The technology sector is always hot when it comes to discussion among investors. Everyone is looking for the "next big thing", and many look to the tech sector and its history of breakthroughs and products for that golden egg. Although 2010 was not an eye-popping year for the sector as whole, especially when compared to the pre-bubble bursting years in the late 1990s, the sector as a whole did relatively well. It returned 11% for the year, as represented by the Technology SPDR ETF (NYSE:XLK). The sector did underperform the market as a whole, however, despite some huge returns from familiar names like Apple (Nasdaq:AAPL), Netflix (Nasdaq:NFLX) and salesforce.com (NYSE:CRM). However, 2011 is a new year, and more than a few tech stocks ended 2010 on a hot streak. Let's look at three such companies that hope to keep up their momentum heading into 2011.
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Finisar Showing Momentum
The first and hottest on our list is Finisar Corp. (Nasdaq:FNSR). For those unfamiliar with the company, Finisar specializes in optical subsystems and components that connect a variety of networks, such as LANs, CATV and WANs. The Sunnyvale, California-based firm ended 2010 with a 27% increase in its stock price in December and an astounding 60% increase in the final three months of the year. These results were driven by record revenues and earnings in the company's second quarter earnings announcement in early December, with revenues increasing 65% over 2009 and a $65 million turnaround in earnings over the same period. Management is especially excited about the company's growth prospects in the WSS/ROADM line card segment, which saw revenues grow over 27% from Q1 and expect another 20-30% growth in the coming quarter. With expectations so high, it shouldn't come as a surprise that the stock trades at a P/E ratio of just under 35 and is just under its 52-week high. But if you're looking for a stock with momentum, Finisar definitely fits the bill.
Motorola Making A Comeback
Next on our list is Motorola (NYSE:MOT), a mobile phone (among other products) company that many had left for dead in the past couple of years. But it has proven that it still has a place in the industry. Best known for its handsets that dominated the global mobile phone landscape for much of the past 10 years, Motorola has struggled to keep up with the explosive growth of the smart phone market and the emergence of the iPhone. It had trouble keeping up with the smart phone industry's first mover, Research In Motion (Nasdaq:RIMM) - until recently. With the introduction of Google's (Nasdaq:GOOG) Android operating system onto cheaper handsets, including Motorola's Droid phones, companies like Motorola and Nokia (NYSE:NOK) have seen their share prices jump 40% and 25%, respectively, since last summer. Motorola has been able to keep up the momentum through the holiday season, rising 11% in December, as many industry watchers expected its handsets to be popular gift items. The recent announcement that the company will be spinning off its handset and cable set divisions into the newly created Motorola Mobility will allow Motorola to get full value for shareholders wanting to cash in on the company's return to mobile prominence. Add to this that the company will be showcasing its new tablet computer, the Droid Xoom, at CES later this week. Keep an eye on Motorola; 2011 could be a big comeback year.
Our last addition to this list may come as a bit of a surprise. Microsoft (Nasdaq:MSFT) saw its shares rise 17% in the last quarter of 2010. The tech giant announced strong earnings in its Q1 results in late October, with profit rising 52% over Q1 2009. Stronger corporate spending and wide-scale adoption of its latest Windows 7 operating system had investors putting their money in Microsoft, with hopes that its Windows phone operating system can capture market share away from the big players in the ever-growing smartphone market. Plus, with over $40 billion in cash and short-term equivalents as of the end of September, the possibility of some strategic acquisitions is keeping shareholders hopeful.
Keep an eye on these three stocks early in 2011 to see if they can keep up their torrid pace. Playing on their momentum could end up being a very profitable venture for tech investors. (To learn more, see our Primer On Investing In The Tech Industry.)