While the innovation space suffered in 2022, investors should still keep an eye out for compelling tech stocks to own this year. True, you never want to dismiss steep volatility. In such cases, the valuation of impacted companies fell for a reason, and usually not a good one. Nevertheless, being too pensive with the equities sector imposes possible opportunity costs.
Moreover, the tech stocks to own this year enjoy a fundamental advantage. Unlike mature, well-established enterprises, companies that forward the latest advancements across various functionalities will likely always be in demand. After all, the word “progress” implies forward movement, not regression. As well, even under a possible recession, nations will still invest in their future. Therefore, while it’s an unnerving prospect, the red ink from last year may be your friend. Below are the tech stocks to own for 2023.
|KLIC||Kulicke and Soffa||$49.73|
Alphabet (GOOG, GOOGL)
Internet technology firm Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) suffered a brutal beatdown last year. There’s no other way to put it. In the trailing year, the GOOG Class C shares dropped nearly 30% in equity value. Even in the trailing half-year period when other securities bounced dramatically higher, GOOG finds itself 18% below parity. Still, it likely ranks among the tech stocks to own this year.
Fundamentally, you can’t ignore Alphabet’s core Google ecosystem. Yes, invariably, the Google brand implies the search engine platform, where it utterly dominates the global market. However, it’s the entire ecosystem that matters. From search to social media (via YouTube) to cloud-based software (such as Google Docs), the Alphabet umbrella has become inextricably ingrained in the modern economy.
Also, Wall Street analysts rate GOOG a strong buy. And not just that but a unanimous strong buy. That’s right, despite the aforementioned 30% trailing-year loss, experts refuse to rate GOOG a hold, let alone a sell. Combined with recently spiking positive hedge fund sentiment, Alphabet represents one of the tech stocks to own this year.
As an always-relevant prospect for your portfolio, Microsoft (NASDAQ:MSFT) naturally deserves consideration for tech stocks to own. Still, its utilitarian profile didn’t spare the company from volatility in 2022. In the trailing year, MSFT gave up 23% of equity value, which isn’t particularly encouraging. Still, market participants should keep a close eye on this company.
For one thing, Microsoft’s investment in artificial intelligence specialist OpenAI may pay dividends. The tech and software giant seeks to incorporate ChatGPT, an AI-driven chatbot that promotes interfacing through normal language, in its Bing search engine. Over time, some experts believe that Bing could become a competitor to Google.
Now, such rivalry may take time to develop because Google is so entrenched in the mainstream consciousness. Still, Microsoft and Alphabet can co-exist. Both have their niche relevancies, particularly in the broad business ecosystem.
Finally, analysts appreciate MSFT, rating it a consensus strong buy. Further, their average price target implies a potential upside of nearly 22%. Therefore, it makes the ranks of tech stocks to own this year.
On the surface level, Intuit (NASDAQ:INTU) seems to be going absolutely nowhere. Specializing in tax and accounting software, Intuit appears relevant. However, in the trailing year, INTU gave up more than 30% of its equity value. Further, it’s not off to an auspicious start in the new year, shedding over 3%. Still, I peg this as one of the tech stocks to own this year and for many years down the line.
Fundamentally, as I’ve mentioned several times before, Intuit will likely play a meaningful role in the gig economy. Recently, entertainment giant Disney (NYSE:DIS) ruffled feathers when CEO Bog Iger requested that currently, hybrid workers return to the office. Mostly, I believe that the worker bees will tow the corporate line. However, a good many from Disney and other back-to-office companies will revolt, thereby cynically bolstering the gig economy.
But here’s the thing: filing W-2 tax forms for corporate employees on balance represents an easier task than filing 1099 forms. The latter (which gig workers or independent contractors must file) involves more granular disclosures. Fortunately, Intuit’s programs may help, making INTU one of the tech stocks to own.
Kulicke and Soffa Industries (KLIC)
For arguably the vast majority of American investors, when it comes to tech stocks to own, Kulicke and Soffa Industries (NASDAQ:KLIC) does not come to mind – as in, not at all. It’s not for a lack of relevance. Per its public profile, the Singapore-rebased Kulicke is a leading provider of semiconductor, LED, and electronic assembly solutions serving the global automotive, consumer, communications, computing, and industrial markets.
Unfortunately, in a crowded field, KLIC found it too easy to get lost in the shuffle. Therefore, it’s down about 7.5% in the trailing year. Nevertheless, positive momentum finally picked up, with KLIC gaining over 14% since the January opener. Financially, Kulicke deserves serious consideration for tech stocks to own because of its undervalued status.
Currently, the market prices shares at less than 7 times trailing earnings. In contrast, the sector median stands at 17 times. More importantly, the company commands an outstandingly stable balance sheet, with a strong cash-to-debt ratio of almost 19 times. As well, Kulicke sparks excellent business quality based on its return on equity of over 37%.
Another less-than-celebrated innovator is STMicroelectronics (NYSE:STM). While you might not recognize the brand name, chances are, you’ve used (or are still using) its products. A global semiconductor firm, STMicroelectronics manufactures and delivers technology-imbued microchips which undergird modern innovations. These include electric vehicles, key FOBs, factory equipment, and data centers, to name but a few categories.
To be sure, the behind-the-stage relevancies didn’t quite spare STM stock from volatility in 2022. In the trailing year, STM declined by 10%. However, astute market participants have caught onto the opportunity, bidding up shares by over 15% so far this year. Better yet, STMicroelectronics may have more room to run.
Financially, the company represents another fiscally stable enterprise that enjoys an objectively undervalued business profile. Presently, the market prices STM at 10.3-times forward earnings, well under the sector median of 18.9 times. Moreover, the semiconductor specialist sports strong profit margins. Overall, then, it’s well worth consideration for tech stocks to own in 2023.
On the surface level, CoreCard (NYSE:CCRD) might seem risky based on its underlying business. Per its website, CoreCard delivers a powerful and integrated solution for any type of card issuing program including complex credit. In simple terms, the architecture enables its client enterprises to manage all aspects of their card programs under one umbrella.
Of course, eroding consumer sentiment – particularly due to rising inflation in 2022 – presents viability concerns. If people start cutting their spending en masse, CoreCard may likewise lose relevance. On the other hand, money velocity data indicates that at least up to the third quarter of last year, spending accelerated. Therefore, CoreCard may enjoy rising demand in 2023.
Granted, CCRD ranks among the riskiest tech stocks to own this year. However, objectively, CoreCard is undervalued, with the market pricing shares at 18 times trailing earnings. That’s below the sector median of 26 times. Also, the company benefits from a strong balance sheet, particularly an equity-to-asset ratio of 0.82 times that rank better than nearly 86% of its rivals.
Sea Ltd (SE)
Arguably the most disappointing name among tech stocks to own this year, Sea Ltd (NYSE:SE) started off so swimmingly following the spring doldrums of 2020. SE soared to stratospheric heights late into 2021. However, seemingly trading in sympathy with the rapidly imploding cryptocurrency market, SE likewise suffered a deleterious price action. Indeed, in the trailing year, shares lost 64% of their equity value.
To be certain, when companies lose that much value, there’s a reason for it. Often, it’s a very toxic one. Despite the obvious negative implications, though, Wall Street analysts remain optimistic about Sea’s future. Presently, the experts peg SE as a consensus moderate buy. On average, they target a return to the $88.54 price target. This implies an upside potential of over 44%.
While I’m not going to dismiss the many risks associated with SE, here’s the deal: the company is fortuitously positioned in the promising internet economy of Southeast Asia. According to Reuters, even with a downgraded forecast, analysts believe this segment will command a valuation of $330 billion by 2025. Therefore, it’s worth putting SE on your radar of tech stocks to own this year.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.