List of Top Tech Stocks in April 2017

best tech stocks for April 2017What Top Tech Stocks This Month Look Like

It’s amazing how much money you can make in 30 days. That thought crossed my mind repeatedly as I reviewed the top tech stocks this month, my computer screen drenched in green. Ten of the best tech stocks for April 2017 rose by more than 32% in the preceding month.

Which means, if you extrapolate for the year, they could generate more than 384%!

So much for “April showers bring May flowers.” It looks like this could be the month for investing in tech stocks. But I would still advise certain precautions.

For example, I ignore tech stocks with less than $300.0 million in market cap. Why? Because those “micro-cap stocks” carry enormous volatility. You can make a lot of money from them, to be sure, but there’s also a lot of risk. Fortunes have been lost trading those stocks.

Instead of gambling on no-name stocks that hustled their way onto the public exchange, look for stocks that are accelerating based on fundamentals. Is their business actually getting stronger?

If you ask that question, you’re already halfway to making a decent investment. I can’t tell you the number of professional fund managers that ignore this basic concept. They give lavish presentations for “sophisticated investors” using “advanced data analytics.”

But they probably can’t tell you if the company is making money or not. If you ask them about on-the-ground realities, they’ll probably get shifty-eyed and trot out half-baked answers.

Put another way, they are just focused on the stock. But when the dust settles, it is the underlying company that makes the stock valuable. Keep that in mind as we review the top tech stocks this month. You really want to ask yourself: Should I buy these stocks for April?

Some of them could be worth the time and money. But not all of them.

How I Think About Investing in Tech Stocks

You may notice that our top tech stocks this month are different from those on other websites. This is because I apply behavioral economics to investing in tech stocks.

Let me explain for those who may be unfamiliar with behavioral economics.

It is a pretty obscure science that explains how people make decisions. What do they want to buy? How much are they willing to pay? Famous thinkers like Robert Shiller and Daniel Kahneman won Nobel Prizes for answering these questions.

Their insights aren’t just for academics. For example, the Undiscovered Managers Behavioral Value Fund Class A (MUTF:UBVAX), which is built on behavioral economics ideas, outperformed the S&P 500 between 2011 and 2016.

Very few hedge fund managers can match those returns, let alone once their fees are taken into account. “Two and twenty” is the industry standard, meaning they take two percent up front and 20% from the back end. Contrast that with the behavioral economics fund that only takes 1.29%.

A side-by-side comparison isn’t flattering to hedge funds. Part of the problem is that complex financial models are built on shaky foundations. Strange assumptions, like the one about humans being perfectly rational, are embedded into hedge funds, contaminating their analysis.

They get a lot of that nonsense from Economics 101 classes. Students are taught the “Efficient Market Hypothesis,” which tells them that all people are rational and everyone is on a level playing field.

Finance majors across the country eat up this up, despite the fact that it’s not true. Only later do economics professors start talking about where the market goes wrong.

Ask anyone who studied economics past the undergraduate level. Most of them will tell you that economics is far messier the deeper you get into it. You can’t simply brush aside the fact that people are irrational sometimes, or that they are swayed by “mob mentality.”

We see it all the time with investing. If Warren Buffett puts money in a stock, thousands of investors follow him without a moment’s hesitation. It’s amazing how quickly they abandon rationality when the “Oracle of Omaha” makes a move.

They pounce on the stock without thinking.

I try to remember these lessons when analyzing the best tech stocks for April 2017. It helps me avoid the booby traps that so many other investors fall prey to.

5 Best Tech Stocks for April 2017

With that said, and without further ado, here’s our list for the top tech stocks this month.

TOP TECH STOCKS THIS MONTH

Symbol

Company

1-Month Return

AAOI

Applied Optoelectronics Inc

56.34%

HIMX

Himax Technologies, Inc. (ADR)

54.94%

KEM

KEMET Corporation

38.33%

OLED

Universal Display Corporation

31.03%

MOMO

Momo Inc (ADR)

27.51%

 

Applied Optoelectronics Inc

Applied Optoelectronics Inc (NASDAQ:AAOI) is riding high on an emerging technology trend—fiber-optic networking. You may remember headlines from a few years ago when Google and AT&T started planting fiber optic cables underground.

Both tech giants wanted to make internet speeds faster, but they soon realized that expanding coverage was difficult. It may be easy to plant fiber optic cable underground in Tulsa, Oklahoma, but it’s a little tougher in New York City. This was a major stumbling block for them.

Applied Optoelectronics took a much smarter route. It specializes in three different areas: Internet data centers, cable television, and fiber-to-the-home (what Google and AT&T did).

So it is trying to achieve the same thing, but that isn’t its main objective. Internet data centers will likely provide it with a solid base of revenue for the next few years, because there is an arms buildup underway between several data center giants (I’m looking at you, Amazon!).

AAOI stock chart,

Chart courtesy of StockCharts.com

Himax Technologies, Inc. (ADR)

Himax Technologies, Inc. (ADR) (NASADQ:HIMX) is a semiconductor company, which is to say it makes microchips. But don’t lump it in with boring old stocks like Intel Corporation (NASDAQ:INTC). Himax has far more interesting things going on—such as augmented reality (AR).

It sells to LG, GM, Sony, Sharp, and Samsung, among others. Did you catch the odd-name-out in that grouping? GM. Why would a graphics chipmaker have a car company on its client roster?

Fair warning: the answer sounds like science fiction. Automakers are starting to add displays onto their windscreens, much like F-16 fighter jets. These displays might show the speedometer, outside temperature, and distance to other vehicles.

Himax also sells to manufacturers of augmented reality headsets.

I’m encouraged by its presence in an emerging technology space, because it means the upside potential is still undiscovered. Considering its strong performance over the last month, HIMX stock is looking good heading into April.

HIMX stock chart

Chart courtesy of StockCharts.com

KEMET Corporation

Some tech stocks get attention because their products push the boundaries of innovation. But that is not always where you can find the best returns. Sometimes success in business means doing what others find boring.

KEMET Corporation (NYSE:KEM) is real, if not living, proof of this concept.

The company makes electronics components, such as “tantalum capacitors” and “aluminum electrolytic capacitors.” It sells these parts to firms that manufacture electronic devices, much like the device you’re using to read this article. Its products are boring, but essential.

KEM stock

Chart courtesy of StockCharts.com

Momo Inc (ADR)

Retail investors pay a lot of attention to social media stocks that have U.S.-based business. But behavioral economics would suggest this is a geographical bias that we can exploit.

Look to overseas markets like China, where companies like Momo Inc (ADR) (NASDAQ:MOMO) are catching fire. Morgan Stanley underwrote its initial public offering, which goes to show that institutional investors are aware of this opportunity.

Momo’s platform connects people and enables them to share content, be it music, videos, or events. This is a pretty standard fare in social media, but there’s no denying that Momo is extremely popular. It was even an acquisition target last year.

That potential sale flopped, but I think we might see those offers renewed in April 2017 (or soon after). Here’s why: the company’s return on equity jumped from 31.01% to 65.94% in 2016. It is exactly the kind of entity that a tech giant would want to absorb.

So keep a close eye on MOMO stock. There is a very strong possibility that this company will be bought out at a premium. And since its surge this month was part of a three-month catapult that launched the share price up 91.88%, MOMO is one of the best tech stocks for April 2017.

MOMO stock chart

Chart courtesy of StockCharts.com

Universal Display Corporation

Universal Display Corporation (NASDAQ:OLED) also benefits from the boom of electronics devices, because screens are its business. It deals in organic light emitting diode (OLED) technology, which is used in everything from smartphones to televisions.

Unlike more popular names in the tech industry, Universal Display actually makes a profit. It generated $25.82 million in net income last quarter, off just $74.58 million in sales. Margins like that are hard to come by in the technology space, if you ever come by a profit at all.

OLED stock is on our list of best tech stocks for April 2017 because it makes something real. I often get tired of the market’s obsession with digital tech stocks. How about we remember that hardware is at the root of everything? Would that be so bad? OLED stock’s stellar run says no, and that’s just fine by us.

OLED stock chart

Chart courtesy of StockCharts.com

Conclusion

Investing in tech stocks is about doing the unexpected, looking where others dare not. You’ll notice that our top tech stocks this month are not flashy or inherently appealing. They are sound, and that is much more important.

There is still risk, as with every other investment, but our list of best tech stocks for April 2017 skews towards unloved industries. Electronics components, Chinese social media, data center fiber optics. These are not stocks that generate headlines, but they can generate profits.

And at the end of the day, that’s why we bother investing in tech stocks.