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They tried. They really tried to broaden this market out. But when push comes to shove, it seems investors just can’t get enough of their favorite technology titans!
Look at Nvidia Corp. (NVDA, Rated “B+”), one of the hottest semiconductor stocks in 2016 and earlier this year. It looked like the chip darling was going to take a breather last month. But now it’s finding renewed momentum, and challenging its all-time highs again. The stock has soared almost 60% year-to-date, 210% in the past year, and a mind-boggling 1,294% in the past half-decade!
Of course, Nvidia looks like a slacker compared to some other tech standouts. Take the red-hot fiber optic networking product maker Applied Optolectronics (AAOI, Rated “B”). Its shares have more than tripled in 2017, and skyrocketed 527% in the past year!
Elsewhere in the tech industry, chipmaking equipment company Applied Materials (AMAT, Rated “B+”) just claimed the top spot in one of our exclusive, proprietary Weiss Ratings “Heat Maps”. Two of the red-hot “FAANG” stocks are also close to breaking into the “Top Ten” on that list — Google parent Alphabet (GOOGL, Rated “A-”) and Facebook (FB, Rated “B+”). The Maps are designed to identify stocks with the strongest momentum, best Ratings, and greatest profit potential.
Meanwhile, I just recommended a major chip sector player in my High Yield Investing newsletter. This stock pays a market-beating dividend, one that’s grown at an annualized rate of almost 17% in the last three years, and its shares are now rising nicely. You can get all the details by subscribing here .
At some point, it’s only natural to ask: Is this a re-run of the Nasdaq bubble in the late 1990s? Or does the tech titan trend have further to go?
Well, valuations aren’t as ridiculous now as they were back then. Even scorching-hot Nvidia is trading at “only” 61 times earnings, while Alphabet is at 34X. That compares to the triple-digit P/Es we saw everywhere in 1998-2000. Many of today’s tech titans also make money … a lot of money … unlike the dot-bombs of yesteryear. We’re also not seeing a slew of online brokerage commercials featuring secretaries driving Ferraris.
Then again, the AdvisorShares ETF provider just launched a New Tech and Media ETF with the ticker symbol “FNG” – a product clearly designed to capitalize on the “FAANG” momentum trend. Plus, Goldman Sachs warned about the excessive gains and oddly low volatility of the FAANG names last month.
Finally, some tech-focused mutual funds are really pushing the performance envelope. Even unleveraged varieties like the Zevenbergen Genea Fund (ZVGNX, Rated “D+”) and the Fidelity Select Technology Portfolio (FSPTX, Rated “B+”) are up roughly 48% and 45% in the past year. That’s not late-1990s territory … but it’s closing the gap.
Bottom line: I’m happy to enjoy the ride while it lasts, and you should be, too. But be sure to focus on the highest-rated, fundamentally strongest companies in the sector. And remember that at some point, tech is going to get too hot for its own good. That’s when you’re going to want to head for the exits, rather than let your gains go up in smoke!
Until next time,
Mike
ETF Spotlight Edition, by Mike Larson, Senior Analyst Mike Larson is a Senior Analyst for Weiss Ratings. A graduate of Boston University, Mike Larson formerly worked at Bankrate.com and Bloomberg News, and is regularly featured on CNBC, CNN, Fox Business News and Bloomberg Television as well as many national radio programs. Due to the astonishing accuracy of his forecasts and warnings, Mike Larson is often quoted by the Washington Post, Chicago Tribune, As-sociated Press, Reuters, CNNMoney and many others. |
