Tech and gold mining companies don’t have much resemblance. Tech represents modern companies that focus on the latest innovations to drive the economy, while gold is a safe haven asset amid turbulent times.
But investors have been equally enthusiastic about both the asset classes so far this year. After all, Invesco QQQ Trust ETF (QQQ) that includes tech behemoths like Amazon, Microsoft and Netflix has seen its asset under management (AUM) climb around 14% so far in 2020.
Similarly, the SPDR Gold Shares ETF’s (GLD) AUM surged more than 30% to date, per Refinitiv data. What’s more, QQQ’s price is up 3.2% on a year-to-date basis, while GLD has gained more than 13%.
Nonetheless, these asset classes are moving upward for completely different reasons. Let’s take a look –
Even as the coronavirus outbreak has sent markets gyrating, the tech sector continues to navigate. Importantly, tech companies involved in cloud computing are positioned to gain the most as social distancing measures to contain the outbreak has increased the number of people working or learning from home.
As majority of people are remotely working or learning remotely, most of the companies need to move a bulk portion of their workloads to the cloud. To top it, consumers have developed the practice of shopping online. Thus, any consumer-oriented business needs to have a digital presence on the cloud in order to survive.
Daniel Ives of Wedbush had said that nearly $1 trillion will be spent on the cloud over the next decade, which is good news for big cloud players.
By the way, the work and study from home trend has no doubt been a boon for software vendors that provide remote working facilities like upgrading computers, peripherals and communications equipment.
Prominent among such companies are Zoom, Slack, GoToMyPC, Zoho Remotely, Microsoft Office365 and Atlassian. Internet publishers and broadcasters are also seeing a rise in demand.
Gold prices, in the meanwhile, continued to rise after the Fed unanimously trimmed the benchmark federal funds rate a full percentage point to a range of zero to 0.25% in March.
This is because lower interest rates tend to make bonds and other fixed-income investments less attractive. Thus, money flowed out of bonds and money market funds into gold.
The Fed, incidentally, trimmed its short-term interest rates to pump cash into the financial system, and help banks provide more loans to businesses and households.
The Fed acknowledged that “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States and that the effects of the coronavirus will weigh on economic activity in the near-term and pose risks to the economic outlook.”
In fact, Fed Chair Jerome Powell recently said that the coronavirus-induced economic downturn is worst since World War ll.
5 Solid Choices
In the current unsettling times, investors are more confident about the aforesaid winners. We have thus selected five stocks from such areas that possess a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Microsoft Corporation MSFT won a $10-billion cloud computing contract from the Pentagon last year. The contract helped it build one of the strongest cloud infrastructure businesses in America. And now the cloud computing business has accelerated on the coronavirus outbreak.
After all, cloud-host enterprise works solutions like Microsoft Teams product have added more than 44 million daily users around the world amid the outbreak, which is more than double of 20 million users that the company had added last November.
The Zacks Consensus Estimate for its current-year earnings has advanced 1.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.8%.
Zoom Video Communications, Inc ZM provides cloud-based platform for video conferencing that helps workers stay connected from any part of the world.
Virtual learning has picked up, and Zoom is providing the necessary platform. The Zacks Consensus Estimate for its current-year earnings has moved 4.9% north over the past 60 days. The company’s expected earnings growth rate for the current year is 22.9%.
Royal Gold, Inc. RGLD acquires and manages precious metal streams, royalties, and related interests. The company is based in Denver.
The Zacks Consensus Estimate for its next-year earnings has climbed 19.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 59.3%.
Equinox Gold Corp. EQX engages in the acquisition, exploration, and development of mineral deposits. One of the company’s principal properties is Castle Mountain situated in California, the United States.
The Zacks Consensus Estimate for its current-year earnings has risen 100% over the past 60 days. The company’s expected earnings growth rate for the current year is 231%.
Alamos Gold Inc. AGI engages in the acquisition, exploration, development, and extraction of gold deposits in North America.
The Zacks Consensus Estimate for its current-year earnings has moved up 28% over the past 60 days. The company’s expected earnings growth rate for the current year is 60%.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
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