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How to Determine Most Promising Tech Stocks to Invest in?

Author: Igor Balanchuk
22 February 2021, 17:53
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Votes: 1

Tech stocks are always a target for experienced investors as this kind of asset, especially if we talk about a dominating company, can influence the whole sector of the global economy. However, huge scales impose an imprint on the risks due to high complexity and default competitiveness in the sector, making such shares a rather risky game. Login Casino follows the latest financial news, now describing the issue of tech stocks and how to choose the best ones for investing in.

How to Determine Most Promising Tech Stocks to Invest in?

While the issue of investing is always regarded as the activity of the richest people in the world, the recent affordability of stock exchanges allows trying the knowledge and gut feeling for almost everyone. Of course, there are plenty of differences while investing in diverse sectors, so knowing the niche you are trying to achieve success at is vital.

Thus, the major investing characteristics of the tech stock sphere are:

  • Big volatility.
  • Huge-scale diversification (ability to choose an unknown company or FAANG).
  • High interest in the sector.

The biggest technology companies are influencing billions of people's everyday lives, and this effect is only increasing. It makes the game of investing in tech shares a rather interesting game as one can join the mainstream movement with global outcomes.

What makes top tech stocks interesting for investors?

However, not the only aforementioned aspects are forming the interest towards tech stocks. Those who feel familiar with the technology sector can try to predict the upcoming trend and though bet on a new Apple or Microsoft. In general, the following elements make the tech industry an interesting direction to review for investing:

  • The increasing influence of technologies on everyday life (people use more and more instruments and tools with years, and this trend won't change in the nearest future);
  • Long historical background for better understanding (the continuation of the previous item; knowing the development pace and influence of particular technologies help in predicting the upcoming ones);
  • Different sub-directions inside tech (from AI and AR to automobile and space technologies; deep knowledge in one of the sectors can help to determine the most prospective firms to invest in);
  • Investing flexibility (this sector gives the ability to make both short- and long-term investments,  along with the ability to join the global leader or try to bet on the unknown firm that can make a breakthrough); 
  • Interconnection with almost all other industries (medical instruments, chemical industry, agricultural sector, AI, and neural networks in politics and sociology – the importance of technologies is increasing in all the human activity areas).

tech stocks

It's hard to define which of the items is the most important as they form a reliable background for making investments in the tech sector. Moreover, even an inexperienced investor can find the most suitable niche that is related to his or her expertise and try to make predictions.

Specifics of new tech stocks

An Initial Public Offering (IPO) is rather similar to the lottery game – none can guarantee that the young company's shares will skyrocket. Even though the tech sector seems to be better analyzed, in reality, the future of the company is always volatile due to numerous factors. Competitors, stakeholders, copyrights, unforeseen circumstances, and many more influence every technological firm's development.

For instance, let's take a look at the theoretical situation: Elon Musk presented Tesla 30 years ago. That was the time when the vast usage of mobile telephones and PCs was a dream. If to take into account the effectiveness of the batteries in the 1990th, Tesla stock price would definitely drop right after the IPO with total unbelief in the promising project. Twenty years ago, the situation with potential Tesla's IPO wouldn't be so critical but still far from immediate growth. Interestingly, even ten years ago, the project wasn't too persuasive, which could be seen in the timeline chart of Tesla shares cost.

Every promising technology has to be presented in the right place, right time. We've seen flying cars in the films produced in the 80s and 90s, and we're sure that the 2000s would definitely be the time of such an incredible innovation. It means that betting on a new company that promises an incredible future and even supports it with prototypes or technical documentation is rather dangerous.

While people now can try to invest in Musk's SpaceX project, they have to understand that colonization of Mars can cost immense amounts of money and cannot be profitable without a technological breakthrough. For example, people have to significantly increase space flying speed or find a new chemical element on Mars that can be transformed both into electric energy and oxygen. So, don't believe in colorful presentations and have a cold mind concerning technologies' real possibilities.

tech stocks to buy

Are cheap tech stocks worth attention or not?

As the investing procedure is always about increasing the initial budget, finding cheap stocks can become a rather biased game. Of course, people are making huge steps in this direction but investing in every small firm can be rather dangerous. That is the trick of low-price shares: the cost can be the sign of underestimation or flourishing future absence at the same time.

The tricky nature of cheap stocks can be compared with startups, which are the promising companies that are seeking funding. The last words make the difference – startuppers are looking for investments with great passion, so even a comparatively cheap investment can lead to full disappointment. Moreover, only a few percent of startups grow into serious projects due to numerous reasons, which makes the strategy of "investing into numerous cheap firms" not the most reliable one. Just remember that all the participants of potential deals think that they know more but someone has to lose in the end.

Is looking for the best tech stocks right now works in practice?

One of the most common practices of choosing the stock to invest in is to look at their most recent value and price fluctuations. Such a tactic is clear enough as it includes the latest news on the topic and allows to analyze the latest fluctuations and build appropriate forecasts.

Such an approach is always called momentum and relates to the simplest way of finding investing opportunities. The idea behind it relies on the positive feedback loop, when the increase of share prices causes more attention, investments, and, therefore, even faster growths.

However, one should know that this method of investing is suitable for reviewing the latest trends only. Depending on the particular sector or firm, the actual time frame is three to twelve months. The specifics of applying this method for the tech stocks don't significantly differ, and one has to be concerned if the firm grows a few consecutive months in a row. The economic explanation is rather simple in this case: even the development requires structural adjustments, so the outperforming is followed by drops for some period at least.

Tech stocks to buy in 2021

best tech stocks right now

What directions are the most prospective in 2021?

Actually, the discussion of best tech stocks in 2021 should start with FAANG (abbreviation to Facebook, Apple, Amazon, Netflix, and Google). Those giants have a capitalization of more than 1 trillion dollars each, which gives them a huge influence and, therefore, the ability to change the market disposition by simply buying smaller firms and eliminating the competitors. Interestingly, the previous passage's discussion about avoiding shares with a steady growing trend isn't actual for those tech giants as they can dictate the situation for a huge amount of people.

However, betting on FAANG shares is mainstream, which is also not the most profitable step. Thus, in the year-to-date (YTD) scales, none of them doubled their shares' prices, although all of them showed steady growth and recovery after the coronavirus-caused March drop. Nevertheless, suppose someone wants to feel the complicity of the biggest tech market players. In that case, the price per share for FAANG representatives varies from a few hundred to a few thousand dollars, which looks even cheaper than buying a single bitcoin.

Best tech brands (except for FAANG) to look at right now

As we said, FAANG firms are a bit of a mainstream option for investments. At the same time, there are plenty of firms with dozens of billions of capitalization, which promise faster growth and have a stable market position at the same time. There is no need to determine the order for them, so just an alphabetic numbering of the top-10 tech companies for investments in 2021:

Advanced Micro Devices (AMD)

A well-known computing manufacturer has a market capitalization of more than 100 billion dollars. The company logically benefited from the coronavirus lockdown and showed steady growth for a couple of years. It's hard to believe, AMD's stocks were about 2$ in 2016, while now they are around 100$ per share. An x50 increase in the prices and huge market capitalization is the reason why this manufacturer should be regarded as the investing option.

top tech stocks

Broadcom (AVGO)

Another tech manufacturer, but which is focused on producing semiconductors for wireless technologies. 5G, Wi-fi, Bluetooth, and all that stuff is gaining momentum for years, and Broadcom is one of the most reliable representatives in the niche. The firm's market capitalization is close to $200B, and the announcement of cooperation with Intel only strengthens its position. Although the company’s growth wasn't huge in 2020, it's still a pretty interesting variant for investor betting.

Cloudflare (NET)

As it can be seen from the firm's name, Cloudflare is focused on cloud computing and related technologies. As the issue of data storage and processing is its focus, the company is also active in developing protection and performance software, which cannot lose actuality in the near future. Interestingly, the March downfall wasn't so sharp for the firm, while in YTD terms, their shares almost quadrupled. Although their market capitalization is "only" $26B, Cloudflare looks rather persuasive to take into account, at least.

Coherent (COHR)

One has to hurry up buying the shares of Coherent, which is a manufacturer of laser-related products. Having a market capitalization of $3.7B, the firm is expected to be acquired by Lumentum for $5.7B. Such a huge difference was closely related to the crucial earning per share value, which was almost 1000% for Coherent shareholders. 

Intel (INTC)

The leading computer processors and chipsets manufacturer continues the steady growth, increasing the market capitalization to almost $250B. That was one of the firms that fastly recovered from the March drop. However, the year 2020 wasn't so successful for the stakeholders because of downfalls in summer and autumn. It creates nice preconditions to invest in the tech giant, who just recovered the stock price that was a year ago and looking for further growth.

new tech stocks

NVIDIA (NVDA)

While being a well-known GPU (graphic processing unit) developer and manufacturer, NVIDIA has already made plenty of steps into other niches. The company seems to have a gut feeling on what will be needed on the market, fulfilling the store shelves with graphic cards for Bitcoin mining while now focusing a lot on cloud storage technologies. The market capitalization of more than $350B allows the firm to provide M&A (mergers and acquisitions) activity, buying smaller multibillion firms like Arm. Doubling of the stocks in the YTD and overall power looks promising.

PayPal (PYPL)

The top electronic payment system is a must-review option for investors in 2021. PayPal was pretty flexible in 2020, fastly adjusting for an even wider spread of contactless payment, which was way important during the quarantine. As a result, its share prices almost tripled during the previous year and there was especial growth after the company’s announcement of adding cryptocurrencies into the system. There are no doubts that PayPal will soon achieve $300B+ market capitalization, which shows the firm's real power.

Qualcomm (QCOM)

A powerful semiconductors manufacturer with a market capitalization of almost $180B is another interesting option for investors. Qualcomm holds patents for mobile communication standards, manufactures wireless devices, and is one of the most well-known mobile processor developers. Quite slow growth during the previous couple of years changed after the lockdown announcements, and the producer saw a more than doubled stock prices jump.

Roku (ROKU)

cheap tech stocks

A bit underestimated software and hardware manufacturer, Roku showed how to cope with the tough 2020. Its shares more than tripled in the YTD review, while the firm showed that the cooperation with Netflix wasn't accidental. Suggesting all the services related to streaming (which is a trendy phenomenon, just look how Twitch stocks raised) allowed to achieve influential $50B+ market capitalization, and it seems not to be a peak in 2021.

Salesforce (CRM)

The tech giant with $200B+ market capitalization is another firm that is tightly related to cloud technologies while becoming more known for its CRMs. The year 2020 allowed the firm to combine both directions and develop suitable remote working environments for enterprises around the globe. The price fluctuations chart of Salesforce shares doesn't look too stable, but it opens wider opportunities for smart investors.

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Frequently asked questions

What are tech stocks?

Tech stock is the shares of the companies that are related to diverse technologies.

Why are tech stocks falling?

Tech stocks can fall due to numerous reasons, while among the most common ones are high competition in the market or M&A activity of bigger brands.

What tech stocks to buy?

It's better to focus on the niche where you feel the biggest confidence and only then choose a particular company to invest in.

How to invest in tech stocks?

Investing in tech stocks begins with registering on an exchange, where particular firms' shares are traded.

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