If your New Year's resolution was to overhaul your portfolio, you're by no means alone.
Every year when December fades to January, many investors rebalance their portfolios, which means investors are on the prowl for new stock picks poised to perform in 2015 and beyond.
And in an attempt to meet this New Years' need, I spent the past weekend researching several tech stocks I believe long-term investors should have on their radar. The rationale for investing in each of these names will vary widely, and as always, any interested investors should always perform his or her own due diligence prior to purchasing. Also, as an attempt to help those interested, I'll be publishing more in-depth analyses of each company in the following days.
And now without further ado, here are my top five tech stocks to own in 2015.
5. Yandex (NASDAQ: YNDX)
If it isn't already, the crippling one-two punch of plummeting oil prices and international sanctions are a virtual lock to push the Russian economy into severe recession in 2015. Such contractions will likely crimp Yandex's main sales source -- online advertising -- in the near-term. However, I'm more concerned with Yandex's long-term outlook, which thankfully is much rosier. However, this justified fear of all things Russian has helped push this long-term growth play down to just 14 times earnings.
In Yandex's investment thesis, it probably makes sense to emphasize the beyond part of "poised to perform in 2015 and beyond." Nonetheless, Russian search giant Yandex gains the bottom spot on my list because of the current disconnect between its long-term business potential and its current pricing.
Before closing, I want to emphasize that Yandex at present is not a stock for the faint of heart. With things likely to get worse before they get better in Russia, year ahead quite conceivably see Yandex stock continue to fall. However, intrepid growth investors could also be handsomely rewarded for snatching up shares of this established name with a proven business model and massive growth runway.
4. Qualcomm (NASDAQ: QCOM)
I've been a fan of semiconductor powerhouse Qualcomm for years now -- and for good reason. The company has direct and significant exposure to the ongoing mobile revolution, both in terms of its leading chipset business and its hugely lucrative intellectual property licensing business. Combined, these two divisions have helped both sales and profits grow at nearly 20% annually over the past five years.
That's an amazing five-year stretch any way you slice it. So why has Qualcomm's stock only returned roughly 69% during this same period, including dividends?
Qualcomm stock has dropped roughly 7% over the last six months, largely driven by headwinds in its IP licensing business. For brevity's sake, Qualcomm has encountered trouble collecting royalties on the host of patents it controls in emerging markets, most critically China. I'll touch on this issue more in my full write-up. However, suffice it to say this issue certain looms large with Qualcomm investors at present.
3. Apple (AAPL +0.73%)
2014 was a comeback year for the world's most valuable publicly traded company, and many believe Apple stock is poised for another strong year in 2015.
I agree.
Apple's iPhone 6 and 6 Plus are genuine game-changers for Apple, financially speaking. Thanks to its aging iPhone installed base in key markets like the U.S. and China, the iPhone 6 will likely unleash the mother of all upgrade cycles in the next several quarters. Expect Apple to set a fresh all-time record for sales, profits, and iPhones sold in its upcoming quarterly report. However, there are a number of potentially interesting product storylines that should play out in the year ahead and could all hold positive implications for Apple's long-term prospects.
2. IBM (IBM 1.66%)
The last 24 months haven't gone as planned at Big Blue, and it's largely the current air of pessimism surrounding IBM that has my interests piqued. As I write this, IBM's shares have retreated about 16% over the past year.
True, IBM missed the boat on cloud computing and is scrambling to establish its own foothold in this new computing paradigm. This won't be easy. Amazon, Microsoft, and Google have established early leads in this new computing world. However, IBM is making progress. Its cloud revenue is expected to top $7 billion next year, $3 billion of which will come from existing IBM customers. Continuing to transition new customers into the cloud will be important, but winning fresh contracts will prove the only way to continue to grow IBM's nearly $100 billion revenue base. Thankfully, IBM remains a corporate IT research powerhouse. In fact, Big Blue has been awarded the most U.S. patents of any company for 21 straight years. IBM also has enough financial flexibility to acquire compelling new technologies to bolster its cloud push.
The crux of the IBM storyline comes down plain and simple on whether or not you believe IBM can once again pull off "the big pivot," as it did in the 1990s. If so, IBM's current 12 times price-to-earnings valuation will be well worth the risk.
1. Amazon (AMZN 1.19%)
There's a clear theme of buying slumping stocks as work in this list, and I believe Amazon's 24% decline over the past year creates a nice potential entry point into one of the most dynamic and visionary companies of our time.
Nearly all the investor ire that's hampered Amazon over the past 12 months has focused on its ever-shrinking margins, a point I wholly admit exists. However, for a few reasons, I also buy into Amazon's long-held arguments that it's investing for a brighter future.
Although we don't think of it this way, online retail remains a mere fraction of total U.S. retail spending, and even more so globally. And by investing in a world-class distribution network now and continuing to cultivate a growing crop of Prime users, Amazon is creating powerful competitive advantages and incentives that will help give it both cost and service advantages as online retail continues to grow into a cornerstone of global commerce. There are also bright spots like advertising and AWS, both of which also have significant long-term potential. Bottom line, I believe Amazon has decades of growth ahead of it, and any long-term tech investors should be give it a long, hard look at its current prices.
I hope you've found these suggestions useful. If you're interested to learn more about any of these picks, make sure to check back for the deep dives into each company.
