Investors have been on an exciting ride this year. The market plummeted in March, at the onset of the pandemic in the United States, and quickly rebounded throughout the summer, driven by tech stocks benefiting from the stay and work from home trends.
However, the rally in tech stocks recently slowed down, as three vaccine candidates provided hope that we could finally return to normal. Investors rotated from technology stocks into companies that were beaten down during the pandemic. Though this trend may continue into December, I believe soaring cases of COVID-19 will continue to be a significant driver for technology stocks as we enter the new year.
That’s why it’s prudent for savvy investors to consider adding solid technology companies to their portfolios. Today I’m going to highlight three such companies: NVIDIA Corporation (NVDA), Logitech International S.A. (LOGI), and Amkor Technology, Inc. (AMKR).
NVIDIA Corporation (NVDA)
NVDA has certainly benefited from the coronavirus-induced stay-at-home wave, with the stock up 128.1% year to date. Unlike many of its technology peers, it was also up 6.9% in November. The company is the leading designer of graphics processing units that enhance the experience of computing platforms.
NVDA has been acquiring companies to advance its AI capabilities. It completed the acquisition of Mellanox Technologies earlier this year and is looking to close a $40 billion bid for ARM Holdings. It is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Its GPU capabilities offer greater processing speeds for expanding AI workloads for enterprise customers.
It also sees a surge in Hyperscale demand, which benefits the company’s Data Center business. The expansion of NVIDIA GeForce NOW is expected to drive its user base. Solid uptake of AI-based smart cockpit infotainment solutions is also a boon. Moreover, collaboration with Daimler-owned Mercedes-Benz is expected to further strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics space.
NVDA has a strong history of sales and earnings growth and is highly profitable, with a return on equity of 25%. The stock is rated a “Buy in our POWR Ratings system. It holds a grade of “B” in Trade Grade, Buy & Hold Grade, and Industry Rank, three out of the four components that make up the POWR Ratings.
Logitech International S.A. (LOGI)
LOGI is a Switzerland-based provider of personal computer and mobile accessories for navigation, video communication, and collaboration, smart home, and other applications. Similar to NVDA, the stay-at-home trend boosted sales due to an increase in orders. In addition, the company’s thriving cloud-based video conferencing services is a key growth catalyst.
The company has also been benefiting from a strong performance from its Gaming and Video Collaboration units. The rising adoption of new mobile platforms in traditional and emerging markets fuels demand for the company’s peripherals and accessories. Its stock is up 93.9% for the year and was up 6.7% for November.
LOGI sees strong momentum in its new products, which should further boost revenue. Plus, its partnerships with cloud providers Zoom Video (ZM), Microsoft (MSFT), and Google (GOOG) should also aid growth. Overall, I think a continuation of the stay-at-home trend should continue to be advantageous for the company as its products benefit from more employees working from home.
Like NVDA, the company has a strong history of sales and earnings growth and is highly profitable with a return on equity of 39.3%. The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. The stock is also ranked #12 in the Technology – Hardware industry.
Amkor Technology, Inc. (AMKR)
AMKR is a provider of outsourced semiconductor packaging and test services to integrated device manufacturers, fabless semiconductor companies, and contract foundries. The company recently posted very strong third-quarter results, with both earnings and revenues topping estimates. Earnings were up 65.2% year over year, while revenue increased 25%.
Revenue was driven by strong performance in its advanced product lines. The company is also seeing strong demand in the automotive, communications, and industrial markets and the computing and consumer markets. AMKR also provided new guidance for Q4, with sales between $1.25 billion and $1.35 billion and gross margins between 17% and 20%.
Further growth will be driven by 5G, IoT wearables, and advanced automotive systems. The growing demand for mobile devices and an increasing percentage of auto sales as part of its revenue should boost AMKR’s prospects next year. While the stock is only up 13.4% for the year, it has a very strong November with a 24.4% gain.
The company has a strong balance sheet and is currently undervalued with a P/E of only 11.5. AMKR even sports a 1.1% dividend yield. AMKR is rated a “Buy” in our POWR Ratings system. The stock has a grade of “A” for Trade Grade and a “B” for Buy & Hold Grade and Industry Rank.
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NVDA shares rose $3.08 (+0.57%) in premarket trading Tuesday. Year-to-date, NVDA has gained 128.13%, versus a 14.10% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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