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What are we looking for?

Tech stocks showing revenue growth and bullish price momentum.

Technology is the best-performing U.S. sector year to date with the Technology Select Sector SPDR Fund (XLK) up 15.1 per cent. It is also the best-performing sector over the past month with a return of 7.2 per cent. Companies in the computer hardware, software and semiconductor space are leading the sector higher.

Interestingly, looking back a year ago this week when I wrote a similar article for this column, the tech sector was also the monthly leader with an impressive 13.8-per-cent return as the S&P 500 posted new record highs. Could this be a signal that the S&P 500 will climb toward similar highs amid the coronavirus pandemic? The Nasdaq-100 Index, which is heavily weighted to technology companies, is already posting new highs at time of writing. If last year was any indication of what happens when the technology sector leads the S&P 500, we could see a continuation of the rally we have been watching since the pandemic lows in March.

The screen

We will be using Trading Central Strategy Builder to search for stocks in the outperforming technology sector that are showing both positive revenue growth and bullish share-price momentum.

We begin by setting a minimum market capitalization threshold of US$5-billion. We wish to focus on large-cap names in the market because of the greater stability and safety that they offer.

Next, we will filter for stocks that have had at least a 20-per-cent return over the past 52 weeks, 8 per cent year-to-date and 5 per cent over the past four weeks to find the stocks showing upside momentum.

Finally, we like tech stocks that show revenue growth in their most recent quarter compared with the same period a year ago.

Companies are ranked based on price and revenue growth criteria selected. For informational purposes, we have also included the recent stock price, price-to-earnings ratio and dividend yield.

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

Topping our list is Teradyne Inc., which makes automatic test systems for use in the wireless, automotive, aerospace and defence industries. Teradyne has the highest revenue growth on our list, growing 42.6 per cent in its most recent quarter compared with the same period a year ago. The company’s shares have the second-best four-week performance on our list at 21.7 per cent.

Apple Inc. has the largest market cap on our list with Microsoft Corp. in a close second at US$1.58-trillion and US$1.55-trillion, respectively.

Over the past year, the top-performing company on our list, in terms of price return, is chip maker Nvidia Corp., with an impressive gain of 129 per cent. The company also has the best year-to-date performance, at 62 per cent. Shares continue to post new record highs as the uptrend prevails.

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 a 16.1-per-cent annualized return compared with 7.7 per cent for S&P 500 index.

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.

Select U.S.-listed technology stocks

RankCompanySymbolMkt. Cap. (US$ Bil.) Rev. Growth Last Qtr.vs. Yr. Ago (%)1Y Price Perf. (%)YTD Price Perf. (%)4W Price Perf. (%)P/EDiv. Yld. (%)Recent Price (US$)
1Teradyne Inc.TER-Q13.742.669.721.621.728.60.582.91
2KLA Corp.KLAC-Q29.929.858.68.49.720.51.8193.15
3Microsoft Corp.MSFT-Q1,552.014.650.929.810.136.11.0204.70
4Nvidia Corp.NVDA-Q234.438.7129.462.07.671.00.2381.20
5Lam Research Corp.LRCX-Q46.12.665.98.619.223.31.4317.48
6Logitech Int'lLOGI-Q11.213.658.
7Apple Inc.AAPL-Q1,578.00.580.724.012.828.50.9364.11
8CoreLogic Inc.CLGX-N5.36.357.
9ASML Holding NVASML-Q140.79.575.025.89.952.60.8330.60
10Monolithic Pwr. Sys.MPWR-Q10.517.369.832.

Source: Trading Central

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

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