Tech Stocks Stage Stunning Recovery: 5 Nasdaq 100 Picks

A jobs report tailor-made to boost investor sentiment helped U.S. stocks surge higher last Friday. The biggest beneficiaries of this data were tech stocks, with the Nasdaq hitting closing and intraday records. In the process, the index recouped losses incurred during February’s correction, inching up marginally.

Clearly, investors are seeking out tech stocks in an environment where growth-oriented investments are a favored option. Additionally, tech stocks have seen a successful earnings season and are expected to report strong numbers through 2018. With no roadblocks in sight, it makes sense to bet on large-cap tech stocks from the Nasdaq 100 at this point.

Tech Stocks Rebound From February Correction

During the week ended Feb 9, the Nasdaq Composite index declined 5.1%, suffering its worst losses since early 2016. And it has taken only a month for the tech-heavy index to recover completely. On Mar 9, the index gained 1.8% to close at 7560.81, around 0.33% higher than the previous record achieved on Jan 26.

Additionally, the Nasdaq 100, which is made up of the 100 largest companies in the index, hit a record level. The Nasdaq is now up 9.5% year to date while the S&P 500 has gained only 3.4%. The broader market benchmark is yet to fully recover from February’s selloff, thanks to inflationary concerns.

But in a market captivated by superior momentum levels, the likes of Microsoft (NASDAQ:MSFT) , Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) have once again become investor favorites. Apple (NASDAQ:AAPL) and Amazon each gained 1.7% on Mar 9 while Netflix rose 4.6%. The Philadelphia Semiconductor Index gained 2.1%.

Strong Earnings Expectations, Lack of Impediments

As of Mar 7, we have received Q4 results from 98.2% of the sector’s market cap in the S&P 500 index. Total earnings for these tech companies are up 23.6% from the same period last year on 10.9% higher revenues. Additionally, for full-year 2018, total earnings for these companies are expected to rise 22.7% on 10.9% higher revenues. (Read: A Very Positive Earnings Picture)

Strong earnings prospects are among the key reasons why tech stocks have once again caught investors’ imagination. Given the strong economic backdrop, this class of assets has become a favored option among investors since they are growing at a faster pace than the overall economy.

Also, there is a clear absence of factors which could snap the ongoing tech gains, at least in the short term. This is why they are becoming favored choices, much in keeping with one of last year’s top stock strategies, sticking with winning options. Further, investors are choosing to ignore any associated volatility which accompanies such an investment strategy.

Our Choices

Tech stocks have rebounded within a month of February’s correction, outpacing their equity counterparts. Investors have chosen to focus on their strong earnings prospects and the lack of impediments to future gains. This class of equities is probably the most favored growth choices even as the economy goes from strength to strength.

Given this backdrop, it makes sense to bet on large-cap tech stocks which make up the Nasdaq 100. Notably, this prominent large-cap index also hit a record high on Mar 9. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM Score.

Applied Materials, Inc. (NASDAQ:AMAT) is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.

Applied Materials has a VGM Score of B. The company has expected earnings growth of 35.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 8.8% over the last 30 days. Applied Materials has gained 20.5% year to date. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron Technology, Inc. (NASDAQ:MU) has established itself as one of the leading worldwide providers of semiconductor memory solutions.

Micron has a Zacks Rank #2 (Buy) and a VGM Score of A. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 1.7% over the last 30 days. Micron has gained 32.8% year to date.

Seagate Technology plc (NASDAQ:STX) is the second-largest manufacturer of hard disk drives (HDDs) in the United States.

Seagate has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 18.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.1% over the last 30 days. Seagate had gained 43.9% year to date.

Intel Corporation (NASDAQ:INTC) reported stellar fourth-quarter results and provided an encouraging guidance. The top-line growth came on the back of impressive results from Data Center Group (DCG), Internet-of-Things Group (IOTG), Non-Volatile Memory Solutions (NSG) and Programmable Solutions Group (PSG),

Intel has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for the current year has risen 0.2% over the last 30 days. Intel has gained 13.1% year to date.

Cognizant Technology Solutions Corp. (NASDAQ:CTSH) is a leading provider of information technology, consulting and business process outsourcing services.

Cognizant has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 11.8% for the current year. The Zacks Consensus Estimate for the current year has moved up 7.1% over the last 30 days. Cognizant has gained 19.3% year to date.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>