NEW YORK (TheStreet) -- Technology stocks have somewhat underperformed the broader markets in the first six months of the year, but some of the best performing stocks were the semiconductors, fueled by recent industry consolidation. Investors are also betting on which semiconductor companies could be the next to merge.
The S&P 500 Information Technology Index fell 0.02% through June 30, 2015, slightly underperforming the broader S&P 500, which eked out a 0.2% gain.
Several big combinations announced this year include: Avago Technologies (AVGO) and Broadcom Corp. (BRCM), in a deal worth $37 billion; Intel (INTC) and Altera (ALTR) also announced they would merge in a transaction worth $17 billion; as well, NXP Semiconductors (NXPI) announced it would acquire Freescale Semiconductor Ltd. (FSL) for $12 billion.
These S&P tech stocks had big wins in the first half of the year. That said not all of the stocks on this list are buys. TheStreet pairs each of these tickers with TheStreet Ratings to let you know if you should buy, sell, or hold these best-performing stocks.
TheStreet Ratings, TheStreet's proprietary ratings tool, 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 stocks were among the best S&P 500 tech performers to date. And when you're done be sure to see which stocks in the S&P 500 had the best overall gains this year.CTSH data by YCharts
10. Cognizant Technology Solutions ( CTSH)
Sub-Industry: IT Consulting & Other Services
Market Cap: $37.3 billion
Rating: Buy, A
Year-to-date return: 16%
Cognizant Technology Solutions Corporation provides information technology (IT), consulting, and business process services worldwide. The company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other.
TheStreet said: "We rate COGNIZANT TECH SOLUTIONS (CTSH) 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, reasonable valuation levels, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 22.5%. Since the same quarter one year prior, revenues rose by 20.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CTSH's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.08, which clearly demonstrates the ability to cover short-term cash needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.08% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- COGNIZANT TECH SOLUTIONS has improved earnings per share by 8.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COGNIZANT TECH SOLUTIONS increased its bottom line by earning $2.35 versus $2.02 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.35).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 9.8% when compared to the same quarter one year prior, going from $348.88 million to $382.90 million.
- You can view the full analysis from the report here: CTSH Ratings Report