Top Tech Stocks in 2017
You don’t have to dig too deep to uncover some of the best tech stocks. That’s because the best technology stocks have been the best performers in 2016. That said, you have to do a little digging if you want to find tech stocks to invest in 2017 that aren’t being constantly flogged by Wall Street. To help add depth to your portfolio, it might also be a good idea to make room for a one-time rarity in the technology sector: high-dividend tech stocks.
Best Tech Stocks Dominate Miserable 2016
Last year wasn’t especially a stellar year for stocks, what with the S&P 500 index throwing up a 0.7% loss. And 2016 hasn’t exactly been a smooth ride. The markets may be up seven percent so far this year and trading near all-time highs, but to get there, investors have had to stomach some of the most volatile swings.
I’d like to say it’s going to get better, and obviously it will eventually, but August isn’t exactly known as being a bull market for stocks. In fact, August is the worst month for U.S. stocks. Since the mid-1990s (before the tech bubble burst), August has produced the worst average monthly performance. August is also the month that experiences the worst individual drops. Even when it’s good, August rallies are, comparatively, pretty underwhelming.
But there is reason for hope, thanks to tech stocks. Tech stocks have been bullish since the markets bottomed in March 2009 and are at their highest levels in 16 years. The Technology SPDR (ETF) (NYSEARCA:XLK) is at its highest levels since 2000.
One reason to remain bullish on tech stocks in general is that they are climbing because of strong fundamentals and earnings growth. This is the opposite of what the broader markets have been doing lately, which has been climbing higher because of artificially low interest rates, not because of strong revenue and earnings growth. In fact, most of the market is advancing despite weak results.
The XLK has advanced 13.2% year-to-date; the S&P 500, on the other hand, is up seven percent, in spite of itself.
Another reason to be bullish on technology stocks in 2017 is the U.S. dollar. The greenback has rebounded from its lows in early May, but is still down roughly three percent so far in 2016 at 96.09 against a basket of other currencies.
This is significant because tech sector stocks have the most exposure to the U.S. dollar. Roughly 60% of technology stock revenue comes from overseas. If the U.S. dollar continues to fall, this will benefit U.S. technology stocks in the second half of the year.
Second-quarter U.S. gross domestic product (GDP) advanced a miserly 1.2% in the second quarter. Analysts with their pulse on the U.S. economy expected it to grow 2.6%. The Atlanta Federal Reserve sees the U.S. economy growing 3.7% in the third quarter, but that seems more than a little aggressive. (Source: “U.S. economy seen growing at 3.7 percent in third quarter: Atlanta Fed,” Reuters, August 9, 2016.)
The U.S. economy will remain weak, as will the global economy, and the Fed will be forced to keep interest rates at current levels. This actually bodes well for technology sector stocks.
Top Tech Stocks for 2017
As a result, technology stocks are the best place for investors, especially now. Not only do technology stocks provide investors with excellent potential (e.g., the social media site developed by a Harvard student), but they are actually making money.
Some of the bigger technology sector stocks are pouring money back into their companies in the form of high-dividend stocks. It’s never a bad idea to look at stocks with a long track record of making money, growing shares, and increasing annual dividends.
Looking for the best tech stocks to watch or some new names to add to your technology stocks list? Below is a list of the best technology stocks to watch in 2017.
Advanced Micro Devices, Inc.
Advanced Micro Devices, Inc. (NASDAQ:AMD) has been one of the best performing technology stocks in 2016, up roughly 132% year-to-date. While the stock trades for just $6.60, it’s not your typical penny stock. In fact, AMD has a market cap of $5.25 billion.
AMD is an international semiconductor company that designs integrated technology that powers millions of intelligent devices, including personal computers, game consoles, and cloud servers. (Source: “Investors Relations,” Advanced Micro Devices, Inc., last accessed August 9, 2016.)
It hasn’t all been good times for AMD. The company’s share price had been struggling since 2006 as it worked to rebuild market share it lost to Intel Corporation and NVIDIA Corporation. But it has been turning a corner in 2016. Over the last number of months, AMD has announced a new $300-million joint venture that will give it further access to the Chinese server market. It also launched a new graphics card and acquired software company HiAlgo Inc.
On July 21, AMD announced that second-quarter revenue increased nine percent year-over-year and 23% sequentially to $1.02 billion. The company reported second-quarter net income of $69.0 million, or $0.08 per share. This comes from a one-time gain of $150 million related to a joint venture. Excluding this gain, AMD would have reported a loss of $40.0 million, or $0.05 per share. (Source: “AMD Reports Second Quarter 2016 Results,” Advanced Micro Devices, Inc., July 21, 2016.)
Going forward, AMD expects third-quarter revenue to advance around 18% sequentially to $1.21 billion.
NeoPhotonics Corp (NYSE:NPTN) is another name to add to the best technology stocks to watch list. The company’s share price is up 30% since the beginning of 2016, and a more impressive 305% since the start of 2015.
NeoPhotonics develops and manufactures hybrid photonic components for bandwidth-intensive, high-speed communications networks. Products include photonic integrated circuits (PICs), amplifiers, glass substrates, laser modules, passive optical components, and photodiodes. (Source: “Company,” NeoPhotonics Corp, last accessed August 9, 2016.)
In the second quarter, revenue increased 16.1% year-over-year to $99.1 million. In the second quarter of 2015, the company reported (then) record quarter revenue of $85.4 million. (Source: “NeoPhotonics Reports Second Quarter 2016 Financial Results,” NeoPhotonics Corp, last accessed August 8, 2016.)
Second-quarter 2016 revenue was flat, with record first-quarter revenue of $99.1 million. Net income was up 50% at $2.7 million, or $0.06 per share.
Given industry trends and NPTN’s strong market position, the company raised and narrowed its expected revenue growth for 2016 to a range of 22% to 25%.
International Business Machines Corporation
International Business Machines Corp. (NYSE:IBM) isn’t actually flying under anyone’s radar, but it is a bullish technology stock that provides a high dividend. Not only does it provide an annual dividend of 3.46%, or $5.60 per share, but it has also raised its annual dividend for 21 consecutive years.
That’s a nice, reliable income stream at a time when government bond prices are near all-time highs, meaning yields are near all-time lows. That makes IBM’s 3.46% yield look really attractive.
So too does the company’s capital appreciation. IBM’s share price is up 223% year-to-date, significantly outpacing the S&P 500 and Dow Jones Industrial Average index.
For those out of the technology loop, IBM is the world’s top provider of computer products and services and a leader in almost every market it serves. This makes IBM a great long term stock. That means you probably don’t need to worry about any August tailwinds affecting the broader markets. The company isn’t going anywhere, and it continues to have great long-term growth potential.
That’s why I’m adding it to my list of the best technology stocks. For me, these three stocks are on my watch list for the top tech stocks to invest in for 2017.