Although macroeconomic headwinds this year brutalized the innovation sector, investors should consider targeting tech stocks to buy amid the turmoil. True, the sector features risks – there’s no way around this point. However, for both contrarians and those taking calculated risks, the technology sector features incredible discounts.
At its core, the narrative for tech stocks to buy centers on the famous Warren Buffett quote: to paraphrase, be fearful when others are greedy and greedy when others are fearful. Of course, you don’t want to base your entire portfolio on aphorisms. Nevertheless, when it comes to game-changing innovators, a little bit of contrarianism can go a long way.
| NVDA | Nvidia | $163.27 |
| TSM | Taiwan Semiconductor | $73.83 |
| LRCX | Lam Research | $500.82 |
| LOGI | Logitech | $62.55 |
| POWI | Power Integrations | $78.00 |
| IPGP | IPG Photonics | $94.63 |
| DAVA | Endava | $71.54 |
Nvidia (NVDA)
Headquartered in Santa Clara, California, Nvidia (NASDAQ:NVDA) is one of the giants in the semiconductor industry. Specifically, it made a name for itself through its graphics processing units, which feature extensive utility for gaming applications as well as cryptocurrency mining. In addition, Nvidia began pushing the envelope regarding artificial intelligence and machine learning, providing an intriguing backdrop for tech stocks to buy.
For contrarians, you can just look at the market performance. On a year-to-date basis, NVDA fell nearly 48%. At the same time, near-term momentum is intense, with shares gaining 36% over the trailing month since the Nov. 10 close. Much of the sentiment centers on lighter-than-expected inflation data, implying that the Federal Reserve in the future may be a bit more accommodating regarding its monetary policy.
Financially, NVDA offers myriad positive attributes that no one should ignore. Primarily, the underlying company kills it in terms of income-statement metrics. Its three-year revenue growth rate and net margin rank among the sector’s best. In addition, Nvidia features a stable balance sheet, bolstered by an Altman Z-Score of 12.75 that reflects extremely low bankruptcy risk.
Taiwan Semiconductor (TSM)
Based in its namesake country, Taiwan Semiconductor (NYSE:TSM) specializes in contract manufacturing and design. Per its public profile, TSM represents the world’s most valuable semiconductor company, the world’s largest dedicated independent semiconductor foundry, and one of Taiwan’s largest companies. Despite the accolades, TSM took a beating, dropping 45% since the January opener.
Still, for contrarians, Taiwan Semiconductor makes a case for game-changing tech stocks to buy. Part of the negativity surrounding TSM centers on the geopolitical crisis between the island nation, China and a potential American and western intervention should the world’s second-biggest economy try something militarily. However, given the amount of support the U.S. and others gave to Ukraine, it’s likely the Chinese are more interested in saber-rattling than actually doing something stupid.
That should give investors room to breathe and consider the company’s core financials. Not surprisingly given its relevance, TSM enjoys excellent profit margins. For instance, its net margin of 40.6% ranks higher than over 97% of the competition. Thus, TSM represents one of the tech stocks to buy on the dip.
Lam Research (LRCX)
Founded in 1980, Lam Research (NASDAQ:LRCX) operates out of Fremont, California. The company is a supplier of wafer fabrication equipment and related services to the semiconductor industry. Per its corporate profile, Lam’s products are used primarily in front-end wafer processing, which involves the steps that create the active components of semiconductor devices and their wiring.
Against the January opener, LRCX gave up 33% of equity value. While naturally arousing concerns, prospective investors should also note the near-term momentum. In the trailing month, LRCX gained over 48%, among the top-performing tech stocks to buy for the period. With other industries normalizing, investors may be bidding up LRCX in hopes of a broader recovery.
Financially, Lam Research offers great value for prospective risk-takers. Primarily, LRCX trades at 14-times forward earnings, below the industry median of 15.3 times. As well, the company features excellent quality of business as evidenced by its return on equity (ROE) of 75.8%. That beats out over 99% of the competition.
Logitech (LOGI)
Founded in 1981, Logitech (NASDAQ:LOGI) is based in Switzerland. The company is a well-known global brand, specializing in the manufacturing of computer peripherals and software. Still, that hasn’t saved LOGI from volatility. Since the start of the year, shares dropped over 31% in equity value. However, in the trailing month, LOGI gained over 34%, encouraging interested onlookers.
Fundamentally, what may help spark a recovery in the computer peripherals specialist is the burgeoning gig economy. With more employers likely to start recalling their employees back to the offices, a class conflict might erupt. Cynically, this dynamic should bode well for Logitech as newly minted gig workers who refuse to return to the corporate rat race may start buying their own equipment.
Financially as well, Logitech makes an attractive case for tech stocks to buy. Despite sharp losses in the market, the company features strong profit margins. For example, its operating margin of 12.6% beats out 81% of its rivals.
Power Integrations (POWI)
Headquartered in San Jose, California, Power Integrations (NASDAQ:POWI) is a semiconductor manufacturing firm. Specifically, it supplies high-performance components used in high-voltage power conversion. Applications include high-power systems such as solar and wind energy, industrial motor drives, electric vehicles, and high-voltage DC transmission lines.
Against the January opener, POWI dropped nearly 17% in equity value. However, the near-term enthusiasm is undeniable, making POWI an enticing idea among tech stocks to buy. In the trailing five days, shares gained more than 18% while in the trailing month, shares swung higher by 22%. With the Biden administration spearheading various infrastructural initiatives, Power Integrations should see a relevance surge.
On the financial front, perhaps the most conspicuous attribute of the company centers on its balance sheet. Specifically, the company carries zero debt. Ordinarily, that might not be the most favorable use of cash. However, during these uncertain times, a zero-debt balance sheet provides much flexibility. Therefore, POWI ranks among the tech stocks to buy.
IPG Photonics (IPGP)
Headquartered in Oxford, Massachusetts, IPG Photonics (NASDAQ:IPGP) is a manufacturer of fiber lasers. Per its public profile, the company develops and commercializes optical fiber lasers, which are used in a variety of applications including materials processing, medical applications, and telecommunications.
Since the beginning of this year, IPGP dropped over 48% of equity value, a not-uncommon magnitude of loss compared to other contrarian tech stocks to buy. However, the company may be in the early stages of a recovery process. In the trailing five days, shares moved up over 1% while in the trailing month, they gained over 5%.
Fundamentally, several tech stocks to buy responded positively to the aforementioned news about lighter-than-expected inflation data. With the Fed possibly able to consider a more accommodative monetary policy, circumstances may be bright for IPGP.
Moving forward, investors will probably take note of the company’s incredibly robust balance sheet. Primarily, its cash-to-debt ratio stands at over 57 times, beating out 84.5% of the competition.
Endava (DAVA)
Based in the U.K., Endava (NYSE:DAVA) provides digital transformation consulting, agile software development services, and various automation solutions. Following the January opener, DAVA stock ended up shedding over 57% of its equity value. However, the bearishness appears to have faded recently. In the trailing five days, DAVA gained half a percent while it’s up over 7% in the trailing month.
While not the most well-known enterprise stateside, DAVA may be a hidden gem among tech stocks to buy. On the income statement, Endava commands a three-year revenue growth rate of 28%, outranking over 84% of the competition. Further, its free cash flow growth rate during the same period is 52.1%, beating over 85% of its rivals.
On the bottom line, the company features a net margin of 12.7%. In contrast, the industry median level is only 1.9%. As well, Endava benefits from a solid balance sheet, particularly its equity-to-asset ratio of 0.7 that’s better than 68% of the industry.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.