NEW YORK (TheStreet) -- With Apple's Inc. (AAPL) Worldwide Developers Conference beginning yesterday, and the uptick in semiconductor mergers, we decided to take a look at the best volatile large-cap stocks investors should buy.
New companies in any industry can be volatile. But in the technology industry, younger companies are especially volatile, due to new technologies coming out, and new start-ups being created. To alleviate risk, many tech companies acquire younger start-ups before they take off. By doing this, the larger companies eliminate possible competitors, or broaden their business lines so they are not single product or service companies.
So, what are the best tech companies that are also highly volatile that investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which tech companies made the list. And when you're done, be sure to read about which biotech companies to buy now. Year-to-date returns are based on June 8, 2015, closing prices. The highest-rated stock appears last.SWKS data by YCharts
3. Skyworks Solutions, Inc. (SWKS)
Rating: Buy, A+
Market Cap: $19.5 billion
Year-to-date return: 40.7%
Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets analog and mixed signal semiconductors worldwide.
"We rate SKYWORKS SOLUTIONS INC (SWKS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SWKS's very impressive revenue growth greatly exceeded the industry average of 0.6%. Since the same quarter one year prior, revenues leaped by 58.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SWKS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.46, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SKYWORKS SOLUTIONS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for SKYWORKS SOLUTIONS INC is rather high; currently it is at 51.31%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.84% is above that of the industry average.
- Powered by its strong earnings growth of 112.50% and other important driving factors, this stock has surged by 125.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SWKS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: SWKS Ratings Report