Over the last 18 months, technology stocks have been on fire. It’s been easy to find tech trends shaping the world.
And I’ve said it before: The pandemic was the great accelerator.
Before COVID-19, for example, few companies offered work from home. Others only offered it conditionally.
But the pandemic made it a necessity. Companies adapted; the trend accelerated. And companies that once doubted its effectiveness saw incredible productivity data and made it permanent.
E-commerce is another example. Sure, people have been shopping online for years ... but not everyone.
Many small businesses needed to pivot quickly to continue sales through the shutdown. And it’s true that consumers still want to try goods and services before spending money on them.
But overall, we’re continuing to see the expansion of immersive e-commerce.
Just today, Amazon.com Inc. (Nasdaq: AMZN) asked me if I wanted to see if a bookcase I was considering buying would fit in my space. All I had to do was click accept to the camera, and Amazon would show me exactly what it would look like there by using the site’s augmented reality software.
Both of these trends — working from home and e-commerce — saw huge pressure to push forward, but by no means are either in their final forms.
That’s also the case with 5G, self-driving vehicles and artificial intelligence (AI). These trends were accelerated but still have a long way to go.
Technology always moves forward.
According to Statista, there are over 21 billion interconnected devices in the world — a number that’s growing more and more every day.
Even our local yoga studio is contributing to that expansion. Each teacher has an app for the new lighting system, allowing them to change the color and brightness of the fixtures.
So, for me, the question is not whether tech will continue to be profitable. It’s which companies are the safest to profit from these inevitable trends.
I headed over to the Weiss Ratings Stock Screener and pulled a list of the entire information technology (IT) industry, then sorted by rating.
The result was 110 ”buy”-rated stocks. Lots of choices! But let’s take a quick look at the top three.
First, we have the only “A”-rated company on today’s list: Oracle Corp. (NYSE: ORCL). It’s a software company specializing in helping its enterprise clients discover their data in new ways.
In simple terms, it sells database software and technology. And by utilizing cloud systems and Internet of Things (IoT) capabilities, its software can be adapted to fit any enterprise’s needs.
It’s one of the largest software companies in the world. It’s also been able to hold its “buy” rating status for the majority of the past four years. There’ve been a few short-lived drops into the “hold” range, but overall, Oracle has maintained its safe investment status.
The company also continued to pay its dividend through the pandemic. At today’s prices, shares yield around 1.25%. Shares are currently up 44% over the past six months and 67% over the past year.
The other two stocks we’ll look at are the only two “B+”-rated companies the screener showed.
You may not have heard of Oracle, but this next software company is a household name. Microsoft Corp. (Nasdaq: MSFT) is the giant behind MS Office, Teams, Outlook and Windows. And that’s nowhere near a comprehensive list of their offerings. The company is behind a whole slew of rapidly growing cloud-based solutions for individuals and organizations.
Although Microsoft has continued to pay a dividend, its dividend yield has slid to 0.76%. The share price has grown because the company continues to grow. But management hasn’t increased the dividend payments at a comparable rate.
This is only a bad thing if you’re looking at the company from an income investing point of view. Since 2014, Microsoft only dropped from its “buy” rating once. And three months later, it was right back on track.
You just can’t argue with that kind of safety and stability. Shares are up 17% in the past six months and 42% over the past year.
Rounding out the top three is Entegris Inc. (Nasdaq: ENTG), a supplier of advanced materials and process solutions for the semiconductor and other high-tech industries.
Essentially, the company partners with leaders in these industries to ensure the latest in microcontamination control.
If you follow trends in the technology space, you know there’s a shortage of semiconductors and other integral components. As these companies continue to catch up, Entegis will continue to profit. This will undoubtedly continue to fuel the movement of ENTG’s stock. Shares are up 21% over the past six months and 73% over the past year.
As I mentioned earlier, my list was generated by using an industry-specific filter.
I wanted to get the widest variety of companies in IT. You can also use the Weiss Ratings Stock Screener to search by sector. This means within information technology, you can specifically select software and services, technology hardware or semiconductors.
I’d love to hear from you if you’ve ever gone to the website to recreate any of the lists I’ve written to you about or if you’ve found any other great lists!
Best,
Kelly Green
