet’s Google) have cumulative cash and short-term investments of more than $460 billion.
Here, we have zeroed in on five tech stocks that could enrich your portfolio in 2020 and beyond.
Apart from a significant amount of cash on their balance sheets, these stocks also have a favorable combination of a Growth Score of A or B, and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities.
Intel INTC had a cash and short-term investment balance of approximately $13 billion as of Dec 31, 2019. The long-term expected EPS growth rate for the company is 7.5%. Additionally, the stock carries a Zacks Rank #1 and has a Growth Score of A. Shares of Intel are down 21.4% from its 52-week high of $69.29.
The company is likely to continue benefiting from its data-centric focus. Strong uptake of its second-gen Xeon scalable processors as well as solid demand from cloud service providers is expected to drive data centric business revenues. Intel is planning nine product releases on 10 nm this year. Moreover, it is adding 25% wafer capacity across its 14 nm and 10 nm nodes in 2020.
NVIDIA NVDA had a cash balance of approximately $11 billion as of Jan 26, 2020. This Zacks Rank #2 stock is currently trading 23.8% below the 52-week high of $316.32. Additionally, with a Growth Score of A, the long-term expected EPS growth rate for the company is pegged at 12.7%.
NVIDIA is expected to continue benefiting from solid demand for its GPUs in the gaming desktops and notebooks. Moreover, an increase in Hyperscale demand is a tailwind for this chipmaker’s data-center business. Additionally, ray-traced gaming, rendering, high-performance computing, AI and self-driving cars are key growth areas.
Atlassian Corporation Plc TEAM, a leading provider of team collaboration and productivity software, has cash and short-term investment of approximately $1.9 billion as of Dec 31, 2019. The stock is currently trading 18.1% below its 52-week high of $156.12. This Zacks Rank #2 stock’s EPS is likely to grow 22.3% in the long run. The stock has a Growth Score of A.
Atlassian is poised to grow owing to massive digitalization of work from organizations, big or small. This apart, integration with leading applications like Slack, Dropbox, and Adobe, along with partnerships with the likes of Amazon’s AWS and Microsoft, will likely expand the Atlassian paying user base.
Fortinet FTNT had a cash and short-term balance of nearly $2 billion as of Dec 31, 2019. The Zacks Rank #2 stock has plunged 32.2% from its 52-week high of $121.82. With a Growth Score of A, the long-term expected EPS growth rate for the company is pegged at 14%.
Fortinet seems to benefit from the growing threat landscape, thanks to its suite of efficient offerings. The FortiMail platform can be used to block specific file types containing certain keywords.
With the growing number of employees working from home due to coronavirus fears, the use of cloud and virtual meetings is also increasing. This is a great opportunity for the new hacking method doing the rounds to extract information and launch an attack.
Square SQ had a cash and short-term investment of $1.5 billion. The long-term expected EPS growth rate for the company is pegged at 30.8%. Additionally, the stock carries a Zacks Rank #2 and has Growth Score of B. The stock is down 33.8% from its 52-week high of $87.25.
Square is expected to continue benefiting from solid growth environment for digital payments. The company’s seller ecosystem has helped in strengthening relationship with sellers, contributing well to payment volume as well as the top-line growth. Additionally, growing adoption of its Cash App in the bitcoin space remains a tailwind for Square’s business growth.
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Click to get this free report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Intel Corporation (INTC) : Free Stock Analysis Report Fortinet, Inc. (FTNT) : Free Stock Analysis Report Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report Square, Inc. (SQ) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research