5 Tech Stocks To Watch Out For In The Second Half Of The Year

The first half of 2016 was rather tumultuous for investors. The slowdown in the Chinese economy coupled with sliding oil prices set off alarm bells every now and then at all the major domestic indexes, fueling concerns of a global economic slowdown.

Also, in March, the Federal Reserve backtracked on its decision to hike rates four times a year to two times in 2016 statin that “global and financial developments continue to pose risks", thereby failing to allay investors’ concerns.

However, in a meeting held in mid-June, the Fed didn’t hike rates as a weak jobs report for May; a low level of business investment and lower-than-expected inflation wasn’t conducive to a rate hike. For the time being, interest rates continue to stay between 0.25% and 0.50%.

Finally, shocking “Brexit” results, whereby the people of Britain chose to leave the 28 nation European Union, led the equity markets across the globe, including the U.S, to a massive sell off, wiping out nearly $3 trillion dollars. Prior to the referendum held on Jun 24, most of the poll results were in favor of “Bremain” but the actual results came in favor of “Brexit” by a slight margin. While the “Leave” vote share was 51.9%, votes to “Remain” in the EU came in marginally below at 48.1%. Following the results, British Prime Minister David Cameron announced that he would step down by October. The Fed chairperson had earlier added at the FOMC meeting that the “Brexit” scenario was likely to have "consequences for economic and financial conditions in global financial markets."

What Lies Ahead?

It seems that markets have started to shrug off the overblown fears of Brexit. Last week, the S&P 500, NASDAQ composite and Dow Jones industrial average closed in the green, reverting most of the Brexit losses. The S&P 500 was up 4.3%, NASDAQ composite was up 4.4% and DJIA was up 4.2%, given the recent encouraging pool of economic data. This signals further growth for the domestic economy in the latter half of the year.

Data for the month of June on private sector jobs, manufacturing and consumer spending was encouraging. Also, the “third” estimate from the Bureau of Economic Analysis showed that first quarter output of goods and services increased at an annual rate of 1.1%, higher than the consensus estimate of a 1% increase. In addition, relatively lower gas prices will give Americans the freedom to spend more on discretionary activities, thus boding well for the economy.

Tech Sector Performance

Volatility has had its fair share of impact on the technology sector. Year-to-date, the S&P North American Technology Sector Index is down 0.2% as against a gain of 2.9% for the S&P 500. However, we believe that it is too early to call out the sector now because the stronger season is typically in the back half of the year and there are other catalysts that can increase technology spending very rapidly. Also, the buzz surrounding cloud computing, AR/ VR and AI technology keeps investors’ interest in the sector alive. It’s also important to note that tech companies have huge cash balances that should help in facilitating organic and inorganic expansion.

Tech Stocks to Pick for the Second Half

Now that the first half of 2016 has come to an end, let’s not sulk over opportunities lost. By using our Zacks Stocks Screener, we bring forth five such stocks with a VGM Score of ‘A’ or ‘B’ and a Zacks Rank #1 (Strong Buy) that promise better returns, on an average, than the individual components, as it considers three times as many items that are correlated to future stock returns.

Arista Networks, Inc (NYSE:ANET) : Headquartered in Santa Clara, CA, Arista Networks offers cloud networking solutions for datacenter and cloud computing environments. It also offers Ethernet switches, pass-through cards, host adapter solutions and networking services.

Arista Networks has a Zacks Rank #1 and a VGM Score of B. The company has a long-term expected earnings growth rate of 19.3%. Moreover, it has beaten the Zacks Consensus Estimate in the trailing four quarters by an average of 14.9%.

Citrix Systems, Inc (NASDAQ:CTXS) : Headquartered in Fort Lauderdale, FL, Citrix supplies application delivery and management software and services that enable the effective and efficient enterprise-wide deployment and management of applications.

Citix Systems sports a Zacks Rank #1 and has a VGM Score of B. The company has a long- term expected earnings growth rate of 12.2%. Moreover, it has topped the Zacks Consensus Estimate in the trailing four quarters by an average of 36.6%.

Ubiquiti Networks, Inc (NASDAQ:UBNT) : San Jose, CA based Ubiquiti is into designing, manufacturing and selling broadband wireless solutions. Its products and solutions include radios, antennas and management tools and other applications in the unlicensed radio frequency spectrum.

Ubiquiti Networks sports a Zacks Rank #1 and has a VGM Score of B. The company has a long-term expected earnings growth rate of 10.8%. Moreover, the company has beaten the Zacks Consensus Estimate in the trailing four quarters wan average positive surprise of 12.8%

Sanmina Corporation ( (NASDAQ:SANM) ): Another San Jose CA based company; Sanmina offers electronics contract manufacturing services. It focuses on engineering and fabricating complex components and also on providing complete end-to-end supply chain solutions to Original Equipment Manufacturers.

Sanmina sports a Zacks Rank #1 and has a VGM Score of B. The company has long-term expected earnings growth of 17.5%. Moreover, the company has an average positive surprise of 10.5% in the trailing four quarters.

Synchronoss Technologies, Inc. (NASDAQ:SNCR) : Synchronoss is a leading name in providing on-demand transaction management software to Tier One communications service providers.

Synchronoss sports a Zacks Rank #1 and has a VGM Score of B. The company has a long-term expected earnings growth rate of 17.0%. Moreover, the company has an average positive surprise of 4.9% in the trailing four quarters.

Looking Ahead

The abovementioned stocks have grabbed the spotlight with striking performances supported by solid earnings beats and bright prospects. With this in mind, we believe that investing in these stocks would yield strong returns for your portfolio in the short term.