Where industry goes, the stock market goes — so what does that mean for tech stocks?
Let’s follow this logic … We live in an age of incredible technology … so there should be incredible tech-related stocks, right?
OK, things aren’t always so simple in the stock market, but it’s true that there can be great opportunities out there with tech stocks.
The problem? Tech stocks can be volatile, and that can mean more risk. The tech industry can be fickle, so the stocks can be, too. It’s always important to do your research before trading, and that’s especially true when it comes to tech.
Here, I’ll offer up a starting point for traders who are interested in exploring tech stocks. I’ll start off with what they are, then delve further into how to incorporate them into your trading strategy.
Table of Contents
- 1 What Are Tech Stocks ?
- 2 The Top 5 Tech Stocks to Watch Right Now
- 3 Conclusion
What Are Tech Stocks ?
Tech stocks are stocks in the technology sector.
But hang on … what’s classified as technology? While you might instantly think of companies like Apple or Microsoft, the sector actually goes way beyond that.
Basically, any company relating to technology — including research and development, distribution, and actual tech gadgets — could be classified as a tech company. And these stocks would be tech stocks.
So in addition to manufacturers of things like smartphones and computers, tech stocks would include the stocks of companies that create software, hardware, products, and tech-related services.
In some cases, it could even include companies that create medical advancements using technology — these would be a sub-sector called biotech stocks.
The History of Tech Stocks
From the first ticker machine (originally designed to quote gold prices) to the invention of the telephone and beyond, the advent of the internet, technology, and the stock market have had quite a love affair.
Not only have advancements in technology helped shape the way we trade (hooray for online trading and screeners like StocksToTrade!), but the companies responsible for tech advancements have also offered opportunities to trade.
In the ‘old’ days, the tech sector might have included things like computer hardware, software, semiconductors, and communications equipment.
But as time marches on and technology advances, the sector is expanding. Internet companies, app companies, e-commerce, cloud-based computing, and social media companies are among the relatively new additions to the sector.
In 1971, the Nasdaq Composite Index was established. And this index primarily represents tech-focused stocks.
The index started with a value of 100. By 1995, when the dot-com boom was heating up, the index closed above the 1,000 mark. It continued a steady ascent, and by the year 2000, was closing above 5,000 points.
And then the dot-com bubble burst. It was like Armageddon to the Nasdaq Composite. It would eventually lose at least 75% of its value. For a long time after, investors were understandably leery of tech stocks.
But the market rebounded eventually, and stocks related to tech once again took off. Since 2002, the Nasdaq Composite has gone up about 800%.
Now, in case those numbers don’t mean much to you, let’s put it into an example. Say you found a stock that traded for $3 per share in 2002, and you bought 5,000 shares for $15,000. Theoretically, your return could be well into six-digit territory today.
Why Tech Stocks Matter
The obvious reason tech stocks matter? Tech is an increasingly important part of not just our lives but the global economy.
In the U.S., the tech sector includes monoliths like Amazon, Facebook, Google, and Microsoft. Check out their growth on a stock chart — it looks almost like a caricature of a typical stock’s growth.
Tech companies are growing, and so are their share prices.
Currently, the top 10 tech stocks in the U.S. have a massive market cap of $5 trillion. Yes, trillion. Not sure how much that is? Think about a million. That’s a lot, right? A trillion is a MILLION million.
The Top 5 Tech Stocks to Watch Right Now
Rekor Systems (NASDAQ: REKR)
This Maryland-based holding company creates security tech products and services for the government and private sector customers.
The stock price had mainly been flatlining around under $1 per share since November 2018 … But then in June, it started to ascend in price. And in July it shot up to over $5 per share.
Take a look at the REKR one-year chart below:
If you scan the news, the company’s had some product successes lately, but there doesn’t seem to be one glaring catalyst for the stock’s sudden growth. It’s since pulled back, but it’s definitely on the radar for many traders now.
Digital Turbine (NASDAQ: APPS)
This Austin-based company delivers end-to-end platform solutions for app developers, device manufacturers, and various other third parties. As recently as June, the company was trading for about $3.70 per share, but at the time of this writing, it’s approaching the $7 mark.
Here’s the APPS one-year chart:
It’s been getting all sorts of ‘buy’ and ‘strong buy’ ratings from analysts — but you should already know what I think about that … Do your own research … ALWAYS.
That said, this stock’s growth has been phenomenal. Also, the fact that the earnings have been strong and that it has a pretty high stake from institutional investors is worth noting.
Inseego (NASDAQ: INSG)
This San Diego-based company is pioneering 5G technology and cloud-computing solutions. It works with cell providers, distributors, and directly with consumers. The stock’s chart has been mainly moving upward, but in late July, it started trending down.
Take a look at the INSG one-year chart:
However, as of early August, things might be changing. That includes a positive earnings report with a 26% year-over-year growth and live 5G network trials with Verizon and Sprint starting up. The outlook could be a bit rosier for Inseego.
Boingo Wireless (NASDAQ: WIFI)
Boingo is a wireless distributor based in LA. The stock’s been going down in price, and after a recent lukewarm Q2 earnings report, the price dropped further.
However, just this week they announced a partnership with Verizon to improve their 5G presence in Phoenix — and shares shot up about 14%. The share price is still very much down from the 52-week high of $35.98, so there could be an opportunity for growth with this stock.
Below is the WIFI one-year chart:
ViewRay (NASDAQ: VRAY)
ViewRay is an Ohio-based company that designs and manufactures MRI equipment. They had some tough times earlier this month despite higher earnings overall. But actual sales were disappointing, the year guidance was downgraded, and the CFO is leaving. The slew of bad news led to a pretty significant sell-off.
Here’s the VRAY one-year chart:
But more recently, the company’s COO purchased a big chunk of stock in the company, which investors saw as a vote of confidence in the company’s future. Could it be a sign that there will be a turnaround? Maybe, maybe not. But it may be worth watching.
Technology is a huge part of our lives and culture, and it’s accelerating at an ever-faster rate. With these developments can come opportunities for savvy traders who are willing to do their research.
Tech stocks can be fickle and volatile — but they can also experience rapid growth in short periods of time. So do your research, plan your trades, stay on top of the news, and be prepared to make your move when the setup fits your criteria.
When it comes to trading, you can never know how the market will change. That’s why it’s important to build a strong foundation of trading knowledge. Smart traders learn to study the past so they can better adapt to the ever-changing market.
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Are you ready to work hard, study hard, and develop the skills you need to trade intelligently? Apply today!
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How do you trade tech stocks? And how have your tech trades worked out? Leave a comment and let me know!