In this article, we will look at the 11 tech stocks to consider for the long term. If you want to explore similar stocks, you can also take a look at Long-Term Stock Portfolio: 5 Tech Stocks to Consider.
Growth stocks are lagging in 2022 amid skyrocketing inflation and incessant rate hikes. As of September 30, the tech-heavy NASDAQ composite index has lost 33% of its value year-to-date. Growth stocks have been beaten down to levels where they are presenting an attractive entry point for long-term investors.
Analyst Says: “Try To Get Great Names On Pullbacks”
Senior securities analyst at Rosenblatt Securities, Barton Crocket, was interviewed on CNBC’s Squawk on the Street, where he discussed how investors can navigate the current market situation around tech stocks by investing in blue chip companies. He also talked about how now is an attractive entry point for long-term investors to own some of the top tech companies. According to Barton Crocket, investors “have to own tech” because “tech is the future”. Here are some comments from the analyst:
“What I think we’re looking at is an environment where it’s more treacherous than really any time in many years to own tech. You’ve got valuation risk around higher interest rates, around slowing growth, you’ve got a plethora of new secular challenges…You have a lot of things to consider but you have to own tech right, so tech is the future. The question is how you navigate that, and I think you want to stick with and have some exposure to some of the best names at a reasonable valuation…”
Barton Crocket was then asked if long-term investors should take up stakes in tech stocks before earnings season or wait for companies to report earnings. The analyst said that “clearly there’s increasing risk as we worry about the macro into the earnings reports” but “the stocks have reflected a lot of this already”. The analyst said that investors that are trying to time the market amid macro uncertainty can “miss an opportunity” and that they should instead “try to get great names on pullbacks”.
While the near term for tech stocks looks gloomy, they can become the highest returning components of your portfolio in the long term. Some of the top tech stocks to consider buying for the long-term include Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Apple Inc. (NASDAQ:AAPL). These among others are discussed in the article below.
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Our Methodology
To determine the 11 best long-term stocks in the tech sector, we looked for companies that exhibited strong profitability over the past decade and had mature businesses, strong fundamentals, and leading positions. We narrowed down our selection to stocks that had positive market sentiment. Along with each stock, we have included the hedge fund sentiment and analyst ratings. We have ranked these stocks according to their popularity among elite hedge funds.
Long-Term Stock Portfolio: 11 Tech Stocks To Consider
11. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
Some of the top features that make International Business Machines Corporation (NYSE:IBM) a good long-term stock include the company’s leading position, pricing power, and rich dividend history. Moreover, the stock is trading at a fair value. As of October 3, International Business Machines Corporation (NYSE:IBM) is trading at a PE multiple of 19x and is offering a forward dividend yield of 5.56%, which the company supports with free cash flows of $7.5 billion. The company has also managed to retain its profitability amid higher interest rates and has a trailing twelve-month operating margin of 11%.
Wall Street analysts are bullish on International Business Machines Corporation (NYSE:IBM) and the stock has a consensus Buy rating. This August, Credit Suisse analyst Shannon Cross raised her price target on International Business Machines Corporation (NYSE:IBM) to $163 from $156 and when she took coverage of the stock with a buy-side Outperform rating. Over the past three months, International Business Machines Corporation (NYSE:IBM) has received 5 Buy ratings and 4 Hold ratings from Wall Street analysts.
Insider Monkey spotted 40 hedge funds that were bullish on International Business Machines Corporation (NYSE:IBM) at the close of the second quarter of 2022. These funds held collective stakes of $948 million in the company. As of June 30, Arrowstreet Capital is the top shareholder in International Business Machines Corporation (NYSE:IBM) and has stakes worth $372.6 million in the company.
Other profitable and cash-rich tech stocks to buy for the long term include Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Apple Inc. (NASDAQ:AAPL).
10. Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Holders: 69
Oracle Corporation (NASDAQ:ORCL) is another cash-rich profitable tech company that investors can own for the long term. The company’s trailing twelve-month operating margin and free cash flows sit at $34.32% and $5.37 billion respectively. On September 12, Oracle Corporation (NASDAQ:ORCL) reported earnings for the first quarter of fiscal 2023. The company reported a revenue of $11.45 billion, up 17.65% year over year, and ahead of Wall Street estimates by roughly $128,000.
Oracle Corporation (NASDAQ:ORCL) is another Buy-rated stock on Wall Street. Over the past three months, the stock has received 8 Buy ratings and 11 Hold ratings from Wall Street analysts. This September, Deutsche Bank analyst Brad Zelnick reiterated his Buy rating and $110 price target on Oracle Corporation (NASDAQ:ORCL). The stock has an average price target of $90, which represents a potential upside of 45%.
At the close of Q2 2022, 69 hedge funds were long Oracle Corporation (NASDAQ:ORCL) and held stakes worth $4.18 billion in the company. This is compared to 61 hedge funds in Q1 2022 with stakes worth $4.33 billion. As of June 30, First Eagle Investment Management is the leading investor in Oracle Corporation (NASDAQ:ORCL) with stakes worth $1.8 billion in the company.
Here is what First Eagle Investments had to say about Oracle Corporation (NASDAQ:ORCL) in its second-quarter 2022 investor letter:
“Oracle is one of the world’s largest independent enterprise software companies and has been reinventing itself for the cloud-computing environment, a transition pursued primarily through investments in organic research and design and smallish, well-priced acquisitions. That said, Oracle in June closed its largest-ever deal with the acquisition of Cerner, a designer of software to store and analyze medical records and other healthcare data.
Oracle took on additional debt to finance this all-cash acquisition and as a result plans to moderate its stock-buyback program to focus on debt reduction. Despite the weak quarter for the stock, Oracle’s operations remain strong; it reported better- than-expected results for its most recent quarter and issued upbeat guidance for the coming fiscal year.”
9. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
On September 29, Micron Technology, Inc. (NASDAQ:MU) announced earnings for the fiscal fourth quarter of 2022. The company generated a revenue of $6.64 billion and reported earnings per share of $1.45, beating expectations by $0.08. Wall Street analysts are bullish on Micron Technology, Inc. (NASDAQ:MU) in the long term. On September 29, Summit Insights analyst KinNgai Chan upgraded Micron Technology, Inc. (NASDAQ:MU) to Buy from Hold. This September, Needham analyst Rajvindra Gill adjusted his price target on Micron Technology, Inc. (NASDAQ:MU) to $60 from $64 and reiterated a Buy rating on the shares.
Micron Technology, Inc. (NASDAQ:MU) is currently trading at a discount. As of October 3, Micron Technology, Inc. (NASDAQ:MU) has a trailing twelve-month PE ratio of 6.79 and is offering a forward dividend yield of 0.92%, which the company backs with free cash flows of $3.1 billion. The stock is one of the best undervalued long-term stocks.
Over the past three months, Micron Technology, Inc. (NASDAQ:MU) has received 20 Buy ratings and 5 Hold ratings from Wall Street analysts. The stock has a consensus Buy rating and an average price target of $65, which represents an upside of 24% from current levels.
Insider Monkey found 69 hedge funds that held stakes in Micron Technology, Inc. (NASDAQ:MU) at the end of Q2 2022. The total value of these stakes amounted to $2.16 billion. As of June 30, Matrix Capital Management is the most prominent shareholder in the company and has stakes worth $221 million.
Here is what Meridian Funds had to say about Micron Technology, Inc. (NASDAQ:MU) in its second-quarter 2022 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
8. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM, Incorporated (NASDAQ:QCOM) is an industry leader in the semiconductor space and has exposure to a variety of end markets including RF systems, 5G, 4G, and optimized software. The stock has a secular growth story and is presenting an attractive entry point for long-term investors. As of October 3, QUALCOMM Incorporated (NASDAQ:QCOM) is trading at a PE multiple of 10x and is awarding investors with a dividend yield of 2.66%. Moreover, the company is profitable and cash rich. QUALCOMM Incorporated (NASDAQ:QCOM) has a trailing twelve-month operating margin of 35.8% and has free cash flows of $6.6 billion.
Wall Street analysts see material upside to QUALCOMM Incorporated (NASDAQ:QCOM). On September 23, Deutsche Bank analyst Ross Seymore maintained his $170 price target and Buy rating on the stock with a $170 price target. On September 26, JPMorgan analyst Samik Chatterjee maintained his buy-side Overweight rating and $185 price target on QUALCOMM Incorporated (NASDAQ:QCOM) and said that the stock’s current valuation “provides substantial upside”.
At the end of Q2 2022, 71 hedge funds were long QUALCOMM Incorporated (NASDAQ:QCOM) and held stakes worth $2.80 billion in the company. As of June 30, Alkeon Capital Management owns more than 4.2 million shares of QUALCOMM Incorporated (NASDAQ:QCOM) and is the largest shareholder in the company.
7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 72
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the largest semiconductor manufacturers in the world by revenue and has managed to maintain its top position among peers. The stock is trading at bargain levels currently and is presenting an opportunity for long-term investors. As of October 3, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is trading at a PE multiple of 15x and is offering a forward dividend yield of 2.71%, which the company backs with free cash flows of over $15 billion. The stock is one of the best long-term stocks.
Wall Street analysts see upside to Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). On September 14, Daiwa analyst Rick Hsu upgraded Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to Buy from Outperform and raised his price target on the stock to NT$645 from NT$550. Over the past three months, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has received 3 Buy ratings and 1 Hold rating from Wall Street analysts and has a consensus Strong Buy rating.
At the end of Q2 2022, 72 hedge funds were long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and held stakes worth $9.22 billion. As of June 30, Fisher Asset Management owns more than 26.3 million shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and is the leading shareholder in the company. The investment covers 1.52% of Ken Fisher’s 13F portfolio.
Here is what RiverPark Funds had to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its second-quarter 2022 investor letter:
“Taiwan Semiconductor detracted from performance despite a business performance that saw revenue accelerate to over +30% growth. The Company is one of the few fabs in the world that is capable of manufacturing leading-edge integrated circuits (IC). The Company’s leading-edge capacity is being absorbed by high-performance computing applications, particularly by Apple, which has become an integrated circuit powerhouse over the past decade.
The Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries should continue to foster a superior competitive position and attractive long-term growth.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
Wall Street sees material upside to NVIDIA Corporation (NASDAQ:NVDA). On September 20, Oppenheimer analyst Rick Schafer maintained a buy-side Outperform rating and his $250 price target on NVIDIA Corporation (NASDAQ:NVDA). On September 21, JPMorgan analyst Harlan Sur reiterated a buy-side Overweight rating and his $220 price target on NVIDIA Corporation (NASDAQ:NVDA). Over the past three months, the stock has received 24 Buy ratings and 9 Hold ratings from Wall Street analysts and has an average price target of $207, which implies an upside of 66% from current levels.
NVIDIA Corporation (NASDAQ:NVDA) should be on long-term investors’ radars. The company’s leading position in gaming, data center, and artificial intelligence positions it to dominate the market share over a long-term horizon. Moreover, NVIDIA Corporation (NASDAQ:NVDA) is a profitable and cash-rich tech stock. The company has a trailing twelve-month operating margin of 31.48% and has free cash flows of $6.2 billion.
On August 24, NVIDIA Corporation (NASDAQ:NVDA) reported strong earnings for the second quarter of fiscal 2023. The company reported earnings per share of $0.51 and generated a revenue of $6.7 billion, up 3% year over year, and ahead of Wall Street consensus by $3.47 million.
At the close of Q2 2022, 84 hedge funds held stakes in NVIDIA Corporation (NASDAQ:NVDA). The total value of these stakes amounted to $3.31 billion. As of June 30, Fisher Asset Management is the most prominent investor in the company and has stakes worth $1.15 billion.
Here is what Baron Funds had to say about NVIDIA Corporation (NASDAQ:NVDA) in its second-quarter 2022 investor letter:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
In addition to NVIDIA Corporation (NASDAQ:NVDA), some of the best long-term stocks include Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Apple Inc. (NASDAQ:AAPL).
Click to continue reading and see Long-Term Stock Portfolio: 5 Tech Stocks To Consider.
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Disclosure: None. Long-Term Stock Portfolio: 11 Tech Stocks To Consider is originally published on Insider Monkey.
