The U.S.-China trade war has rattled investors’ psyche, but that doesn’t mean you should let fear and uncertainty replace fundamental analysis. Technology stocks continue to offer some of the best opportunities for investors looking for above-average returns in fast-growing niche segments. Below we look at three technology companies you should consider for your portfolio.
- Yandex NV (NASDAQ: YNDX)
- Wayfair Inc. (NYSE: W)
- Skyworks Solutions Inc. (NASDAQ: SWKS)
- Market Cap: $12.3 billion
- Revenue Growth: 35.7%
- Free Cash Flow: -$111 million
Yandex, the so-called ‘Russian Google,’ is one of the world’s fastest growing search engines — one that is beating Google at its own game in emerging markets. An expanding ecosystem of services and a large internet market have allowed the company to boost annual revenues like clockwork. Between 2009 and 2018, Yandex increased annual sales by a whopping 1,362%.
Yandex has a strong history of increasing its free cash flow, which has allowed the company to broaden its ecosystem through partnerships and investments (2018 was the first year in the last decade Yandex had negative free cash flow). The company has partnered with Uber to develop a ride-hailing and food service business and owns several other enterprises ranging from payments platforms to on-demand video services.
YNDX stock peaked in early 2018 but has yet to return to those levels. However, the share price is up 38% this year, far outpacing the Nasdaq Composite Index.
- Market Cap: $13.8 billion
- Revenue Growth: 43.6%
- Free Cash Flow: -$137 million
Wayfair was one of the best performing technology stocks of the first quarter. Though still not profitable, the online home furnishing retailer has put up massive revenue numbers in recent years.
In all of 2018, Wayfair generated more than $6.7 billion in sales, up from roughly $4.7 billion the year before. The company’s annual revenue growth is up more than 1,000% since 2012.
Wayfair has earned significant market share in the United States and is looking to replicate that success in other markets, including Canada, Germany, and the United Kingdom. Jeffries has given the stock a “buy” rating due in large part to its international opportunity.
This stock pick isn’t without its challenges. Losses have gotten bigger in recent years and profitability doesn’t seem to be on the horizon anytime soon. But the company is adding thousands of employees, a testament of its huge growth potential moving forward.
- Market Cap: $12.2 billion
- Revenue Growth: 5.9%
- Free Cash Flow: $830 million
After climbing steadily through the first four-and-a-half months of the year, shares of Skyworks Solutions have tumbled recently due to softer demand for Apple iPhones. But the semiconductor company is finding ways to diversify into other markets outside of smartphones, including next-generation wifi routers and radio systems.
Skyworks is also poised to capitalize on the 5G revolution and has already secured large contracts to deliver on the next phase of global connectivity. During the most recent quarterly earnings call, Skyworks’ management announced it had secured large contracts with Nokia and Ericsson.
Like the other two companies on this list, Skyworks has enjoyed consecutive years of solid revenue growth, though the pace of that expansion has slowed recently. The company generated more than $3.86 billion in sales in the year ended Sept. 30, 2018.
Mid-cap tech stocks can provide a good mix of value and growth potential, especially in today’s macroeconomic climate. The stocks on today’s list are well-established brands with considerable upside across major segments of the tech industry.
Disclaimer: Author holds no investment positions in Yandex, Wayfair or Skyworks at the time of writing.