Two Ways I’m Following Tech Leaders to Higher Highs
12.3% gains by spring…
Two Ways I'm Following Tech Leaders to Higher Highs
By Lucas Downey, Contributing Editor, TradeSmith Daily
Ask 100 investors about the best stocks to buy right now, and odds are most will point to technology stocks.
Whether it's the A.I. boom, automation, or productivity software — these trends are monumental and aren't going anywhere anytime soon.
That's because when you peek under the hood at the true market leaders in the tech space, sales and earnings are booming.
And if you know how to isolate the top stocks, you stand to make some hefty coin by riding this multi-year trend.
Today we're going to laser in on the semiconductor and software industries. Not only have these areas crushed the markets recently, one awesome historical study points to double-digit gains coming in the months ahead.
But before I show you the two tickers to buy ahead of this trend, let's take stock of what's happening now…
With high inflation and a turbulent stock market, cash is hard to come by for most Americans. But, one financial expert claims his A.I. algorithm has made an income breakthrough that could solve this massive problem.
Software & Semiconductor Stocks Are the True Market Leaders
Stocks have come a long way since the lows in October. The S&P 500 has rallied hard, posting nearly 19% gains since. Pretty good, right?
Thing is, those juicy gains pale in comparison to the performance of semiconductor and software names.
A great barometer for those groups is the VanEck Semiconductor ETF (SMH) and the iShares Expanded Tech-Software Sector ETF (IGV).
Both of these funds have trampled the S&P since Oct. 26, with SMH jumping 40% (orange) and IGV up 28% (blue) against the S&P's relatively small, but still impressive 19% climb (green):
Source: FactSet
The reason these ETFs are surging is simply due to the quality of their holdings.
When you crack open SMH, you'll find a war chest of outstanding companies like NVIDIA (NVDA), Taiwan Semiconductor (TSM), Broadcom (AVGO) and more.
Each of these titans are expected to grow their sales and net income by double digits in the years ahead… partly due to the A.I. race set in motion a year ago.
Let's just say business is booming!
And we find the same high-quality scenario in the holdings of IGV.
Its top three holdings are Salesforce.com (CRM), Microsoft (MSFT), and Adobe (ADBE) — similar to the semiconductor firms above, these big three are also estimated to grow their sales and net income by double digits in the years ahead. (I own CRM and MSFT in personal accounts.)
Those are the common traits of superior stocks. So, we should focus on the growers and those constantly innovating.
Following this approach, few areas of the market have a more favorable outlook. The growth profiles alone should make an investor want in on this boom.
But on top of that a rare technical signal just fired, suggesting huge upside for these groups in months ahead…
Not only that, technology stocks led the forward gains… jumping 24.5% a year later.
Today we're taking that study one step further and diving into three of the major groups inside the Tech space: Semiconductors, Software & Services, and Tech Hardware & Equipment.
By using the same framework as that prior study, we find that long stretches between new all-time highs for the S&P offer one of the most bullish omens for these three groups.
What's even more eye-popping is that big gains didn't take long to occur.
When the S&P 500 takes more than a year to make a new all-time high:
Semiconductors rally 23% six months later
Software & Services names bounce 15.5% higher six months later
Hold for 12 months, and Software names fly even higher to 25.1%
That's a lot of juice.
This signal tells us we could see another 12.3% gain in Semiconductors by the first day of spring…
And you should see Hardware names boast awesome performance too, with the highest 12-month performance of the bunch at 26.4%.
What this study tells me is that new highs are often the green light for growth stocks.
Higher stock prices tend to forecast a healthier economic backdrop unfolding… and that means now's the time to make hay.
Sales are climbing. Earnings are oozing.
If you're like me and see a vibrant future for Semiconductor and Software names, do your homework and check out SMH or IGV.
Jason is a Wall Street veteran with an easy-to-follow system for finding the best stocks out there.
Drawing data from company balance sheets, technical signals, and the flow of institutional capital, he's able to sift out the contenders from the pretenders.
And in his premium research service, TradeSmith Investment Report, he's been all over the semi and software run.
One semiconductor recommendation is up 47% in less than two months… And another tech play is up 63% in the last six months.
And Jason just recommended a brand-new under-the-radar chip name with all-star qualities.
A $6 trillion financial bubble is set to burst as soon as tomorrow… and strange as it may seem, it could be the ultimate buy signal for the exact type of stocks Jason spends his time uncovering.
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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