These days, technology is everywhere and its influence goes far beyond the way we work, communicate and shop. Technology governs our utilities, healthcare, education, travel, and virtually everything we can think of. In fact, tech has changed the way we think. Because tech is such an integral part of modern life, tech stocks are worth considering for any well-diversified investment portfolio. Here’s our guide on how to choose the best tech stocks for you.
How to Pick a Good Tech Stock
The best tech stocks to buy lead price performance in their respective industries. As with any stock, you should look for strong fundamentals when choosing tech stocks.
However, no industry evolves as fast as tech. Products or services that were revolutionary a few years ago can rapidly become outdated. There are also promising technologies that appear poised to take off, but never gain traction with consumers or businesses.
Where tech stocks differ from other types of securities is that the industry is often hard for the layperson to understand. In fact, most analysts do not have the capability to truly decipher emerging tech stocks. If you are in the tech industry, that is a huge advantage in understanding the complexities inherent with many tech stocks. That doesn’t mean someone unfamiliar with quantum mechanics and number theory should not invest in tech. One place to start is by looking at blue-chip tech stocks.
When looking at any stock, it’s important to consider factors such as its price, earnings ratio, and how it fits into your overall portfolio. All of these can be done using stocks screeners. Find out as much about the company as you can. And most importantly, learn how to read stock charts so you can see the performance of a stock and learn to predict emerging trends.
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Consider FAANG Stocks
FAANG stocks refer to the top tech companies, the household names of Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOGL) (Alphabet became Google’s parent company in 2015, fitting nicely into the FAANG acronym). Not only are these among the largest companies on the planet, but they dominate their markets completely and are familiar to anyone using the internet. FAANGs make up 15% of the S&P 500.
The FAANGs, however, are far off their peak valuations. Netflix, for instance, closed at its all-time high on January 21, 2021, at $586.34. On June 4, 2021 it closed at $494.74. As the pandemic eases, people have entertainment options beyond staying home and watching TV. That could affect the company’s future share price. For example, Amazon reached its all-time high of $3,531.45 on September 20, 2020, closing at $3,401.46 on June 25, 2021.
Best Tech Stocks to Invest In
There are a number of tech stocks that could be a good fit for your portfolio. We are not recommending that you buy the stocks below, as only you know what is best for your investment portfolio. Instead, use this list as a starting point to do research to find the best tech stocks to buy now, or ask a financial advisor like Paladin Registry or Farther Financial for help.
Advanced Micro Devices (AMD)
For half a century, this multinational semiconductor company “has driven innovation in high-performance computing, graphics and visualization technologies,” per its website. The company recently announced the acquisition of programmable logic supplier Xilinx, making AMD a leader in the high-performance computing industry.
Intel Corp (INTC)
This giant semiconductor company designs and creates central processing units (CPUs), the “brain” of the computer. The CPU allows the computer to interact with every application or program installed. Intel’s products are essential for computers, connected devices, and the cloud. Artificial intelligence, 5G network transformation, autonomous driving, and the rise of the intelligent edge are shaping tech’s future, and Intel is at the forefront.
Founded in 1968, the company went public on October 13, 1971, at a price of $23.50 per share. It has since had 13 stock splits. While it started out as PC-centric, Intel is now more focused on data as the world becomes more data-centric. Primary businesses include:
- Client Computing Group: The dominant CPU provider
- Data Center Group: Cloud communication and infrastructure
- Internet of Things: Products designed for internet connectivity, ranging from retail to smart buildings
- Mobileye: Autonomous vehicles
- Non-volatile Memory Solutions Group: Creation of memory and storage products
Intel is less dependent on China than rival chipmakers. Its production sites are concentrated in the U.S. and Israel.
With a current dividend yield of 2.49%, Intel provides shareholders with a significantly higher dividend yield than most tech stocks. This is a good long-term growth stock.
This blue-chip tech stock, a member of the Dow Jones Industrial Average, is now essential infrastructure. It is a stock to hold for the long-term, as its products affect so much of the national economy. It’s also a company with which virtually everyone is familiar. Besides its huge array of products, Microsoft owns Azure, second only to Amazon as a cloud infrastructure platform. And Microsoft’s annual revenue has been rising in recent years.
Note that Salesforce’s stock symbol does not reflect its name. CRM stands for customer relations management, and Salesforce is the top CRM platform in the world. Its Salesforce Customer 360 helps businesses unite their sales, marketing, service and IT teams from anywhere, offering complete solutions. Salesforce allows companies to launch and scale eCommerce quickly and seamlessly.
The pandemic caused ecommerce sales to soar even higher, and sales are only expected to grow. Last year, the company replaced Exxon on the Dow Jones Industrial Average. And in December, Salesforce signed an agreement to purchase Slack (WORK), a top enterprise communications platform, securing its place in the working world for a while.
Square, Inc. (SQ)
This stock appears to have short and long-term growth potential. This payment technology company saw transaction rates increase significantly during the pandemic, as remote payments soared.
Founded in 2009 by Jack Dorsey and Jim McKelvey, it is now capitalized at more than $120 billion. Its initial product was the Square reader, which enables businesses to accept credit cards, contactless cards, Apple Pay, and Google Pay wirelessly. Among its top products is Cash App, which allows customers to send and receive money with anyone, donate or tip. It even allows merchants to use bitcoin. The Square point-of-sale system is another major product, a POS easy to use for every kind of business. Unlike most digital payment companies, Square focuses on the small to medium business market rather than the behemoths.
Square is also considering creation of a non-custodial hardware wallet for bitcoin. Because the company has embraced bitcoin, stock volatility has increased recently with that of the cryptocurrency. While investors should keep this volatility in mind, Square’s long-term prospects are solid. The pandemic affected many of the company’s vendors, but with life returning to a new normal, vendor use should increase substantially.
Are Tech Stocks Right for You?
Tech is a huge part of the equity market. It impacts much of our business and personal lives, and its influence will only become stronger in the future. While blue-chip tech stocks belong in everyone’s investment portfolio, many tech companies are relatively new. This makes determining what might happen during an inevitable slump hard to predict. The dot com bubble burst more than 20 years ago, but that was driven by the retail promise of the new Internet and the accompanying frenzy as speculators bid up businesses that never generated a profit.
While tech stocks are booming again, two decades after the dot com bubble tech is an older and incredibly diverse industry. Tech stocks run the gamut from artificial intelligence to cloud computing to machine learning to streaming, and that’s a small sample. There are few sectors offering so much diversification.
Those new to tech investing may prefer putting their money in exchange-traded funds (ETFs) or mutual funds focusing on this sector. For instance, rather than buy individual small-cap tech stocks, you might want to spread your risk by investing in an ETF dedicated to this segment of the market.