There are no certainties in the market but betting on the continued growth of technology seems as safe as they come. Technology, from semiconductors to cloud software, help support much of the economy because businesses and organizations of all shapes and sizes from every possible industry rely on tech directly or indirectly. The everyday consumer is also more connected than ever, from iPhones AAPL to Amazon Alexa AMZN speakers, and countless other devices.
Taking a broader view of the market, things are looking bullish. The market began back-to-back weeks by surging to new highs on positive vaccine news from Pfizer (NYSE:) and Moderna (NASDAQ:). Plus, the U.S. economy and the S&P 500 earnings picture were already improving without the help of a vaccine (also read: Diving Into Retail Sector Earnings).
The S&P 500 is now up roughly 13% in 2020 and 10.5% since the start of November. And some of the most influential firms on Wall Street such as Goldman Sachs (NYSE:) have turned far more bullish for 2021. And who could blame them, especially when the Fed has committed to holding its key interest rate to near zero through at least 2023.
Now let’s jump into three highly-ranked stocks that fit into the tech basket that investors might want to consider buying. All three also boast solid dividend yields…
Garmin is far from the biggest name in tech and many might know it for its in-car GPS devices, as well as smartwatches, and fitness trackers that compete against the likes of Apple and Fitbit (NYSE:). GRMN boasts an expansive portfolio of these devices and it also sells high-end fish finders, advanced radars for aviation and boating, and many other higher-end offerings. Garmin topped our Q3 estimates at the end of October, with sales up 19% to $1.1 billion. Its top-line growth was driven by serious expansion in its marine, fitness, and outdoor units.
Zacks estimates call for Garmin’s fiscal 2020 sales to climb 7% to reach $4.0 billion, with FY21 projected to come in another 6% higher. These estimates would come on top of last year’s 12% growth and stack up well compared to FY18’s 7% revenue growth. GRMN’s adjusted earnings outlook appears similar over this stretch and its longer-term EPS outlook has improved since its Q3 report. This bottom-line positivity helps the stock land a Zacks Rank #2 (Buy) right now and Garmin has consistently beat our earnings estimates.
Garmin stock has jumped over 17% in the past month to crush the tech sector and it closed about 5% off its recent highs on Wednesday. Shares of the navigation and GPS giant have climbed 200% in the past five years to outpace the tech sector’s 122%. This run helps make its 2.13% dividend yield that tops the 30-year U.S. Treasury and the S&P 500’s average (both at roughly 1.6%) appear even more impressive. Garmin also trades at a discount against the tech sector, and it closed Q3 with a strong balance sheet.
Taiwan Semiconductor Manufacturing Company TSM
Taiwan Semiconductor is the world’s largest semiconductor manufacturer, with roughly 55% market share. TSMC runs a dedicated semiconductor foundry business and it claims to have the “world’s largest semiconductor design ecosystem” that has enabled “85% of worldwide semiconductor start-up product prototypes.”
Companies turn to foundries such as TSMC for their integrated circuit production because the costs and time involved are enormous, which makes building chips in-house far less attractive, if not impossible for many. This has helped Taiwan Semiconductor land deals giants like Nvidia NVDA and it’s even helping produce Apple’s new in-house processors. TSMC’s revenue has surged by 29% or higher in the trailing four periods, including in the third quarter. And the company stands to benefit from the continued growth of the chip space, and it’s ready to capitalize on the shift to 5G and more.
Zacks estimates call for its Q4 sales to jump 24% to help lift its adjusted earnings by 26%. The company’s positive earnings revisions help it land a Zacks Rank #2 (Buy) at the moment and TSM is part of an industry that sits in the top 4% of our over 250 industries. TSMC shares have surged 70% in 2020 vs. its industry’s 45% climb, which includes an 11% jump in the past month. TSM stock hovers not too far off its recent records and its 1.44% dividend yield blows by the 10-year U.S. Treasury’s 0.87% and is an added bonus for a company that looks set to grow for years in a vital industry.
Best Buy BBY
Best Buy might not be your traditional tech stock. Nonetheless, it sells smartphones, TVs, connected-appliances, and nearly every other consumer electronics device one could imagine. The firm has benefitted from the work-from-home world. More importantly, tech devices aren’t going to go out of style no matter what the future holds. BBY spent the last several years bolstering its e-commerce offerings, while remaining exposed to the still massive brick-and-mortar market.
BBY topped our Q2 estimates, with sales up 4% and adjusted earnings up 58%, even though its stores were impacted by the coronavirus. Best Buy is one of the last big names left to report its Q3 results, which are due out on November 24. Zacks estimates call for BBY’s adjusted Q3 EPS figure to jump 50% to reach $1.69 a share, with its revenue projected to climb nearly 12% higher to $10.9 billion. The company’s sales and earnings growth is expected to continue in the fourth quarter and next year.
Best Buy stock has surged 280% over the last five years to easily beat Walmart (NYSE:) WMT, Target TGT, and the S&P 500. This run includes a 35% climb in 2020 and the stock closed Wednesday around 5% off its recent highs. Despite this growth, BBY trades at a significant discount against some of its competitors and its 1.85% dividend yield beats Walmart’s 1.45% and Target’s 1.67%. And the company’s earnings trends help it hold a Zacks Rank #2 (Buy) right now.
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