It’s time to focus on tech stocks with enterprise-based businesses
For the past decade or more, the choice for a strong growth portfolio has been obvious: tech stocks. However, 2022 has been different. In what has been described as a “stampede out of tech,” investors have been abandoning the sector in favor of safer ground. Many of the top tech stocks have become mega caps, limiting their ability to deliver the kind of growth they did during eras like the early days of smartphones or video streaming. They also face economic challenges, including inflation and rising interest rates.
However, don’t make the mistake of throwing the baby out with the bathwater. Not all tech stocks are doomed to slide into a period of stagnation. Many are set to deliver big gains in coming years. Especially those that operate under the radar, offering technology services to corporate clients rather than selling products to consumers.
These seven tech stocks have felt the impact of the recent tech stock sector butchery. That only makes them more appealing because now they’re available at a discount.
- Axcelis Technologies (NASDAQ:ACLS)
- Donnelley Financial Solutions (NYSE:DFIN)
- Endava (NYSE:DAVA)
- ExlService (NASDAQ:EXLS)
- FactSet Research Systems (NYSE:FDS)
- Fortinet (NASDAQ:FTNT)
- Gartner (NYSE:IT)
To make your purchasing decision a little less stressful, each of these tech stocks earns a high rating in Portfolio Grader. In fact, most are rated as an “A,” backed by a strong “buy” recommendation.
Tech Stocks to Buy: Axcelis (ACLS)
By now, the crippling shortages hitting the semiconductor industry are old news. There’s no easy fix, with new fabrication plants costing billions and taking years to build. One way for investors to take advantage of this situation is by investing in a company that helps those semiconductor companies to improve their yields.
Axcelis sells the next-generation Purion platform. This ion implanter technology is used in the semiconductor fabrication process. Axcelis’ Purion platform helps to optimize yields by reducing glitches and minimizing contagion of metals used in the process. The company markets its value as improving fabrication plant “precision, purity and productivity.”
The demand for its services can be seen in Axcelis full-year 2021 results. The company reported record full-year revenue, operating profit and gross margin.
ACLS stock had been on a steady growth path since 2020. I say “had,” because like so many tech stocks, it was hit hard to start 2022. After starting strong and closing at an all-time high of $77.17 on Jan. 3, the pullback began. ACLS stock bottomed out, hitting a $54.20 low on Jan. 28. It has since staged a partial recovery, but is still down nearly 14% since the start of the year. That means there’s still time to pick up Axcelis shares on the cheap.
At the time of publication, ACLS stock earned an “A” rating in Portfolio Grader.
Donnelley Financial Solutions (DFIN)
Donnelley Financial Solutions may not sound like a technology company, but it is. With a twist. This Chicago-based company offers financial software solutions, with a focus on risk management and financial compliance. Investment analysts know the company as the world’s single largest SEC EDGAR filer, with over 160,000 financial reports filed annually.
Customers of DFIN are looking for ways to automate compliance, lower their risk and also cut costs in an increasingly complicated global financial market. DFIN solutions are used by a who’s who of Fortune 500 companies.
DFIN stock is trading at 2022 lows and has slid to a 29% loss to this point in 2022. That’s a stark contrast to the nearly 1,100% growth it posted between the 2020 market crash and last November. This year’s slump offers an opportunity to add this tech stock to your growth portfolio at its lowest price in six months.
DFIN stock currently scores an “A” rating in Portfolio Grader.
Tech Stocks to Buy: Endava (DAVA)
If Endava sounds familiar, it may be because I’ve featured this U.K.-based software development company before. It made my January list of IT stocks to buy and here it is again. Why?
In the case of Endava the appeal is largely in enterprise IT spending. With its focus on helping companies with a “digital transformation,” DAVA stock performed very well during the pandemic. With a mad scramble to establish an online presence, that makes sense. However, the push to get services online is not going to stop as the pandemic’s effects lessen. Current customers expect it, and going digital opens up global markets. Interest rates, inflation and a war in Ukraine won’t stop companies from spending money to digitize their business.
DAVA stock delivered a return of nearly 475% in the pandemic years before skidding to a 20% loss so far in 2022. That weak performance offers a nice opportunity to pick up shares on the dip.
The current Portfolio Grader rating for DAVA stock is “A.”
ExlService Holdings (EXLS)
ExlService Holdings — or EXL — is an IT service management company. It provides advanced operational tech solutions such as data analytics to customers in a wide range of sectors, including banking, health, retail, manufacturing and transportation. EXL also helps customers adopt the latest in digital technologies including AI and the cloud. Customers turn to EXL for cost savings, improvements in efficiency and increased quality.
With inflation and interest rates putting upward pressure on corporate costs, companies like EXL stand to gain. The race will be on to keep increases to a minimum, and that means increased adoption of cost-cutting technology. EXLS stock has shown a nice growth trajectory over the past five years, marred by only two major exceptions: the March 2020 stock market crash, and the 2022 tech stock pullback. EXLS stock is currently down 22% from its December 27, 2021 all-time high close. Now is a prime time to consider adding shares to your growth portfolio.
At the time this list of tech stocks was published, EXLS stock was rated as “B” in Portfolio Grader.
Tech Stocks to Buy: FactSet (FDS)
FactSet Research Systems has provided open data and software solutions for over four decades. With offices in 20 countries, the company counts 162,000 investment professionals among its core customer base. FactSet’s Insight blog boasts a readership of 700,000 subscribers. The company also provides enterprise financial data solutions.
As an informed investor, chances are FactSet data is an important part of your stock-buying decision process. You should also consider FDS stock as a part of that portfolio. It has delivered solid returns over the past five years, but its slump in 2022 (down 17% since the start of the year) offers the opportunity to also take advantage of this tech stock’s expected recovery.
FDS stock currently rates an “A” in Portfolio Grader.
One tech “business” has seen a massive increase in 2021 and is on track to repeat that performance in 2022. Cyber crime is spiraling out of control. Ransomware is the poster child for just how badly things can go if your computer gets hacked. The lucrative business of cyber crime just happens to be a favorite of Russian cybercriminals and with the situation in Europe devolving into war and threats of sanctions, you can bet those ransomware attacks are going to increase.
In 2021, ransomware attacks were up 105%, globally. Ransomware attacks against government agencies were up a whopping 1,885%. Against healthcare organizations, the increase was 755%. Adding to the challenge is the increasing adoption of hybrid work arrangements that see employees splitting their time between home and office.
All this is a preamble in support of Fortinet. This California-based company claims to be the world’s largest cyber security provider for enterprise and government customers. The company reported full-year revenue up 29% in 2021, its third consecutive year with growth of 20% or more. It also issued guidance for 2022 revenue that will continue that winning streak.
Despite the impressive performance and the strong likelihood of a solid 2022, FTNT stock is down 5% in 2022. Time to consider making a move on this tech stock.
At time of publication, FTNT stock was rated as a “strong buy,” scoring an “A” in Portfolio Grader.
Tech Stocks to Buy: Gartner (IT)
Finally, there is Gartner. This is another company that is familiar to many in the investment community. Gartner publishes invaluable research on technology trends, such as quarterly smartphone sales and EV sales projections. That qualifies it as a tech stock. However, Gartner also works as a consulting business, working with companies and running various industry conferences. This is big business, to the tune of roughly $4 billion a year.
The company’s target for investors is to provide “long-term, sustained, double-digit growth.” In 2022, that formula has been off, with IT stock down nearly 13%. However, over the long term it is delivering. Since 2009, IT stock’s trajectory has been one of sustained growth. Expect that to continue once the early 2022 rough patch is over.
IT stock currently scores an “A” rating in Portfolio Grader.
This article originally appeared at InvestorPlace.
On the date of publication, Louis Navellier had a long position in ACLA, DAVA and FTNT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.