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All Contents © 2017The Kiplinger Washington Editors
By Wayne Duggan
| January 2017
It has been another great year for the best tech stocks in 2016. As usual, large-cap tech stocks like Facebook Inc. (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet Inc. (GOOG, GOOGL) dominated the headlines with their innovation.
Not only are these stocks popular to own, but Amazon, Google and Facebook are among the most highly rated stocks on Wall Street. In fact, all of these tech giants show up at the top of Bernstein’s list of the most crowded trades in the market.
Unfortunately, Bernstein notes that the most widely owned stocks tend to exhibit some unique trading behavior. First, they underperform during periods of overall market volatility. Second, they correlate with each other more than with the market as a whole. Finally, they react more negatively to negative news than they do positively to positive news.
Instead of running with the herd, consider these three tech stocks that are flying under the radar.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
CACI International Inc. (CACI) has all the elements investors look for in high-growth tech stocks. CACI provides simulation technology solutions for business systems, command and control, communications, cyber security and enterprise information technology.
Just this month, CACI announced a new $31 million contract with the U.S. Army and a $140 million contract with the U.S. Navy. With President-elect Donald Trump soon taking office, there will likely be a ramp-up in military spending ahead.
According to Finviz, CACI stock currently trades at a price-to-sales ratio of only 0.76. That ratio is much lower than all four FANG stocks. At the same time, CACI stock has delivered year-over-year revenue growth of 20% to 30% in the past three quarters. Those are the kind of growth numbers that tech stock investors like to see.
Perhaps that growth is why CACI stock has more than doubled the overall return of the tech sector in 2016. CACI stock is up 34% on the year.
Amkor Technology, Inc. (AMKR) is another one of the best tech stocks flying under the radar. AMKR provides semiconductor packaging and test services. Its services include wafer testing, various types of final testing, system level testing, strip testing and complete end-of-line services.
One of the ways AMKR is delivering growth to its investors is via mergers and acquisitions. Earlier this year, Amkor upped its ownership stake in Japan’s J-Devices to 100%. The move added $800 million in annual revenue for AMKR and solidified the company’s position as the second-largest outsourced assembly and test company in the world. Amkor is also the largest OSAT company in the entire automotive industry.
Despite its 17%, 24% and 48% revenue growth in the last three quarters, AMKR stock trades at a price-to-sales ratio of just 0.75. Some investors already seem to be catching on to the opportunity, sending shares up 81.6% in 2016. Incredibly, CNN shows just three Wall Street analysts currently covering AMKR.
Leidos Holdings, Inc. (LDOS) is another one of the best technology stocks to own if Trump follows through with his pledge to ramp-up defense spending.
LDOS provides IT services and technology for the Department of Defense, the Department of Homeland Security and the NSA. Since early November, Leidos has secured a new $285 million contract with the Department of Energy, a $10 million contract with the U.S. Army and a $66 million contract with the Department of Homeland Security.
There are currently only nine analysts that cover LDOS stock. According to Estimize, those analysts expect LDOS to roughly double its revenue year-over-year in each of the next three quarters. In the most recent quarter, Leidos delivered 45% year-over-year revenue growth.
Yet despite the improving environment in Washington and the company’s impressive growth, LDOS stock trades at a reasonable price-to-sales ratio of 1.43. In addition, its forward price-to-earnings ratio is only 15.8. That’s a much better value than investors typically see in high-growth tech stocks.
This article is from Wayne Duggan of InvestorPlace. As of this writing, he held none of the aforementioned securities.
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