The U.S. stock markets have experienced two strong years of back-to-back gains; the S&P 500 soared approximately 30% in 2013 and a solid 13% in 2014; and the Dow Jones Industrial Average recently topped 18,000 for the first time ever. With the Federal Reserve expected to barely increase interest rates in the second half of 2015, the stock market looks to be the investment of choice for income-starved investors this year—and technology stocks in 2015 may be your best bet.
The top technology stocks to watch in 2015: Brocade Communications Systems, Inc. (NASDAQ/BRCD), QUALCOMM Incorporated (NASDAQ/QCOM), and Benchmark Electronics, Inc. (NYSE/BHE). But more on these shortly.
Getting back to economic conditions, with an improving economy, consumer confidence and spending are increasing. This means one of the best areas for investors to look is the technology sector. That’s because technology stocks provide products and services to both individuals and businesses; improving economic conditions means businesses will be investing and expanding operations, while consumers will be looking to upgrade their computers, tablets, smartphones, and televisions.
But what kind of technology stocks should investors consider in 2015: value or growth? Should investors go with well-established technology stocks or consider lesser-known equities with great potential?
Value or Growth Technology Stocks in 2015?
New products and services helped Apple Inc.’s (NASDAQ/AAPL) share price soar more than 42% in 2014. Facebook, Inc. (NASDAQ/FB) saw its share price advance 45%, while Microsoft Corporation (NASDAQ/MSFT) rewarded investors with a 26.5% increase.
The big technology stock story in 2014 though was Chinese e-commerce juggernaut Alibaba Group Holding Limited (NYSE/BABA). The company began trading on the NYSE in mid-September in the biggest initial public offering (IPO) ever. The stock opened at $93.89 before rallying to a high of $120.00 on November 13. The company is currently trading near $105.00 per share.
Having said that, 2014 was not kind to all technology darlings. Google Inc. (NASDAQ/GOOG) was down approximately 4.5% in 2014, while Twitter, Inc. (NYSE/TWTR) led in terms of disappointments, giving up 45% of its value.
Overall, new publicly traded technology companies might be all the rage for investors looking to ride a wave of momentum, but if you want long-term growth, you have to look at well-established, financially solid tech companies.
3 Technology Stocks with Excellent Upside Potential in 2015
Tech Stock #1: Brocade Communications Systems
Brocade Communications Systems, Inc. (NASDAQ/BRCD) is a leading provider of data center networking products. The company’s products are used in storage area networks (SANs). Brocade’s products support Internet connectivity and enterprise mobility, as well as key technologies, such as software defined networking (SDN) and cloud computing. The company derives more than half its sales from the U.S. The company has a market cap of $5.16 billion, a forward price-to-earnings ratio (P/E) of 12.34, $1.26 billion in cash, and a 1.3% annual dividend.
Tech Stock #2: QUALCOMM
QUALCOMM Incorporated (NASDAQ/QCOM) develops, manufactures, and markets digital communications products and services in the United States, China, South Korea, and Taiwan. Its technology is used in digital wireless communications equipment and satellite ground stations mainly in North America. It generates most of its sales through the development and marketing of semiconductor chips and system software based on CDMA and other technologies. The company has a market cap of $129.3 billion, a forward P/E of 14.3, and operating cash flow of $8.89 billion. It also provides an annual dividend of 2.3%.
Tech Stock #3: Benchmark Electronics
Benchmark Electronics, Inc. (NYSE/BHE) provides contract manufacturing services to electronics makers in the Americas, Asia, and Europe. Its engineering services include new product design, prototype, test, and related engineering solutions; and custom test and automation equipment design and build solutions. Customers include manufacturers of computers, industrial control equipment, medical devices, telecommunications systems, and test and measurement instruments. The company gets approximately two-thirds of its sales from customers in the U.S. The company reported third-quarter results that exceeded guidance (1) and announced a new $100-million share repurchase program.(2)
Investors need to be careful about what kind of technology stocks they invest in. In a market where investors have been rewarding stocks whether they reach their targets or not, it will be important to find technology stocks that can justify their valuations. Those that can’t will get hammered.
Also Read: 3 Top Technology Stocks to Watch in 2016