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What are we looking for?

Outperforming U.S. technology stocks.

The U.S. technology sector has remained the best-performing sector so far this year with the Technology Select Sector SPDR Fund (XLK) up an impressive 41.6 per cent. Digging deeper into the tech sector, renewable energy equipment stocks have led the sector higher with the Dow Jones U.S. Renewable Energy Equipment Index indicating a positive return of 100.9 per cent year-to-date.

The screen

We will be using Strategy Builder to search for companies in the technology sector that are showing positive revenue growth and upside price momentum.

We begin by setting a minimum market capitalization threshold of US$4-billion to screen out small-cap companies that have a greater potential for volatility.

Next, we will filter for stocks that have had at least a 20-per-cent return over the past 52 weeks and 5 per cent over the past four weeks to identify stocks that are showing bullish price momentum.

Finally, we want tech stocks that are indicating positive revenue growth of at least 10 per cent in the most recent quarter compared with same quarter in the prior year.

For informational purposes, we have also included the recent stock price and price-to-earnings ratio. Owing to the growth-oriented nature of the screen, some ratios are shown as “n/a,” indicating a negative P/E.

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

Ten outperforming U.S. technology stocks

RankCompanyTickerMkt. Cap. (US$ Bil.) Rev. Grth. Last Qtr. vs. Prior Yr. (%)1Y Perf. (%)4W Perf. (%)YTD Perf. (%)P/ERecent Price (US$)
1Square Inc.SQ-N99.2139.6248.622.4263.0n/a235.48
2Shopify Inc.SHOP-N130.096.5191.624.3191.1n/a1,174.55
3Datadog Inc.DDOG-Q30.861.3173.619.8176.7n/a108.50
4Fastly Inc.FSLY-N10.741.9407.517.4374.1n/a96.05
5Adv. Micro DevicesAMD-Q117.055.5129.017.3111.2108.596.70
6DocuSign Inc.DOCU-Q43.653.5222.310.6219.9n/a244.95
7Trade Desk Inc.TTD-Q43.831.6271.321.7261.7321.0938.70
8Sunnova Engy. Int'lNOVA-N4.237.0270.324.5267.0n/a41.40
9Okta Inc.OKTA-Q33.042.0125.216.1125.3n/a266.53
10StoneCo Ltd.STNE-Q24.145.5101.215.897.2140.579.98

Source: Trading Central

All told, 57 companies met the criteria; we include the top 10 in the accompanying table.

Ranked at No. 1 is Square Inc. (SQ-N) The mobile-payment company has the highest revenue growth of 139.6 per cent in the most recent quarter compared with the same quarter in the prior year. The stock price reached a new record high this week as it continues its uptrend since the start of the pandemic as more merchants move to contactless payment systems and e-commerce.

Ottawa-based Shopify Inc. (SHOP-T), an e-commerce platform for small and mid-size businesses that has shares listed in Toronto and New York, has the largest market cap on our list at US$130-billion. The company’s year-over-year revenue increased by 96.5 per cent in the most recent quarter. Shopify’s stock also reached a new record high this week as its uptrend continues from its March pandemic low.

Sunnova Energy International Inc. (NOVA-N) is a residential solar and energy storage service provider. The stock’s latest surge began in the lead-up to the U.S. presidential election as investors bet on a win by Joe Biden. The stock has the best four-week price performance on our list at 24.5 per cent, indicating strong upside momentum postelection. The stock also has the second-best year-to-date performance, gaining 267 per cent.

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 enjoyed a 42.2-per-cent annualized return compared with 20.2 per cent for the Nasdaq Composite 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.

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

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