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6 Top Large-Cap Technology Stocks to Buy in Q4

Aniruddha Ganguly

Stock markets ended third-quarter 2019 in the positive territory, with the Dow Jones Industrial Average, the S&P 500 and the tech-heavy Nasdaq rising 0.4%, 0.5% and 0.8%, respectively, on Sep 30, per CNBC data.

Technology stocks, led by Apple AAPL, were among the best performing sectors in the S&P 500. Shares of the iPhone-maker gained 2.4% on positive sales commentary from CEO Tim Cook regarding new iPhones.

Overall, the tech sector has done well in the recently concluded quarter. This is indicated by the robust performance of Technology Select Sector SPDR (XLK), which has returned 1.3%, outperforming the S&P 500’s growth of 0.2% in the last three months.

Volatility to Continue in Q4

Investors had a bumpy ride in the third quarter due to several negative headlines. Some of these factors are expected to moderately impact fourth-quarter 2019 prospects. These include sluggishness in global economic growth and impeachment inquiry into President Trump.

Moreover, the impasse over the ongoing U.S.-China trade war is a major headwind. Notably, the trade talks between the two countries are now set to resume on Oct 10 in Washington. However, expectations of a resolution (temporary or permanent) are quite low.

Notably, per CNBC, Trump halted tariff hikes on Sep 11 as a goodwill gesture “following request of the Vice Premier of China, Liu He and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary.”

The tariff hikes from 25% to 30% are now expected to go into effect on Oct 15 rather than the previously scheduled Oct 1.

However, the lack of any meaningful outcome from the upcoming talks will not only raise tariffs but also increase the uncertainty that can further spook investors.

Technology’s Growth Drivers Aplenty

Technology has been one of the most bankable sectors for investors despite the volatility in the market. Given the robust growth opportunities and the involvement of technology in every sphere of life, the sector can outperform the market even when the economy is in shambles.

The sector is expected to continue outperforming owing to strong growth prospects, driven by the rapid adoption of cloud computing, AI, ML, IoT, blockchain, wearables and AR/VR.

The proliferation of IoT is facilitating connected devices and smart homes. Increasing allegiance to online gaming, music and video-streaming services also deserves a special mention in this regard.

Additionally, the accelerated deployment of 5G technology and faster-than-expected growth in robotics set the stage for more development.

Moreover, the semiconductor market is expected to bounce back in the latter part of the year. Notably, semiconductors are the building blocks of most emerging technologies, including AI and IoT.

Picking the Winning Stocks

Here, we’ve cherry picked six technology stocks that possess a large capital base, and strong fundamentals and characteristics, which help them endure severe volatility.

These stocks either sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, to narrow down the list, we have selected stocks with a VGM Score of A or B.

Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Moreover, each of the six stocks has outperformed the S&P 500 on a year-to-date basis.

Year-to-date Performance

 



Boise, ID-based Micron Technology MU currently sports a Zacks Rank #1 and a VGM Score of B. The company has a market cap of $47.70 billion. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering average positive surprise of 12.9%.

The Zacks Consensus Estimate for fiscal 2020 earnings has increased 10% to $2.75 over the past 60 days.   

Mountain View, CA-based Symantec SYMC currently has a Zacks Rank #2 and a VGM Score of A. The company recorded average positive earnings surprise of 18.6% over the preceding four quarters.

Symantec has a market cap of $14.52 billion. The Zacks Consensus Estimate for fiscal 2020 earnings has climbed 3% to $1.72 over the past 60 days.

Fremont, CA-based Synnex SNX also carries a Zacks Rank #2 and a VGM Score of A, at present. The company delivered average positive earnings surprise of 18.6% over the last four quarters. It has a market cap of $14.52 billion.

The consensus mark for the company’s fiscal 2020 earnings has moved up 3% to $2.18 over the past 60 days.

Guangzhou-based Vipshop Holdings VIPS currently carries a Zacks Rank #2 and a VGM Score of A. The company has a market cap of $5.97 billion.

Vipshop’s earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters, delivering average positive surprise of 11.2%.

The Zacks Consensus Estimate for this year’s earnings has moved up 9.3% to 82 cents in the past 60 days.

Mountain View, CA-based Alphabet GOOGL came up with average positive earnings surprise of 18.9% in the preceding four quarters. The stock currently carries a Zacks Rank #2 and a VGM Score of B.

Alphabet has a market cap of $850.07 billion. The Zacks Consensus Estimate for its 2019 earnings has inched up 0.6% to $49.61 in the past 60 days.

T-Mobile US TMUS also carries a Zacks Rank #2 and a VGM Score of B. The company came up with average positive earnings surprise of 17.9% over the last four quarters.

This Bellevue, WA-based company has a market cap of $66.27 billion. The Zacks Consensus Estimate for its 2019 earnings has climbed 1.2% to $4.08 in the past 60 days.


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