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The Zacks Analyst Blog Highlights: Rocket Fuel, Sierra Wireless, Ichor Holdings, KEMET and Scientific Games

Zacks Equity Research

For Immediate Release

Chicago, IL –March 09, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Rocket Fuel Inc. (NASDAQ: FUEL – Free Report ), Sierra Wireless, Inc. (NASDAQ: SWIR – Free Report ), Ichor Holdings, Ltd. (NASDAQ: ICHR – Free Report ), KEMET Corporation (NYSE: KEM – Free Report ) and Scientific Games Corporation (NASDAQ: SGMS – Free Report ).

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Here are highlights from Wednesday’s Analyst Blog:

5 Terrific Tech Stocks to Boost Your Portfolio Returns

Even as the record busting market rally takes a pause, it may be a good time to take stock of the factors powering it in the first place. Initially met with trepidation, Trump’s electoral victory infused new vigor into the bourses. His promises to reduce taxes and regulatory requirements have been greeted with great enthusiasm by industry at large, helping to propel stocks higher.

Going by current performance, it seems tech stocks have come out ahead of all others during the rally. Despite concerns regarding overvaluation; bright prospects, upbeat earnings and strong economic conditions are helping the sector climb higher. Picking tech stocks seems to be a lucrative proposition at this point. This is especially true for those which are among the top gainers during this period.

Leading S&P 500 Sector YTD

The Technology Select Sector SPDR XLK has gained 9.1% year-to-date, emerging as the leading gainer among the 10 S&P 500 sectors. In comparison, the S&P 500 itself has gained 5.8% over the same period. The technology heavy Nasdaq has gained 8.4% during the year-to-date timeframe.

Tech heavyweights have been powering gains for the sector. In particular, FANG stocks have notched up average gains of around 13% year-to-date, adding $155 billion to their collective market value. On an individual basis, Facebook, Amazon, Netflix and Alphabet gained 19.3%, 12.8% 14.2% and 7.4%, respectively during the year-to-date period. Apple has gained more than 20% over the same period.

Trump’s Victory Provides Boost, Outlook Bright

On the campaign trail, Trump promised to cut taxes, reduce regulations and allow the repatriation of corporate funds held overseas. The tech sector is likely to be a major beneficiary of such policy changes, given that several tech heavyweights have substantial funds parked overseas. Meanwhile, the promise to cut corporate tax rates from 35% to 15% is likely to increase the attractiveness of the U.S. as a business destination and free up funds for investment purposes.

Tech companies are likely to utilize such surplus funds to invest in key trends which are dominating the sector’s landscape. This includes areas such as the Internet of Things (IoT), cloud computing and automation of production facilities. The IoT phenomenon has necessitated the rapid introduction of related devices across homes, workplaces and production facilities, leading to an unprecedented increase in the demand for computing power needed to collate and analyze such data.

Meanwhile, market research company IDC has estimated that expenditure on cloud computing will increase by 21.5% up to 2020. This is nearly seven times higher than average projected spending on information technology as a whole.

What’s Offsetting Valuation Concerns?

With the market rally continuing over a considerable period of time, valuation multiples of nearly all major sectors are lingering near their long-term averages. In the case of technology, the price to sales TTM is at 3.12, well above its median value of 2.46 and extremely close to its five year high of 3.15. Only in a 10-year timeframe is a favorable comparison available, since in this case the high is at 13.24.

But investors have been ignoring this lingering fact and have chosen to focus on recent positives. For instance, the sector delivered stellar fourth quarter earnings growth. As of Feb 17, total earnings for tech companies making up 88.5% of the sector’s total market cap were up +8.7% from the same period last year on +6% higher revenues, with 74.1% beating EPS estimates and 74.1% beating revenue estimates.

Among the encouraging earnings results have been those from semiconductor companies. The likes of Broadcom, Applied Materials and Skyworks Solutions have all posted upbeat earnings results or released positive projections for the future. On Feb 3, shares of Micron gained 3.5% after it raised its forecast for 2017 on rising demand for its memory chips.

Our Choices

Despite the brief hiatus, stocks are likely to move northward shortly. The fundamental catalysts behind market gains, especially economic strength, remain firmly in place. In such a situation, it is likely that the tech sector will take the lead once again since there are several factors working in its favor.

Adding tech stocks to your portfolio, especially those which have gained substantially in recent times, seems to be a prudent option at this time. However, picking winning stocks may be difficult.

This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

Rocket Fuel Inc. (NASDAQ: FUEL – Free Report ) is a leading provider of artificial intelligence advertising solutions for digital marketers.

Rocket Fuel has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 12.9% for the current year. Its earnings estimate for the current year has improved by 20.6% over the last 30 days. The stock has returned 82.5% year-to-date, outperforming the Zacks Internet - Software Market sector, which has gained 6.1% over the same period.

Sierra Wireless, Inc. (NASDAQ: SWIR – Free Report ) is a leading provider of intelligent wireless data communications products.

Sierra Wireless has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Its earnings estimate for the current year has improved by 63.3% over the last 30 days. The stock has returned 82.5% year-to-date, outperforming the Zacks Wireless Equipment Market sector, which has lost 4% over the same period.

Ichor Holdings, Ltd. (NASDAQ: ICHR – Free Report ) is engaged in the design, engineering and manufacturing of critical fluid delivery subsystems for semiconductor capital equipment.

Ichor Holdings has a VGM Score of B. The company has expected earnings growth of 32.8% for the current year. Its earnings estimate for the current year has improved by 1.3% over the last 30 days. The stock has returned 72.2% year-to-date, outperforming the Zacks Electronics - Semiconductors Market sector, which has gained 15.3% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KEMET Corporation (NYSE: KEM – Free Report ) along its subsidiaries is the world's largest manufacturers of solid tantalum capacitors and one of the world's largest manufacturer of multilayer ceramic capacitors.

KEMET has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The stock has returned 71.2% year-to-date, outperforming the Zacks Electronics - Miscellaneous Components Market sector, which has gained 10.9% over the same period.

Scientific Games Corporation (NASDAQ: SGMS – Free Report ) is the leading integrated supplier of instant tickets, systems and services to lotteries, and the leading supplier of wagering systems and services to pari-mutuel operators.

Scientific Games has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 35% for the current year. Its earnings estimate for the current year has improved by 6.6% over the last 30 days. The stock has returned 54.3% year-to-date, outperforming the Zacks Computer - Services Market sector, which has gained 2.3% over the same period.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

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This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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Rocket Fuel Inc. (FUEL): Free Stock Analysis Report
 
Sierra Wireless, Inc. (SWIR): Free Stock Analysis Report
 
Ichor Holdings, Ltd. (ICHR): Free Stock Analysis Report
 
Kemet Corporation (KEM): Free Stock Analysis Report
 
Scientific Games Corp (SGMS): Free Stock Analysis Report
 
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