- The Nasdaq has been the top performer on Wall Street this year, thanks to easing inflation and receding fears over further rate hikes.
- As such, I used the InvestingPro stock screener to search for the best tech stocks to own amid the current backdrop.
- Below is a list of 20 stocks in the Nasdaq which are expected to provide some of the highest returns based on the InvestingPro models.
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- Skyworks Solutions (NASDAQ:SWKS): InvestingPro Fair Value Upside: +28.4%
- NetApp (NASDAQ:NTAP): InvestingPro Fair Value Upside: +26.7%
- Cognizant (NASDAQ:CTSH): InvestingPro Fair Value Upside: +25.3%
- Cisco (NASDAQ:CSCO): InvestingPro Fair Value Upside: +22.7%
- NetEase (NASDAQ:NTES): InvestingPro Fair Value Upside: +19.5%
- Alphabet: InvestingPro Fair Value Upside: +14.6%
- Microchip (NASDAQ:MCHP): InvestingPro Fair Value Upside: +14.1%
- NXP Semiconductors (NASDAQ:NXPI): InvestingPro Fair Value Upside: +9%
- Lam Research (NASDAQ:LRCX): InvestingPro Fair Value Upside: +8.7%
- Enphase Energy (NASDAQ:ENPH): InvestingPro Fair Value Upside: +8.2%
- Applied Materials (NASDAQ:AMAT): InvestingPro Fair Value Upside: +7.9%
- KLA Corporation (NASDAQ:KLAC): InvestingPro Fair Value Upside: +7.4%
- ON Semiconductor (NASDAQ:ON): InvestingPro Fair Value Upside: +6.9%
- Adobe (NASDAQ:ADBE): InvestingPro Fair Value Upside: +4.1%
- Meta Platforms: InvestingPro Fair Value Upside: +3.8%
- GlobalFoundries (NASDAQ:GFS): InvestingPro Fair Value Upside: +3.7%
- Super Micro Computer (NASDAQ:SMCI): InvestingPro Fair Value Upside: +2.4%
- Analog Devices (NASDAQ:ADI): InvestingPro Fair Value Upside: +2.4%
- Intuit (NASDAQ:INTU): InvestingPro Fair Value Upside: +1.8%
- Broadcom (NASDAQ:AVGO): InvestingPro Fair Value Upside: +0.3%
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Stocks on Wall Street extended their year-long rally on Wednesday, with the S&P 500 and Nasdaq Composite both reaching fresh 52-week highs after data showed U.S. inflation continued to subside in June.
Source: Investing.com
The lighter-than-expected CPI report raised hopes that the Federal Reserve will soon end its year-long rate hike cycle, boosting appetite for riskier assets.
The tech-heavy Nasdaq has been the top performer of the three major U.S. indices by a wide margin so far in 2023, surging 33% year-to-date.
That compares to an increase of 16.5% for the benchmark S&P 500 over the same time span and a 3.6% gain for the blue-chip Dow Jones Industrial Average.
The ongoing rally has been fueled by shares of the mega-cap tech companies, with Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), and Tesla (NASDAQ:TSLA) all posting triple-digit gains thus far, while Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL) are also up solidly on the year.
The much awaited U.S. Labor Department report revealed that U.S. consumer prices rose 3.0% in the 12 months through June. It was the smallest year-on-year increase since March 2021 and followed a 4.0% advance in May.
Core CPI, which excludes volatile food and energy prices, eased to 4.8% on an annual basis last month, moderating from a 5.3% increase in May. That was also the smallest annual gain in more than two years.
Given the downward trend in inflation, the market is sensing the Fed is getting closer and closer to the end of its current rate hiking cycle, which began in March 2022 and saw CPI peak at 9.1% last summer.
While the U.S. central bank is still expected to raise rates by 25 basis points at its policy meeting later in July, traders are betting that this month’s move will be the last and final one for the time being.
What to Do Now
At the time of writing, I remain long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 (NYSE:SPY), and the Invesco QQQ Trust (NASDAQ:QQQ). I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
The market rally continues to show impressive strength as bulls remain firmly in control, while those that have been sitting on the sidelines hoping for a pullback continue to get frustrated.
Taking that into consideration, investors should be looking to add exposure amid the promising bullish trend.
As such, I used the InvestingPro stock screener to find the best tech stocks to buy at the moment as inflation continues to subside and the Fed nears the end of its tightening campaign.
By leveraging the InvestingPro stock screener's robust features - including advanced filters, and comprehensive financial metrics - investors can identify stocks with the potential for significant growth, strong fundamentals, and favorable market trends.
I first scanned for companies with an InvestingPro Overall Health Label of either ‘Excellent’, or ‘Great’.
I then filtered for stocks that displayed an InvestingPro Overall Score greater than or equal to 2.75. Financial health score values range between 0.0 to 5.0 and very roughly translate to a company’s percentile ranking in its sector according to the InvestingPro models.
It should be noted that companies with InvestingPro health scores higher than 2.75 have consistently outperformed the broader market by a wide margin over the past seven years, dating back to 2016.
Finally, I searched for names with an InvestingPro Price Momentum Grade of either ‘A’ or ‘B’.
And those companies with a market cap of $10 billion and above that also possessed ‘Fair Value’ price target upside made my watchlist.
Once the criteria were applied, I was left with a total of 20 tech-related companies that all offer strong fundamentals and the potential for long-term growth amid the current market environment.
Top 20 Tech Stocks According to InvestingPro
Among the Nasdaq, here are the top 20 tech stocks that could shape the investing landscape in the months ahead, based on the InvestingPro models.
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Disclosure: I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.