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The technology sector is made up of companies that, among other things, manufacture consumer electronics and their components, develop software, and provide information technology (IT) services like cloud hosting. Well-known companies in this sector include Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL), and Facebook Inc. (FB). The tech sector, as measured by the Technology Select Sector SPDR ETF (XLK), has outperformed the S&P 500 substantially over the past year. XLK returned 50.2% versus the S&P’s 27.7% in the trailing 12-month period. All figures are as of January 6, 2020.
Below, we’ll examine the top three stocks in the tech sector for best value, fastest earnings growth, and most momentum.
Best Value Technology Stocks
Here are the technology stocks in the S&P 500 with the lowest 12-month trailing price-to-earnings (P/E) ratio in the sector. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
- Seagate Technology PLC: Seagate Technology is a manufacturer of hard drives and computer storage solutions. The company makes hard disk drives, consumer retail storage products, and more. In its recent fiscal Q1 2020 report, reflecting the quarter ending October 4, Seagate reported a slight decline in revenue and gross margin year-over-year (YOY).
- HP Inc: HP is a manufacturer of PCs, PC accessories, printers, and ink. They were one of the two companies resulting from the 2014 breakup of Hewlett-Packard, the other being Hewlett Packard Enterprise. HP announced in November that its board of directors had unanimously rejected an unsolicited proposal from Xerox to acquire the computer manufacturing company.
- Fortive Corp.: A diversified industrial company, Fortive has a wide array of business efforts including automation, sensing, transportation technology and more. It was launched as a spin off from conglomerate Danaher in 2016. In October, Fortive reported a Q3 2019 increase in continuing operations of 16.2% YOY along with core revenue growth of 2.1%.
Fastest Growth Technology Stocks
Here are the technology stocks in the S&P 500 with the highest year-over-year earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
- ServiceNow Inc.: ServiceNow is a software company focused on the information technology (IT) management space. Besides IT services, the firm creates and markets cloud services products and other software as well. In Q3 2019, ServiceNow posted subscription revenue of $835 million, representing 35% non-GAAP adjusted YOY growth.
- Gartner Inc.: Gartner is a research and consulting company. It advises clients on IT, finance, human resources, and supply-chain-management, among other areas. In addition to performing research in a variety of industries, the company organizes and host conferences. On October 31, Gartner reported quarterly earnings that significantly surpassed consensus estimates.
- Xerox Holdings Corp.: A holding company, Xerox owns subsidiary businesses that manufacture and distribute printers, scanners, and related accessories and equipment. For Q3 2019, Xerox reported operating cash flow of $356 million, up $82 million YOY.
Technology Stocks with the Most Momentum
These are the technology stocks in the S&P 500 that had the greatest total return over the past 12 months.
|Technology Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Advanced Micro Devices Inc. (AMD)||48.60||54.1||155.8|
|Lam Research Corp. (LRCX)||294.69||42.8||113.5|
|KLA Corp. (KLAC)||179.08||28.3||91.8|
|S&P 500 (SPY)||N/A||N/A||27.7|
|Technology Select Sector SPDR Fund (XLK)||N/A||N/A||50.2|
- Advanced Micro Devices Inc.: Advanced Micro Devices creates and manufactures computer processors and related technologies for both business and consumer markets. AMD reported Q3 2019 revenue of $1.8 billion, up from $1.65 billion a year prior.
- Lam Research Corp: Lam Research manufactures and services equipment used to make microchips. The semiconductor sector is doing well as a whole, measured by the SPDR S&P Semiconductor ETF (XSD), which is up about 48% in the last year. On October 23, Lam reported September quarter (Q1 FY2020) revenue of nearly $2.2 billion, down slightly from the previous year.
- KLA Corp: KLA manufactures equipment that helps test and control the microchip manufacturing process. KLA beat consensus estimates when it reported earnings on October 31, generating revenue of $1.4 billion for the period, above guidance.
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