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What are we looking for?

Nasdaq-listed companies indicating upside earnings and price momentum.

Looking back at U.S. index performance in December over the past five years, the Nasdaq Composite index has closed higher than it opened 75 per cent of the time, outperforming the Dow Jones Industrial Average and the S&P 500. The Technology Select Sector SPDR Fund (XLK) is up approximately 2.3 per cent over the past week, making tech a top performing sector over this period. As the Nasdaq continues to lead U.S. equities higher, we looked for tech stocks that we anticipate will maintain upward price momentum toward the end of the year and beyond.

The screen

We will be using Trading Central Strategy Builder to search for large cap U.S. Nasdaq-listed stocks that have the potential to outperform the broad market in December.

We begin by setting a minimum market capitalization threshold of US$20-billion. We wish to focus on large cap names in the market owing to the greater stability and safety that they offer.

Next, we will filter for stocks that have had a minimum 52-week and year-to date price return of 15 per cent in order to find companies with bullish price momentum.

Lastly, we will look for tech stocks that are indicating revenue growth of at least 10 per cent in the most recent quarter compared with the prior year, and annualized growth in earnings per share of 20 per cent or more over the past five years.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options, and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

Outperforming Nasdaq stocks step into the metaverse

RankCompanyTickerMkt. Cap. (US$ Bil.) Rev. Grth. (Last Qtr. vs. Prior Yr.)5Y EPS Growth (%)1Y Perf. (%)YTD Perf. (%)Div. Yld. (%)P/E (TTM)Recent Price (US$)
1Nvidia Corp.NVDA-Q743.868.344.9117.9124.10.1106.0292.61
2Applied Materials Inc.AMAT-Q138.441.028.5106.080.70.626.7155.98
3Seagate Technology Hdgs.STX-Q21.534.645.682.662.32.914.3100.89
4KLA Corp.KLAC-Q63.235.424.474.762.21.023.6419.84
5Trade Desk Inc.TTD-Q32.839.3106.339.234.2n/a128.0107.5
6Microsoft Corp.MSFT-Q2523.122.025.860.752.50.737.6339.12
7Lam Research Corp.LRCX-Q86.035.538.846.533.50.920.6630.63
8Adobe Inc.ADBE-Q315.322.054.346.034.1n/a54.9670.67
9NetApp Inc.NTAP-Q20.411.933.270.732.
10Cadence Design SystemsCDNS-Q49.312.621.169.137.6n/a71.8187.74
11Trimble Inc.TRMB-Q21.713.827.055.932.8n/a39.388.65
12Teradyne Inc.TER-Q23.816.034.644.626.50.327.2151.61
13Apple Inc.AAPL-Q2482.028.822.

Source: Trading Central

Topping our list is Nvidia Corp., a leading designer of graphics processors. The company is developing infrastructure that will be essential to the metaverse, the shared virtual 3D world. It has the highest revenue growth on our list at 68.3 per cent last quarter when compared with the same quarter last year. The stock has the highest one-year and year-to-date performance on our list at 117.9 per cent and 124.1 per cent, respectively.

Nvidia is also the largest holding in the Roundhill Ball Metaverse Index ETF (META), which started trading this past June. The exchange-traded fund has begin to trend upward, breaking to a new high this month.

Microsoft Corp. also made our list. No surprise here – the software and hardware developer is the most valuable publicly traded company on the planet. It has entered the race to build a metaverse inside its Teams communication software, where users will have 3D avatars to represent them if they’d rather not turn their webcam on. The company has the highest market cap on our list at US$2.52-trillion.

Another key Software developer Adobe Inc., is currently working on new 3-D products in order to become an important design tool provider for the metaverse. Adobe has the second-best five-year historical EPS growth on our list at 54.3 per cent.

Apple Inc. is no stranger to augmented reality applications and user experiences that benefit the metaverse. The company has been investigating how virtual and augmented reality can be implemented in future hardware products. An Apple AR headset has been rumoured to be in the works. Apple has the second-highest market cap on our list at US$2.48-trillion.

Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had an impressive 37.3 per cent annualized return compared with 24.4 per cent for the Nasdaq. The S&P 500 returned 16.5 per cent in the same period.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

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