In this article, we discuss the 10 safe tech stocks to consider for retirement. If you want to skip our detailed analysis of these stocks, go directly to the Retirement Stock Portfolio: 5 Safe Tech Stocks To Consider.
There is no denying the fact that the definition of “growth” and “value” stocks has fundamentally changed in the past few years as the digital economy disrupts business and technology permeates all aspects of lives. Companies like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), once considered “growth” equities, are now present even in the most value-oriented portfolios. Two of these three companies have also registered close to two decades of dividend growth.
Tech Sector “Safety” Amid Inflation and 2022 Outlook
The example of famous investor Peter Thiel, who has grown a meagre $1,700 investment into a multibillion-dollar retirement fund over the course of a little over twenty years, sheds a little light on the overall “safety” of tech stocks in retirement portfolios as well. Since the COVID-19 accelerated the adoption of technology, it has become even clearer that tech firms are likely to dominate the market for years to come. In this environment, traditional value sectors like utilities and consumer goods are being discarded in favor of tech-led disruptors.
Even though a rise in interest rates over the next few months will hit some of these tech firms, analysts expect the sector to emerge stronger out of the inflation crisis. According to research consultancy IDC, the global info tech sector is on track to reach a total market size of over $5.3 trillion in 2022, growing at a compound annual rate of around 6%. Robotics, artificial intelligence, and the Internet-of-Things (IoT) are touted as the leaders of this growth, alongside advances in chips and smart mobility.
Our Methodology
The companies that operate in the tech sector and have long-term growth catalysts were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.
Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Photo by Diana Parkhouse on Unsplash
Retirement Stock Portfolio: Safe Tech Stocks To Consider
10. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 56
Oracle Corporation (NYSE:ORCL) provides software and information technology services for enterprises. Over the years, Oracle Corporation (NYSE:ORCL) has made a solid name for itself in the cloud computing market. The company also has a dividend history stretching back 12 years. As part of a growth plan for the coming decade, Oracle Corporation (NYSE:ORCL) recently also stepped into the healthcare sector with the purchase of Cerner for $28 billion. The stock offers a healthy blend of growth and value for shrewd investors.
Oracle Corporation (NYSE:ORCL) is one of the favorite hedge fund stocks. At the end of the third quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Oracle Corporation (NYSE:ORCL), up from 55 in the preceding quarter worth $2.8 billion.
Just like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Oracle Corporation (NYSE:ORCL) is one of the stocks that elite investors are buying.
Here is what Ariel Investments has to say about Oracle Corporation (NYSE:ORCL) in its Q1 2021 investor letter:
“A temporary factor might be a downturn in the high-yield bond market driving up LBO financing costs for the decline in 2021 GAAP revenue for Oracle Corporation (ORCL) due to a change in accounting methods. In all these examples, stock prices were driven well-below our calculations of intrinsic value. We invested in each company with good outcomes. Later, we will offer instances when this strategy is not successful.”
9. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 63
The rapid digitization of the world in the past few months is certainly one consequence of the pandemic, but it is also part of a larger trend towards a tech-based future. Micron Technology (NASDAQ:MU), one of the premier semiconductor firms in the world, stands to benefit from the increasing use of electronic devices in the coming years as the Internet-of-Things and robotics industries become more mainstream. Bank of America recently called chip stocks like Micron Technology (NASDAQ:MU) “the new oil” of the global economy.
The hedge fund sentiment around Micron Technology (NASDAQ:MU) also speaks volumes about the long-term dependability of the firm. At the end of the third quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.8 billion in Micron Technology (NASDAQ:MU).
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron Technology (NASDAQ:MU) appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron Technology (NASDAQ:MU) showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron Technology (NASDAQ:MU)’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
8. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 95
There are many tech companies that cater to the specific needs of enterprise clients, but the importance of remote work and freelancing cannot be underestimated in the present global economy. Adobe Inc. (NASDAQ:ADBE), which makes and sells software geared towards creative professionals, stands to benefit as virtual workplaces become more common. Adobe Inc. (NASDAQ:ADBE) also has a growing cloud business and analysts have backed the company to be a leading part of the “metaverse” advances.
Piper Sandler analyst Brent Bracelin has an Overweight rating on Adobe Inc. (NASDAQ:ADBE) stock with a price target of $600. Major hedge funds hold stakes in Adobe Inc. (NASDAQ:ADBE) as well. Ken Fisher’s Fisher Asset Management is a leading shareholder in Adobe Inc. (NASDAQ:ADBE) with 6.4 million shares worth more than $3.7 billion.
Here is what Polen Capital has to say about Adobe Inc. (NASDAQ:ADBE) in its Q1 2021 investor letter:
“Adobe Inc. (NASDAQ:ADBE) and Autodesk are both prime examples of the rotation that occurred during the quarter. Both are dominant businesses in their respective markets, which are experiencing structural tailwinds. Despite each business’s position of strength, the stocks of cyclicals and businesses with higher leverage and lower profitability were more favored this past quarter. In stark contrast,Adobe Inc. (NASDAQ:ADBE) and Autodesk both have low leverage, high levels of profitability, high recurring revenues that mitigate cyclicality, and are both capital-light business models—all attributes we appreciate as investors. Adobe and Autodesk were also two of the top three performers within the Portfolio during 2020.”
In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Adobe was one of the most popular tech stocks among hedge funds in 2021.
7. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 117
Analysts predict that a huge chunk of tech-related growth in the coming decade will come from the Asia-Pacific region. Sea Limited (NYSE:SE), a diversified tech firm with large stakes in the digital entertainment, ecommerce, and fintech businesses, will be one of the leading beneficiaries of this boom. Sea Limited (NYSE:SE) is expanding offerings in the video game industry after building unparalleled brand loyalty in the shopping business. Stifel analyst Scott Devitt has a Buy rating on Sea Limited (NYSE:SE) stock with a price target of $300.
Sea Limited (NYSE:SE) has featured among the top hedge fund stock picks for many years. At the end of the third quarter of 2021, 117 hedge funds in the database of Insider Monkey held stakes worth $14.1 billion in Sea Limited (NYSE:SE), up from 104 the preceding quarter worth $12.2 billion.
In its Q4 2020 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Sea Limited (NYSE:SE) was one of them. Here is what the fund said:
“Sea Limited (NYSE:SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)
I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Limited (NYSE:SE). When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee..”[read the entire letter here]
6. Salesforce.com, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 119
On January 12, Barclays analyst Raimo Lenschow maintained an Overweight rating on Salesforce.com, Inc. (NYSE:CRM) stock with a price target of $290, naming the company as a top software pick for 2022 and beyond given the “inflecting momentum” in the core cloud business and a “maturing cross-sell motion”. Salesforce.com, Inc. (NYSE:CRM) provides enterprise cloud computing solutions and has morphed into one of the biggest software names in the world in the past few years.
The bullish analyst sentiment around Salesforce.com, Inc. (NYSE:CRM) is also reflected in hedge fund interest in the stock. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Salesforce.com, Inc. (NYSE:CRM) with 13.9 million shares worth more than $3.7 billion.
In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Salesforce.com, Inc. (NYSE:CRM) is one of the stocks on the radar of institutional investors.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Salesforce.com, Inc. (NYSE:CRM) was one of them. Here is what the fund said:
“We added to our software-as-a-service (SaaS) exposure with the initiation of SaaS leader salesforce.com, which develops software for customer relationship management (we added Workday, which enterprise resource planning applications, last quarter). Saleforce.com is well-positioned in the most attractive end markets in software and will benefit from secular drivers such as remote work and the digital transformation. Salesforce.com is a sustainability leader as well, with a commitment to carbon-neutral cloud, toward which it has set a goal of 100% renewable energy for global operations by fiscal year 2022. The company has a strong focus on equality, in terms of equal rights, pay, education and opportunity. As a data company it has been leading on workforce disclosures and seeks to have 50% of its U.S. workforce made up of underrepresented groups by 2024.”
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Disclosure. None. Retirement Stock Portfolio: 10 Safe Tech Stocks To Consider is originally published on Insider Monkey.
