Arrow Electronics Inc., Analog Devices Inc., and First Solar Inc. are the top tech companies this month.
Arrow's stock fell late last year, turning the semiconductor distributor into a top value stock when it posting record third-quarter sales amid a depressed electronics market. Analog leads its peers in a key measure of earnings and revenue growth thanks to rising production of electric vehicles that use its chips. First Solar shares have more than doubled in the past year, boosted by passage of the green energy-focused Inflation Reduction Act.
These companies are leading their category as tech stocks, represented by the Technology Select Sector SPDR Fund (XLK), have lost almost a fifth of their value in the past year compared with the 13% drop in the Russell 1000 Index.
Here are the top five tech stocks in each category, 15 in all, with the best value, fastest growth, and most momentum. All data are as of Jan. 19.
Best Value Tech Stocks
Value investing is a factor-based investing strategy that involves picking stocks that you believe are trading for less than what they are intrinsically worth, usually by measuring the ratio of the stock’s price to one or more fundamental business metrics. A widely accepted value metric is the price-to-earnings (P/E) ratio.
Value investors believe that if a business is cheap compared with its intrinsic value (as measured by its P/E ratio, in this case), then its stock price may rise faster than that of others as the price comes back in line with the worth of the company. These are the tech stocks with the lowest 12-month trailing P/E ratio.
|Best Value Tech Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Arrow Electronics Inc. (ARW)||113.32||7.0||5.3|
|Avnet Inc. (AVT)||43.40||4.0||5.6|
|Vontier Corp. (VNT)||21.13||3.3||7.9|
|Intel Corp. (INTC)||28.42||117.3||8.7|
|HP Inc. (HPQ)||26.96||26.5||9.0|
- Arrow Electronics Inc.: Arrow provides technology products and services, including electronic components, distribution, and solutions for clients in enterprise computing. Arrow employs nearly 21,000 worldwide and serves more than 220,000 global customers.
- Avnet Inc.: Avnet provides supply chain and logistics services, distribution, and design support for electronic components. It ships about 283 billion units annually and employs 15,300.
- Vontier Corp.: Vontier sells equipment, software, and services for mobility technologies used in vehicle tracking, fuel dispensing, point-of-sale and payment systems, and remote management. It has about 8,500 employees globally. Its latest dividend of $0.025 per share was paid on Dec. 22, 2022.
- Intel Corp.: Intel designs and builds semiconductors and provides products and services related to cloud, network, and edge technology. The company plans to increase the number of transistors on microchips from 100 billion in 2022 to 1 trillion by 2030. Intel recently launched a slate of new scalable processors, GPUs, and CPUs.
- HP Inc.: HP sells desktop and notebook computers, workstations, retail point-of-sale systems, displays, printers and hardware, and support and services. HP’s customers include individual consumers, businesses, and governments. The company holds 27,000 patents and operates in 170 countries globally. HP declared in January a $0.2625 dividend, payable April 5 to shareholders as of March 8, 2023.
Fastest-Growing Tech Stocks
These are the top tech stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in a company’s success. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
|Fastest-Growing Tech Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Analog Devices Inc. (ADI)||163.13||83.1||1,040||38.8|
|Enphase Energy Inc. (ENPH)||222.97||30.3||433.3||80.6|
|Sunrun Inc. (RUN)||25.45||5.4||772.7||44.0|
|NCR Corp. (NCR)||25.69||3.5||666.7||3.7|
|Monolithic Power Systems Inc. (MPWR)||383.29||18.0||78.5||53.1|
- Analog Devices Inc.: Analog is a semiconductor maker that sells integrated circuits, software, and other products to the automotive and communications industries. It has 125,000 customers globally. Operating income increased by 10 times to $1.1 billion in the latest quarter, as revenue grew 39% to record levels, driven by performance in the industrial, automotive, and communications segments.
- Enphase Energy Inc.: Enphase designs, builds, and sells solar energy equipment and hardware including microinverters, energy generation monitoring equipment and software, and battery storage products. It has installed more than 52 million microinverters, which are used to convert a direct current generated by a solar device into alternating current. Enphase reported in January an increase in deployments of its IQ8 microinverters in the Netherlands, Puerto Rico, and New Hampshire, among other locations.
- Sunrun Inc.: Sunrun develops, installs, sells, and maintains residential solar energy systems to U.S. customers including individual homeowners and commercial developers.
- NCR Corp.: NCR is a point-of-sale transactions company that provides services for self-directed banking, retail stores, and restaurants. It employs 38,000.
- Monolithic Power Systems Inc.: Monolithic is a semiconductor company that also provides system integration technologies. Net income increased almost 81% to $124.3 million for the third quarter of 2022, while revenue surged by more than 53% to $495.4 million. The company reported improvement in all end markets for the period.
Momentum investing is a factor-based investing strategy that involves investing in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock up further. These are the tech stocks that had the highest total return over the past 12 months.
|Tech Stocks With the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|First Solar Inc. (FSLR)||165.01||17.6||102.8|
|Enphase Energy Inc. (ENPH)||222.97||30.3||65.7|
|Fair Isaac Corp. (FICO)||623.86||15.6||42.2|
|National Instruments Corp. (NATI)||53.77||7.0||37.2|
|Aspen Technology Inc. (AZPN)||193.77||12.5||29.3|
|Russell 1000 Index||N/A||N/A||-13.0|
|Technology Select Sector SPDR Fund (XLK)||N/A||N/A||-19.1|
- First Solar Inc.: First Solar is a producer of solar panels and components. By 2025, the company expects to have a global annual manufacturing capacity of more than 20 GW. First Solar completed the sale of its 141-megawatt Luz del Norte power plant to Chilean asset manager Toesca in early January for an undisclosed sum.
- Enphase Energy Inc.: See company description above.
- Fair Isaac Corp.: Fair Isaac is an analytics software company that sells products used to manage risk, combat fraud, and optimize operations across a variety of industries. FICO serves customers in over 90 countries.
- National Instruments Corp.: National Instruments provides hardware and software to enhance measuring instruments in the semiconductor, aerospace, defense, and government industries. The company announced Jan. 17 that it had received a proposal from Emerson (EMR) to acquire National Instruments for $53 per share. Emerson previously proposed an acquisition at $48 per share. National said its board is reviewing and evaluating the offer.
- Aspen Technology Inc.: Aspen provides process software and services for manufacturing and other capital-intensive industries. It has more than 3,700 employees in over 60 locations around the globe.
The Impact of Inflation on Technology Stocks
Technology stocks historically have underperformed other sectors during periods of rising inflation. Conversely, the group typically outpaces the broader market during times of falling inflation. For example, the technology bull market between 2009 and 2021 coincided with an annualized historically low inflation rate of 1.7% over that period. Moreover, the sector has led broad market declines year-to-date (YTD) in 2022 amid rising inflation, which reached a 40-year high in June of 9.1%.
Why are technology stocks so sensitive to inflation? It all relates to interest rates. Rising inflation indicates that the Federal Reserve will likely increase its federal funding rate to taper demand. Higher rates affect technology companies in two ways. First, consumers and businesses will have less income to buy technology products and services, which has an effect of slowing corporate earnings. Second, technology companies borrow heavily to fund startup costs, patents, and innovation expenses, meaning the cost of servicing that debt increases when interest rates rise.
The opposite happens when inflation declines. The Fed will likely lower interest rates then, which spurs consumer demand and reduces technology companies' borrowing costs.
Advantages of Technology Stocks
Investing in Innovation: Investing in technology stocks allows investors to back revolutionary ideas that have the potential to improve people’s lives. Technology companies of all sizes continually push boundaries to be first to market with game-changing technology, whether it be Apple Inc. (AAPL) with a new health feature for its iWatch or a startup developing a game-changing semiconductor for the automotive industry.
Growth Potential: Technology stocks offer the potential for sizable gains, with investors usually prepared to pay a premium for future growth. For instance, as of January 2023, the technology sector traded at 20.5 times forward earnings. By comparison, the energy and financial sectors had forward price-to-earnings ratios (forward P/Es) of 8.1 and 12.9, respectively. Although the biggest gains can be found in small-cap technology stocks, even mega-cap tech titans such as the original FANG members—Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Alphabet Inc. (GOOGL)—had an annualized return of 20.9% over the past decade as of Jan. 23, 2023.
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