The NASDAQ rallied nearly 30% this year, outperforming the S&P 500's 20% gain and lifting many tech stocks, some of which posted massive triple-digit gains. Let's take a closer look at the four tech stocks with the strongest year-to-date performance so far: Xunlei (NASDAQ:XNET), Overstock.com (NASDAQ:OSTK), Control4 (NASDAQ:CTRL), and Universal Display Corporation (NASDAQ:OLED).
Xunlei is a Chinese company that provides a cloud platform, the Xunlei Accelerator, which speeds up online transmissions. This platform was originally intended for streaming video, online games, and other cloud-based content.
However, Xunlei's stock rallied more than 300% this year on the growing hype about Bitcoin and other cryptocurrencies. The bulk of that gain came in October, when it introduced its "Wanke coin mining project" for a new cryptocurrency called Wankebi.
Some investors assumed that the combination of Xunlei's cloud acceleration platform and its blockchain tech made it a potential cryptocurrency play. However, there's no evidence that Wankebi will become the next Bitcoin, and the company even warned investors about making those speculative assumptions.
Xunlei is still unprofitable and isn't cheap at 6 times sales, so investors should be wary of this volatile stock.
Speaking of Bitcoin, Overstock.com was one of the first e-tailers to accept the cryptocurrency three years ago. It also invested in blockchain and recently launched its own cryptocurrency trading platform, ICO (initial coin offering), and a regulated trading platform for ICOs.
All that hype about cryptocurrencies has obfuscated the fact that Overstock's main business is still its online marketplace, which sells inventories from other retailers, handmade goods, and brand new merchandise.
Its retail business is profitable, but its blockchain and cryptocurrency business (Medici Ventures) isn't. The company might eventually restructure or sell its retail business to focus on Medici's growth, but that speculative bet could backfire if the cryptocurrency market implodes.
As a result, Overstock is currently unprofitable. Its sales growth decelerated for four consecutive quarters, and turned negative with a 4% drop last quarter. Those are weak growth figures for a stock that was lifted nearly 300% this year by cryptocurrency hype.
Control4 offers a wide range of professionally installed smart home setups, ranging from $1,000 to $250,000. Its C4 Operating System links up devices via software development kits, and users can control those devices on TVs, installed touch panels, and mobile apps.
This made Control4 a great play on the growth of the Internet of Things (IoT) market, which could connect 24 billion devices by 2020, according to BI Intelligence. That expanding market enabled Control4 to consistently post double-digit top and bottom line growth over the past several quarters, and analysts anticipate 17% sales growth and 34% earnings growth this year.
Those strong numbers lifted the stock by more than 200% this year, but it still doesn't look terribly expensive at 25 times forward earnings.
Universal Display Technologies
Universal Display Technologies develops and markets organic light emitting diode (OLED) technologies, which are used in high-end smartphones, tablets, and TVs. OLED pixels generally look brighter and crisper because they emit their own light, whereas traditional LCD pixels need to be illuminated by a backlight.
Universal Display doesn't produce those screens -- it sells materials for creating them, and generates royalties and fees from its patents and designs. Two big buyers of OLED screens are Samsung and Apple, which only recently hopped aboard the OLED bandwagon with the iPhone X.
The market's growing appetite for OLED screens helped Universal Display post accelerating revenue growth over the past four quarters. Analysts expect its revenue and earnings to respectively rise 61% and 113% this year. Universal Display's stock rallied more than 200% this year, but the stock looks a bit frothy at 54 times next year's earnings.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Universal Display. The Motley Fool owns shares of Control4 and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.