Editor's Pick: Originally Published Tuesday, Dec. 22.
Tech has been one of the best performing sectors in the S&P 500 Index this year, despite market volatility in the latter half of 2015 that continues to rock the stock market.
The S&P 500 Information Technology Index is up 5.2% for 2015, vs. a rise of 0.1% for the broader S&P 500. Eight of the 10 top-performing stocks in the broader index this year are technology or technology-related companies. Tech stocks, in general, have been good buys, but some are better investments than others, going forward.
The list below includes stocks within the technology sector that have A+ ratings by TheStreet Ratings, TheStreet's proprietary ratings tool.
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 equity 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 the whole list of good tech buys. When you're done check out the large-cap stocks to sell before 2016.AVGO data by YCharts
1. Avago Technologies (AVGO)
2015 return: 45%
Avago Technologies designs, develops, and supplies semiconductor devices with a focus on analog III-V based products. The company operates through four segments: Wireless Communications, Wired Infrastructure, Enterprise Storage, and Industrial & Other segments.
TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate AVAGO TECHNOLOGIES LTD as a Buy with a ratings score of A+. 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, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 15.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 228.00% and other important driving factors, this stock has surged by 41.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
- AVAGO TECHNOLOGIES LTD reported significant earnings per share improvement 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, AVAGO TECHNOLOGIES LTD increased its bottom line by earning $4.90 versus $1.16 in the prior year. This year, the market expects an improvement in earnings ($9.68 versus $4.90).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 217.8% when compared to the same quarter one year prior, rising from $135.00 million to $429.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, AVAGO TECHNOLOGIES LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: AVGO