It’s time for contrarians to go long for cheap
- While innovation doesn’t pay right now, these are the tech stocks to buy before it does again.
- Block (SQ): After removing the worthless stuff out of its valuation, Block makes sense for the long haul.
- Trade Desk (TTD): As streaming giants plan on offering ad-supported channels, Trade Desk becomes very relevant.
- IBM (IBM): Though IBM is a slow-cooking meal, its myriad business units should make Big Blue delectable.
- Kratos Defense (KTOS): With global tensions heating up, Kratos Defense’s top-tier solutions should prove invaluable.
- Lucid Group (LCID): With EVs too expensive right now, Lucid’s focus on the affluent makes much sense.
- RF Industries (RFIL): Undergirding the connectivity industry, RF Industries is a background player to buy.
- Garmin (GRMN): Rising mobility plus economic constraints bodes well for key Garmin product lines.
Although it may seem a counterintuitive move to make, patient investors may want to consider tech stocks to buy. To be clear, the pain in the innovation segment presents significant concerns. While the tech-heavy Nasdaq gained about 11% in the trailing month, it’s down approximately 18% for the year. The Nasdaq also underperforms the benchmark S&P 500, which is down 11% on a year-to-date basis.
Still, some extenuating circumstances exist that provide some confidence for tech stocks to buy. First, the supply chain disruption that the coronavirus pandemic imposed earlier this year continues to rear its ugly head. Mainly, China’s draconian approach to Covid-19 translated to hardships around the globe. As well, even data centers reported headwinds associated with constrained supply chains.
While problematic, these concerns represent temporary problems. At some point, they will fade into the rearview mirror.
Another factor to consider is the Federal Reserve’s aggressive actions against soaring inflation. With borrowing costs rising, fewer incentives for growth-oriented businesses exist. This dynamic has contributed to layoffs in the tech sector.
Still, this matter will eventually be addressed. However, you’ll want to consider these tech stocks to buy before the big bullish wave hits again.
Data last updated: August 21, 2022 6:40 PM EDT
|
Ticker
|
Company
|
Price
|
|---|---|---|
| SQ | Block Inc | $74.16 |
| TTD | Trade Desk Inc | $65.83 |
| IBM | International Business Machines | $138.18 |
| KTOS | Kratos Defns | $14.75 |
| LCID | Lucid Group Inc | $16.86 |
| RFIL | RF Industries Ltd | $6.98 |
| GRMN | Garmin Ltd | $96.56 |
Tech Stocks to Buy Before the Bull Market Returns: Block (SQ)
Back during the wild trading period of 2021, an investment in Block (NYSE:SQ) made sense. Primarily, Block CEO Jack Dorsey has long endorsed cryptocurrencies and blockchain-related initiatives. Therefore, the dramatic rise in cryptos corresponded with a robust increase in valuation for the company formerly known as Square.
Unfortunately, with the implosion of the crypto sector this year — actually, it started in November of last year — the sudden pessimism impugned upon Block’s sky-high premium. Since the start of 2022, its shares have hemorrhaged 51% of market value. That’s quite a glaring loss considering that SQ stock increased 15% over the trailing month ended Aug. 18.
Fundamentally, the criticisms represent a fair assessment of the situation right now. In its latest earnings report, both revenue and net income slipped against the year-ago comparison.
But here’s the deal: Block’s core business of payment processors and management software evens the playing field between small companies and big. As the broader business environment improves, Block could make a comeback, thus presenting an interesting view for tech stocks to buy.
Trade Desk (TTD)
One of the more compelling tech stocks to buy, Trade Desk (NASDAQ:TTD) doesn’t look like much at the moment. That’s because, on a YTD basis, TTD is down 23%. You can imagine how much pain the company incurred because, in the trailing month, it’s up 50%.
Yes, that’s right — even with a 50% swing higher, TTD is down double digits for the year. As a side note, it’s an important lesson to check the broader context rather than fall for arithmetic tricks.
Anyways, Trade Desk’s programmatic advertisement business received a major lift recently in the entertainment ecosystem. Essentially, streaming giants Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) plan to offer free memberships to access their content libraries. The catch of course is that ads will undergird the content.
Clearly, then, Trade Desk represents one of the major beneficiaries of this twist in the streaming wars. Bottom line, the company just received an expansion of its total addressable market (TAM). Therefore, TTD is one of the tech stocks to buy before the bull market returns.
Tech Stocks to Buy: IBM (IBM)
To be quite blunt, many analysts over the years have supported the contrarian case for legacy tech giant IBM (NYSE:IBM). Seemingly every time, the company known as “Big Blue” failed them, sometimes miserably. Having talked up the case for IBM stock, I share in the pain of having egg splattered on oneself. Nevertheless, without saying this time, it’s different — this time, it’s different.
Mainly, unlike other popular tech stocks to buy, IBM never garnered the intense euphoria that has characterized other sector players. Roughly speaking, from the average price during the company’s spring 2020 doldrums to the new normal peak, shares gained 59%. It’s hardly anything to write home about. At the same time, IBM at the current juncture is up approximately 53% from its pandemic lows.
Not all tech stocks to buy can make that claim. Of course, other reasons exist to be bullish on IBM longer term.
Over the years, management has been reducing its exposure to legacy businesses. Instead, IBM concentrates on the relevant businesses of cloud computing, automation, artificial intelligence, cybersecurity, and even the blockchain.
Kratos Defense (KTOS)
If you haven’t noticed by now, the world can be an ugly and volatile place. While all of the top tech stocks to buy related to the defense industry pose some level of controversy, Kratos Defense (NASDAQ:KTOS) has stayed out of the spotlight.
Kratos “develops and fields transformative, affordable systems, platforms and products for national security and communications needs.” More specifically, the company builds lasers, microwave weapons, UAVs, satellite communications systems, and more.
Unlike other defense-related tech stocks to buy, Kratos doesn’t feature a direct link to the Russian invasion of Ukraine. This contrasts with companies like Lockheed Martin (NYSE:LMT) and Raytheon Technologies (NYSE:RTX). These are the firms responsible for weapons systems like the Javelin, Stingers, and recently, HIMARS.
Still, geopolitical trouble is brewing, especially with House Speaker Nancy Pelosi’s recent trip to Taiwan. And considering Kratos’ array of advanced military hardware KTOS stock seems a solid bet for tech stocks to buy.
Tech Stocks to Buy: Lucid Group (LCID)
Although it’s hyperbole, everyone loves saying that electric vehicles are the future. Let me be contrarian and say that this forecast won’t happen without one of two things happening. The first is a future where the average American makes at least a six-figure salary (with inflation being “normal”). And/or EVs costing at least a third less. Until at least one of those happen then EVs will have trouble competing against combustion cars.
With new EV transaction prices averaging almost $63,000 this year, this figure stands near the U.S. median household income. That means all of the income under one roof. Given the myriad economic troubles that regular folks face right now, Lucid Group (NASDAQ:LCID) makes sense. At least, it makes sense for EV-related tech stocks to buy.
Unlike other executives, Lucid CEO Peter Rawlinson has consistently expressed realism as his guiding star. Per Reuters, when nickel prices soared due to the aforementioned Russian invasion, Rawlinson had this to say: “I think it would be absolutely foolish of me to say we’re never going to raise our prices.”
I love this executive’s candor. Further, I also appreciate that Lucid (for now) concentrates exclusively on attracting top-tier consumers.
RF Industries (RFIL)
If you conduct an inquiry for “tech stocks to buy” with your favorite search engine (probably Google), you’ll notice that the names spat out focus largely on the exciting opportunities. I’m not saying this to criticize anyone as I do the same thing. Indeed, with many compelling ideas down double digits YTD, it’s a chance to turn that frown upside down.
However, before you go discount diving with tech stocks to buy, you ought to consider some “background” players. I’m talking about companies like RF Industries (NASDAQ:RFIL). According to its website, RF “designs and manufactures a broad range of interconnect products across diversified, growing markets including wireless/wireline telecom, data communications and industrial.”
In other words, the company specializes in the literal nuts and bolts of the broad connectivity sector. Or, to use a sports analogy, RF Industries is akin to a solid catcher backing up the star pitcher. The latter may get the glory, but the former helps make it happen in the first place.
Tech Stocks to Buy: Garmin (GRMN)
A multinational tech firm, Garmin (NYSE:GRMN) arguably attracts the most attention for its GPS-related products and systems. In addition, the company specializes in wearable smart devices, such as fitness trackers and smartwatches. Currently, these product lines don’t represent the most relevant businesses. After all, shares are down nearly 26% YTD.
However, as I argued in a TipRanks article, GRMN flies in a holding pattern, waiting for the catalysts to emerge. Personally, I anticipate that over the next several months, these tailwinds will point very favorably for Garmin.
First, those folks who added unwanted weight during the sedentary period of Covid-19 gained quite a bit of it. Naturally, they will want to work the weight off. However, with inflation taking a bite out of the dollar’s purchasing power, consumers prefer one-time purchases. Contrast this dynamic with recurring payments, such as gym memberships, and you can see why fitness trackers may become popular.
Second, cars on U.S. roadways reached records for age. At the same time, employers will likely recall more of their workers in the coming months (say by Labor Day). The combination of these two factors could support Garmin GPS sales. Therefore, GRMN is one of the tech stocks to buy for the long haul.
This post originally appeared at InvestorPlace.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
