The best tech stocks to buy or watch aren’t hard to find, as long as you’re fishing in the right pond. Whether it’s a widely held name like Facebook stock or a lesser-known name like ASML stock, the best tech stocks share many common traits. But they’re getting harder to find now as selling pressure continues to build in the Nasdaq.


The best tech stocks boast strong fundamentals along with leading price performance in their industry groups. Many also show favorable fund ownership trends.

Fishing in the right pond means targeting top stocks showing resilience and holding near highs. Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.

Stock Market Health

After a 40%-plus gain for the Nasdaq composite last year, the environment has gotten a lot tougher for growth stocks.

The 2020 stock market rally started with a follow-through day for the S&P 500 on April 2. It soared 2.3% in higher volume, confirming a new uptrend on the eighth day of its rally attempt. The Nasdaq composite confirmed a new uptrend on April 6 when it soared 7.3% in higher volume.

The stock market went into a correction on Sept. 23 after the S&P 500 flashed its eighth distribution day, falling 2.3% in higher volume. But it didn’t take the stock market long to recover. The Dow Jones Industrial Average flashed a follow-through day on Sept. 30, rising 1.2% in higher volume.

After a sharp pullback for the stock market in October, the S&P 500 followed through again on Nov. 4, rising 2.2% in higher volume.

The stock market uptrend came under pressure, hurt by six distribution days for the S&P 500 between Feb. 18 and March 4. The Nasdaq composite and the Russell 2000 small-cap index are the laggard indexes at this point, but the Dow Jones and S&P 500 continue to hold near highs.

You can monitor the distribution day count every day in The Big Picture column. Read it for exclusive stock market analysis.

To be sure, the coronavirus stock market crash last year resulted in a lot of broken stock charts. But new leaders emerged, resulting in plenty of profit opportunities. It’s tougher now, with the Nasdaq below its 50-day moving average and several leading growth stocks under pressure after big gains last year.

Five Top Tech Stocks

The best tech stocks to buy or watch now include Twitter (TWTR), Facebook (FB), Microsoft (MSFT), Axonics Modulation (AXNX) and ASML (ASML).

Why This IBD Tool Simplifies The Search For Top Stocks

The technology sector is loaded with stocks with outstanding fundamentals. Many sell at a hefty premium, but a high valuation is warranted due to strong growth prospects.

While several growth stocks have corrected 40% or more off their recent highs, the pullbacks for Twitter, Facebook and Microsoft have been contained so far. Microsoft is a member of the IBD Long Term Leaders screen. It’s also a Leaderboard stock.

Finding The Best Tech Stocks To Buy Or Watch

Screening for the best tech stocks to buy or watch is as easy as looking at the MarketSmith Growth 250, a daily screen of high-quality stocks. Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating, or stocks trading up in price with the heaviest volume.

The best tech stocks to buy or watch aren’t guaranteed to be huge stock market winners. But they do have qualities seen in past stock market winners before big price gains.

Twitter Stock

Amid a recent sell-off in technology stocks, Twitter is testing support at its 10-week moving average for the first time after a bullish technical breakout during the week ended Feb. 12.

Twitter stock gapped up on Feb. 10 on bullish Q4 results. Adjusted profit of 38 cents a share topped expectations and was up 52% year over year. Revenue was also better than expected at $1.29 billion, up 28%. Ad revenue rose 31% to $1.15 billion.

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The company’s mobile daily active users increased by 5 million from the third quarter to 192 million in Q4, a bit below analysts’ expectations of 193.5 million. The user base was up 26.3% compared to a year earlier.

Buyers were in the stock again on Feb. 25 when the company said in an SEC filing that it plans to double its annual revenue by the end of 2023, with 315 million mobile daily active users. Twitter recorded just over $3.7 billion in revenue in 2020.

Composite Rating: 84 (scale of 1-99 with 99 being the best)

Latest-quarter EPS % change: 52%

Latest-quarter sales % change: 28%

Three-year annualized EPS growth rate: n/a

Annual return on equity: n/a

Annual pretax margin: 15.1%

Facebook Stock

When Facebook reported Q4 results in late January, the company warned that the looming changes in Apple’s iOS 14 operating system along with a reversal in pandemic trends could hurt its advertising business. Apple’s change will affect Facebook’s ability to target ads, but CEO Mark Zuckerberg recently downplayed the change.

Q4 profit and sales came in nicely ahead of expectations, but Facebook’s user base in the U.S. and Canada fell to 195 million daily active users from 196 million a quarter earlier. It was the second straight quarter where the company lost users in the U.S. and Canada.

At the end of Q4, Facebook counted 3.3 billion monthly users across its family of apps, compared to 3.21 billion in the previous quarter. Besides Facebook, other apps include Instagram, Messenger and WhatsApp.

Facebook is a breakout candidate as it sits near the top of a long consolidation that started in late August. Keep in mind that breakouts have the best chance of working in healthy markets — when new institutional money is moving in from the sidelines — but that’s not happening now; not with the Nasdaq struggling below its 50-day line.

The 300 level is a key resistance level to watch for Facebook.

Composite Rating: 91

Latest-quarter EPS % change: 52%

Latest-quarter sales % change: 33%

Three-year annualized EPS growth rate: 9%

Annual return on equity: 24.6%

Annual pretax margin: 38.6%

Microsoft Stock

The Nasdaq 100 firm has been getting resistance near its 50-day moving average, but Microsoft gapped up Tuesday, helped by news it’s in talks to acquire chat app Discord for $10 billion. Microsoft is a breakout candidate again as it forms a flat base with a 246.23 buy point

The software giant hit a new high in late January when the company reported strong Q4 results. Earnings, sales, and Azure cloud revenue all came in better than expected. Adjusted profit of $2.03 a share was well ahead of the Refinitiv consensus estimate of $1.64. Revenue growth accelerated sequentially, up 17% to $43.1 billion vs. the consensus of $40.18 billion.

Revenue from Microsoft’s Intelligent Cloud business unit totaled $14.6 billion, up 23% year over year. The unit includes the Azure public cloud, as well as server products like Windows Server and GitHug. Azure revenue was up 50%.

The More Personal Computing segment also did well. It houses Windows, gaming, search advertising and devices like Microsoft Surface and PC accessories. The unit did $15.12 billion in revenue, up 14%.

Composite Rating: 73

Latest-quarter EPS % change: 34%

Latest-quarter sales % change: 17%

Three-year annualized EPS growth rate: 22%

Annual return on equity: 40.1%

Annual pretax margin: 37.1%

ASML Stock

Netherlands-based ASML is one of several top performers in IBD’s chip-equipment group. The group is one of the few bright spots in the technology sector, with several group leaders like ASML reporting strong earnings and sales growth in recent quarters.

ASML stock has a consistent long-term record of growth, with a five-year annualized earnings growth rate of 23% and a sales growth rate of 20%.

Why This IBD Tool Simplifies The Search For Top Stocks

When ASML reported Q4 results in January, adjusted profit rose 31%, with sales up 15% to nearly $5.2 billion. For the current quarter, the Zacks consensus is for adjusted profit to soar 199% to $3.08 a share, with sales up 80% to $4.84 billion.

Composite Rating: 99

Latest-quarter EPS % change: 31%

Latest-quarter sales % change: 15%

Three-year annualized EPS growth rate: 14%

Annual return on equity: 25.6%

Annual pretax margin: 30.2%

Axonics Modulation

Amid a sell-off in technology stocks, Axonics Modulation continues to hold support at the 10-week moving average with a relative strength line near new high ground. But it’s just below a 58.87 buy point after a breakout attempt from an early-stage base.

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Axonics is a provider of sacral neuromodulation (SNM) solutions, used to treat patients with overactive bladder, fecal incontinence, and urinary retention. SNM delivers mild electrical pulses to the sacral nerve to restore normal communication to and from the brain to reduce symptoms.

It’s a small-cap stock with a market capitalization of nearly $2.5 billion, but it’s fairly liquid with an average daily dollar volume of around $33 million.

Axonics isn’t profitable yet, but fund ownership has been rising in recent quarters. Increasing fund ownership was seen in several past stock market winners before big price moves.

Composite Rating: 68

Latest-quarter EPS % change: -0.29

Latest-quarter sales % change: 250%

Three-year annualized EPS growth rate: n/a

Annual return on equity: n/a

Annual pretax profit margin: n/a

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.


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