It’s no secret: tech stocks are often the biggest winners on the market.
But how do you spot a tech stock? Sure, there’s the big heavy hitters—Apple, Amazon, Facebook—followed by dozens of hardware, software, crypto, blockchain, and app plays.
Tech stocks aren’t for the faint of heart. What’s up one day is down the next—booms and busts rock Silicon Valley practically every week. That’s why it’s so important to look past the hype.
Looking beyond the trendiest names in tech, investors can find the real winners—diamonds in the rough that might not strike you as straight-forward tech plays, but which incorporate everything that makes tech so exciting, so vital and so necessary for every portfolio.
Here are five picks that showcase the range of options out there—along with some of the most exciting opportunities waiting to be grabbed:
#1 AT&T (NYSE:T)
This major telecommunications company has spent recent years transforming itself into a media company. AT&T has even acquired Time Warner and DIRECTV.
The Time Warner deal, worth $85 billion, has made AT&T a media juggernaut. That’s given it an online platform, HBOGO, to challenge emerging heavy-hitter Netflix.
AT&T has been spending like crazy, and its capex this year will exceed $25 billion. The payoff is this: the company is now a diverse tech stock rather than a telecommunications stock, and that diversity gives it flexibility.
Some of its new assets, such as HBO, are highly profitable and will only grow more valuable in the future. The company’s underlying assets are based on mobile phone use, which is sure to remain strong (there’s little chance of people abandoning their cell phones!).
Plus, this company has paid out a solid dividend to investors. AT&T stock may not be quite as valuable as some of the other heavy hitters, but it’s a good one to have for investors looking for reliable returns.
#2 Cool Holdings Inc. (NASDAQ:AWSM)
What’s the world’s most valuable company? That would be Apple, which set a new record this summer when it passed $1 trillion in value. The company reached such lofty heights thanks to its superb tech, its masterful marketing…and its groundbreaking retail.
Now, a piece of that retail market is being offered up to a tiny company, Cool Holdings, that will soon be seeking to profit from Apple’s historic success.
Apple Stores are the most profitable retail spaces in the world—they earn an average of $5,500 per square foot.
Cool Holdings has been granted a license to open up its own stores all across the U.S., to sell branded Apple products. It’s already opened stores in Latin America, and its plan is to open up 200 stores across the United States by 2020, with an average floor size of 1200 square feet.
With a proven retail potential of $3,750, Cool Holdings’ expansion could be worth a staggering $900 million—all for a company worth only $29.3 million.
You may have heard that retail is dead. But Apple revolutionized retail with the Apple Store, and now Cool Holdings is seeking to replicate that success with its One Click line of Apple co-branded stores.
The idea is to bring Apple retail space to untapped markets, where Apple stores haven’t penetrated.
Cool Holdings has raised $3.7 million to fund its expansion, and it has the full support of Apple Inc. But the company wants to do more than just sell Apple products. It is licensed to sell a range of high-tech products from Bose, Sonos, Moshi and Kanex.
These are seriously profitable brands. Bose alone nearly cracked Forbes’ Top 100 and earned $3.8 billion in revenue last year.
This is a real opportunity, one that is flying under the radar. Apple’s vote of confidence in Cool Holdings shows how profitable this venture could be.
For a tiny company like Cool Holdings, just being near the Apple brand means an increase in valuation, as soon as investors take note…which could happen any day.
Those who are savvy enough to buy in early could see their penny shares worth much more in the near future. Missing this could be like missing the iPod in 2001.
#3 NVIDIA (NASDAQ:NVDA)
You’ve probably heard this story: a popular graphics-card manufacturer secures a chunk of market share and rides an explosion in computer sales to become one of the most valuable stocks in the world.
Indeed, if you had purchased $1000 in NVIDIA stock ten years ago, it would be worth $11,000 today…an increase of 1000%.
NVIDIA manufactures computer chips, graphics’ cards and other computer components. It’s one of the biggest success stories of the last few years: the stock has out-performed most all competitors. And NVIDIA shows no signs of slowing down.
The company plans to roll out a new graphics processing unit (GPU) later this year that would act as a strong catalyst for the company’s stock. The GPU will primarily be used in high-end gaming PCs, a niche market but one that NVIDIA has a strong hold on.
The company has suffered a set-back or two in recent days. Sales to crypto-currency miners fell way below expectations, as NVIDIA cleared only $18 million instead of the $100 million it had hoped for. Given the tumble in the price of Bitcoin, that wasn’t much of a surprise.
But the company has bounced back thanks to strong sales to data centers and GPU, which together account for 82% of NVIDIA’s bottom line. Neither show any sign of slowing down.
Expect NVIDIA to follow on past years’ success. This company will continue to succeed, thanks to its industry-leading position and its strong track-record.
#4 Fitbit (NYSE:FIT)
This tech company made headlines a few years ago when it released its signature product: a wristwatch that measured daily physical activity and athletic performance.
Fitbit hit some headwinds last year as its competitors, including Apple, started releasing smart-watches that have eaten into the company’s market share.
After a red-hot IPO, Fitbit’s stock has tumbled, leading some to wonder if the company would be able to bounce back. Fitbit’s active user base took a hit in 2017.
Second-quarter 2018 revenue was below the level from last year, but Fitbit’s fortunes seem to be improving: Q2 exceeded Q1 revenue by 21% and the average selling price of each unit has increased by 6%.
The company’s Ionic and Versa smart-watches are strong sellers, and Fitbit management has claimed that the Versa outsells its competitors from Samsung, Fossil and Garmin in North America. Even if it can’t rival Apple, Fitbit has carved out a niche in the smartwatch market, which now accounts for 55% of its total revenue.
Fitbit has 50 million registered users to tap for its smartwatches, and millions of old customers that dumped the company when fitness trackers went out of fashion are starting to come back.
A turnaround in the company’s stock could benefit investors who bought in when the price fell. Even if Fitbit doesn’t recover fully to its lofty heights, this stock could emerge as a winner.
#5 Cisco Systems, Inc. (NASDAQ:CSCO)
Cisco officially got its mojo back in 2018. The year has been a great one for the company, with the stock rising by 25%, nearing an 18-year high and soaring above the S&P average.
What’s the secret of its success? Cisco has spent the last several years transitioning from traditional pricing to a subscription service, a model that’s worked really well for Adobe and other software firms.
While dividends from Cisco have been disappointing, the increase in deferred revenue from subscribers’ hints at stronger dividends to come. And this lines up with the company’s stellar stock performance.
In fact, performance has been so strong, and the outlook so positive, Piper Jaffray has pronounced Cisco a safer bet than Apple or Amazon.
This is early hype for a company that isn’t on everyone’s tech radar. The upside on the stock, despite the strong gains it’s made in the last year, could be enormous.
More tech companies that investors should keep a close eye on:
3D Signatures Inc (TSXV:DXD) is a high-tech personalized medicine company with an innovative new software platform which uses 3D analysis to target various diseases and help clinicians identify a diagnosis and optimize treatment plans. 3D Signatures’ software is saving doctors time which will make a huge difference in the treatment of patients.
3D Signatures sets itself apart from its competition through creating individualized treatment plans for patients. Using its mapping platform, the software can determine how a disease will progress and whether or not the patient will respond to treatment
3D Signatures is also engaging in ground breaking research, collaborating with other med-tech leaders to tackle some of the world’s most daunting diseases, such as Hodgkin’s Lymphoma, prostate cancer and lung cancer.
Mogo Finance Technology Inc. (TSX:MOGO): This is a new spin on unsecured credit, which is a burgeoning sub-segment of FinTech. Providing loan management, the ability to track spending, stress-free mortgages, and even credit score tracking, Mogo is at the forefront of an online movement to assist users with their financial needs.
Mogo’s software analyzes borrowers instantly and greatly reduces the traditionally cumbersome underwriting process for loans. It’s online only, so there’s very low overhead and a ton of cash to spend on marketing. Labeled as “the Uber of finance” by CNBC, Mogo is definitely turning heads.
In August, Mogo announced that its financial product line would expand to even more Canadians. Customers in Manitoba, New Brunswick , Prince Edward Island and Newfoundland now have access to MogoMortgage while Mogo’s entire suite of products is now available in Nova Scotia.
EXFO Inc (TSX:EXF): EXFO isn’t new to the Canadian tech sector. The company was founded in 1985 in Quebec City, and its original products were portable testing products for optical networks. Since then, the company has acquired and build 3G, LTE, protocol, copper/xDSL, IMS, and VoIP test and service assurance products.
Recent developments from EXFO are promising for long term growth potential. The new baseband unit emulation technology which is sure to be adopted on a large scale, as the tech offers operators a reduction of costs and a faster revenue stream.
Power Financial Corp (TSX:PWF): Montreal-based Power Financial Corp has been in the finance industry since 1984. The company operates in three segments: Lifeco, IGM and Pargesa Holding SA (Pargesa). And, with its holdings in a diversified portfolio spanning the United States and Europe, Power Financial is a leader in its field.
Focusing its investments in the emerging FinTech industry, Power Financial stands to benefit by riding this wave into the future. The company’s forward-thinking attitude and liberal approach to technology is sure to leave investors satisfied.
Power Financial’s second quarter adjusted net earnings were the highest in the company’s history, and with the election of new directors, the company is sailing smoothly into the second half of the year.
Kuuhubb Inc. (TSXV: KUU) is a company active in the development and acquisition of lifestyle and mobile video game applications. Its strategy is to create sustainable shareholder value through its groundbreaking AI and big data applications is a key point in its success.
Kuuhubb’s recent acquisitions, expansion to Japan, the launch of its first India-specific mobile and brand-new board member create even more value for the company moving into the second half of 2018.
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