What are the New Tech Stocks of 2018 and Beyond?
Investors have scratched their heads for years over which tech companies to invest in. Rather, they should dig deeper into what's fueling growth in the tech sector itself, tracing those roots to ETFs to help reap the rewards.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
What are the new tech stocks of 2018 and beyond? Guess what — no one knows! If I was asked to pick a single technology stock a year ago, it would have been like finding a needle in a haystack. And I’m the CEO of an ETF company!
Instead, there’s a better way to determine where to direct your investment dollars. Rather than picking a particular company to invest in, pick a technology itself. Or, more specifically, an industry within the tech sector, one on which the entire field relies. More on what that might be in a bit.
First, there’s no getting around the fact that technology companies now dominate the stock market. Below is a chart showing the top 25 companies in the S&P 500 index. You’ll notice that five tech companies now occupy the top five slots and eight of the top 25 are technology companies — compared with 20 years ago, when just two of the top five were tech and only five tech companies were in the top 25.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Changing Face of Technology in the S&P 500
| S&P Market Cap Leaders | |||
|---|---|---|---|
| 1998 | April 2018 | ||
| 1. | Microsoft | 1. | Apple |
| 2. | General Electric | 2. | Amazon.com |
| 3. | Intel | 3. | Microsoft |
| 4. | Walmart | 4. | Alphabet |
| 5. | ExxonMobil | 5. | |
| 6. | Merck & Co Inc | 6. | Berkshire Hathaway |
| 7. | International Business Machines | 7. | JPMorgan Chase & Co |
| 8. | Nokia of America | 8. | Johnson & Johnson |
| 9. | Coca-Cola | 9. | Exxon Mobil |
| 10. | Pfizer | 10. | Bank of America |
| 11. | Cisco Systems | 11. | Walmart |
| 12. | Bristol-Myers Squibb | 12. | Visa |
| 13. | AT&T | 13. | Wells Fargo & Co |
| 14. | WorldCom | 14. | Intel |
| 15. | Altria Group | 15. | Chevron |
| 16. | Procter & Gamble | 16. | UnitedHealth Group |
| 17. | Citigroup | 17. | Pfizer |
| 18. | Johnson & Johnson | 18. | Cisco Systems |
| 19. | AT&T | 19. | Home Depot |
| 20. | Bank of America | 20. | Verizon Communications |
| 21. | American International Group | 21. | AT&T |
| 22. | Eli Lilly & Co | 22. | Boeing |
| 23. | BellSouth | 23. | Oracle |
| 24. | Dell | 24. | Mastercard |
| 25. | JPMorgan Chase & Co | 25. | Coca-Cola |
It’s clear that technology is much more pervasive than it was just 20 years ago. Amazon is now the nation’s largest retailer, though it’s considered a tech company; and Visa and Mastercard are now among the largest purveyors of financial transactions, and are increasingly investing in technology for record keeping, fighting fraud and speeding up transactions. Technology, alas, is in everything.
Which industries within technology
Blockchain technology, cloud computing, semiconductors, video games, software and the “Internet of Things” are now eternally locked together and rely on technologies that couldn’t exist without each other. It’s hard to invest in just one industry within tech, but I would prefer to allocate my money in just two or three of those industries within the broader technology sector. Investing in exchange-traded funds (ETFs) allows me to do so.
For the next year, if I had to pick technology stocks, I would probably choose three tech realms to invest in:
- Blockchain technology
- Semiconductors
- Quality technology companies that pay dividends
My investments would not be in individual companies, but rather a basket of technology stocks, like an ETF, allowing me to gain exposure to one slice of the tech sector while diversifying my investments across many companies.
How dividends can help identify tech stocks that are poised for growth
Disappointingly, of the top five tech companies, only Apple and Microsoft pay dividends. Still, 20 years ago none of those companies paid dividends. To some extent, paying dividends is the sign of a company maturing and one that wants to reward investors for investing with the company. I see dividends as a significant indicator of a company’s health and growth.
Apple began paying dividends in 2012 and has been consistently making and growing quarterly cash dividend payments to shareholders. Apple’s annual dividend yield is currently 1.6%. Likewise, Microsoft has routinely paid a quarterly dividend that yields 1.7% today.
At Reality Shares, we feel that screening for quality in tech is paramount, and our proprietary dividend health rating system, DIVCON®, allows us to screen for dividend growth prospects. We evaluate each firm based on seven quantitative factors — expected dividend growth, free cash flows, earnings per share growth, recent dividend actions, buybacks and repurchases, fundamentals (according to Bloomberg) and Altman Z-scores (which measure credit strength) — to rank each company by its quality-based dividend health score.®
Why those 3 slices of technology?
Analyzing a company’s dividend growth is just one method helping identify the three sectors of technology that I believe are poised for growth. Another is the methodology that our blockchain ETF utilizes. First, I should point out that I believe that blockchain is one of the biggest innovations since the advent of the Internet. Blockchain is the underlying technology that bitcoin, a cryptocurrency, was built on, and it is the technology allowing for assets to be stored and transported over the Internet. It is a profound technology that is going to have broad, sweeping effects across all segments of the economy, regardless of what you’re looking at.
As to what we consider could be the next wave of technology, we also developed a screening system for companies in the blockchain space. A company gets a Blockchain ScoreTM that ranks its potential impact in this quickly growing market segment. These factors include the potential for increased economic profit, operational efficiencies and transformational business practices – analyzed to uncover the companies with the most potential within the blockchain economy. That is why the top-ranked Blockchain Scores include several of the tech companies, such as Intel, Amazon and Microsoft, which have the servers, microchips and technology that host blockchains.
Semiconductors are another one of the industries within technology that stands to gain from blockchain technology.
ETFs vs. mutual funds to get technology exposure
Could I get the same tech exposure by making my investments in anything but an ETF? Not really. Let me tell you why. For me, the only competing investments that would give me the right exposure and diversity are mutual funds. But mutual funds tend to fall short, in part, because they tend to charge higher fees and rely on active fund managers to pick the stocks, rather than basing them on indexes. Furthermore, if you planned on trading intraday, you wouldn’t be able to do so with mutual funds as they are only priced once a day, at the market close.
To summarize, there is no crystal ball to predict where technology is going to move, but there are ways of making sure your investments capture enough of the potential upside of whatever the next successful app or technology is likely to be.
Learn more about how we rank and analyze dividend-paying stocks or see how we rank companies investing in blockchain technologies using advanced analytics. Find important information and disclosures at http://www.realitysharesadvisors.com/.
-
How Much It Costs to Host a Super Bowl Party in 2026Hosting a Super Bowl party in 2026 could cost you. Here's a breakdown of food, drink and entertainment costs — plus ways to save.
-
3 Reasons to Use a 5-Year CD As You Approach RetirementA five-year CD can help you reach other milestones as you approach retirement.
-
Your Adult Kids Are Doing Fine. Is It Time To Spend Some of Their Inheritance?If your kids are successful, do they need an inheritance? Ask yourself these four questions before passing down another dollar.
-
The 4 Estate Planning Documents Every High-Net-Worth Family Needs (Not Just a Will)The key to successful estate planning for HNW families isn't just drafting these four documents, but ensuring they're current and immediately accessible.
-
Love and Legacy: What Couples Rarely Talk About (But Should)Couples who talk openly about finances, including estate planning, are more likely to head into retirement joyfully. How can you get the conversation going?
-
How to Get the Fair Value for Your Shares When You Are in the Minority Vote on a Sale of Substantially All Corporate AssetsWhen a sale of substantially all corporate assets is approved by majority vote, shareholders on the losing side of the vote should understand their rights.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to ChanceAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
I'm a Financial Adviser: This Is Why I Became an Advocate for Fee-Only Financial AdviceCan financial advisers who earn commissions on product sales give clients the best advice? For one professional, changing track was the clear choice.
-
I Met With 100-Plus Advisers to Develop This Road Map for Adopting AIFor financial advisers eager to embrace AI but unsure where to start, this road map will help you integrate the right tools and safeguards into your work.
-
The Referral Revolution: How to Grow Your Business With TrustYou can attract ideal clients by focusing on value and leveraging your current relationships to create a referral-based practice.
