The year is drawing to a close, and the next year looms large right ahead. What surprises will the markets bring in 2015? Which expected winners in the tech sector will deliver on their promises in a big way?
We asked three Motley Fool contributors to present their best tech stock picks for 2015. From the turnaround potential of Sprint (NYSE:S) to the unstoppable steamrollers you know as Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL), here's what they came up with.
Joe Tenebruso: Few companies in the world today have such strong leadership positions in so many important, emerging industries as Google. With Search, Android, YouTube, Chrome, Gmail, Google Apps, and more, Google's products and services are a treasure trove of market dominators and fast-growing disruptors. As such, few companies have as many ways to win -- and ways for their shareholders to profit -- as Google.
While Google's massive size will eventually limit its growth, most likely by drawing the ire of regulators for its dominant share of key markets, I do not believe that a period of slow growth is yet upon us. Too much opportunity remains in many of the markets in which Google competes -- and often wins -- both today and in the foreseeable future.
Yet, even with all these exciting growth catalysts, Google remains one of the most reasonably priced stocks I follow. Typically, the market asks us to pay a premium for quality, yet with Google I believe we currently have the opportunity to purchase shares in one of the strongest businesses in the world at a very attractive price. With the stock trading at a forward P/E of 18 (15 if you back out its net cash) compared to an expected long-term growth rate of 17, I believe substantial value can still be found in Google's shares.
As such, Google stands as my largest position in Tier 1, the real-money portfolio that I manage for The Fool, and I expect that to remain the case in 2015 and beyond.
Anders Bylund: I've never seen a better opportunity to buy some Sprint shares than right here, right now.
You know that old saw about buying low and selling high, or the one about investing when everyone else is panicking? Well, the streets around Sprint are red with investor blood right now -- and I think it's a big mistake.
Sprint shares peaked right around New Year's Day in 2013, and have lost lost a terrifying 56% of their value since then. The company is bleeding subscribers while the other three major U.S. wireless carriers are growing. This looks like a company circling the drain, doomed to crash and burn as Sprint's business collapses.
But if Sprint can turn this sinking ship around, the stock should roar back to fantastic returns. And I see a very real possibility that this will happen in 2015.
The company has a fresh source of capital in majority owner Softbank, whose charismatic leader Masayoshi Son basically wants to rule the world. An upcoming series of wireless spectrum auctions come with special conditions to even out the playing field, giving Sprint a chance to overcome its reputation as a worst-in-class service provider. And at just 0.5 times trailing sales, the stock is priced as if neither one of these catalysts were on the table.
So Sprint's business looks poised to recover from a weak 2014 in spectacular fashion. That's why I'm drooling over this spring-loaded stock as we head into 2015.
Andrés Cardenal: As we enter 2015, Apple is the biggest position in my portfolio, and I couldn't be happier with that. Not because the stock is hitting all-time highs, but because I believe it still has a lot of room to run, and 2015 could be great year for Apple.
Demand for the new iPhone 6 and iPhone 6 Plus looks remarkably strong. Apple sold a massive 39.27 million iPhone devices in the last quarter. This represents an annual 26% increase on a sell-through basis. Sales guidance for the crucial holiday quarter was better than Wall Street expected, indicating Apple is finishing 2014 with vigorous momentum.
During the coming year, investors will get more clarity regarding Apple's ventures into new product categories, such as digital payments with Apple Pay and smartwatches with Apple Watch. Considering the company's gigantic size, it won't be easy for Apple to move the needle much from a financial point of view. However, some things are more important than the cold, hard numbers.
Proving to investors that Apple still has what it takes to successfully innovate and disrupt different industries would be a major positive, as it would dissipate concerns regarding the tech giant's culture and drive after the death of Steve Jobs.
Importantly, Apple is still attractively valued: the stock carries a forward P/E ratio of 14.9, versus an average forward P/E of 17.6 for companies in the S&P 500, according to data from Morningstar.
Anders Bylund owns A Shares of Google. Andrés Cardenal owns shares of Apple and Google (C shares). Joe Tenebruso has the following options: short January 2016 $100 puts on Apple. The Motley Fool recommends Apple, Google (A and C shares). The Motley Fool owns shares of Apple, Google (A and C shares). Try any of our Foolish newsletter services free for 30 days.
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