The tech sphere was among the worst hit last year for obvious reasons. The sector, known for having inflated valuations and low earnings, led to tech stocks cooling off. However, tech stocks have been building a nice head of steam of late, despite posting mixed fourth-quarter earnings. Therefore, it might be an ideal time to invest in the best tech stocks to buy.
It's not new news that the 2022 markets took investors and their portfolios on a rollercoaster ride. Technology was one of the worst-performing sectors (XLK) -24%, ending 2022 with six consecutive quarters of declines, as showcased in the below chart. And after poorer than expected earnings, slowing revenues, deteriorating profit margins, and slashing more than 154,000 jobs in 2022, many tech companies continue their plight.
Uncertainty is looming in the first part of 2023 as an economic downturn seems likely, and companies take steps to reduce costs in anticipation of revenue declines. After the 33% decline in the Nasdaq 100, its worst showing since 2008, \"Analysts have already slashed revenue growth estimates for tech companies to 2.4% for 2023, versus a consensus projection of 5.4% just three months ago,\" according to Bloomberg Intelligence.
But then there's the latest 'Goldilocks' CPI reading that shows consumer prices rose 6.5% over the last 12 months, one of the slowest inflation rates in a year. Core inflation increased to 5.7%, and while it would appear that the Fed may downshift rate hikes, the outlook hasn't changed meaningfully from what it was one week ago. Inflation is trending down in line with expectations, which is neither good news nor bad news for tech stocks. This reading may be 'just right,' giving the Fed a runway to downshift the rate of increase by an additional 25 basis points from the December 50-basis point hike in their upcoming meeting.
Seeking Alpha's Quant Ratings and Factor Grades System showcases stocks with shared traits of value, growth, profitability, rising earnings revisions, and momentum that are best equipped to withstand volatility. It is a data-driven process that relies on the statistical measurement of a stock's financial metrics and scoring how it compares to the sector. I have selected ten tech stocks that have performed well in 2022, possess excellent factor scores, and maintain bullish momentum. While past performance is no guarantee of future results, check out our top ten tech stocks for 2023.
Seven out of my top 10 stocks are semiconductors. Why Because they are found in nearly every piece of technology used today. The semiconductor industry is on an uptick and has proven resilient when most of the tech sector was pummeled in 2022.
Because a crucial piece of investing involves diversification, especially amid market volatility, and when selecting growth or tech stocks in a rising rate environment, my picks are unique. Not all are the largest in their respective industries, offering something different for each investor. Let's dive into my first semiconductor stock and my #1 pick overall for 2023.
Offering SuperStorage, SuperServers, advanced cloud, and Big Data solutions, Super Micro Computer, Inc. and its subsidiaries offer a broad range of products and services in the IT space. With a strong network of semiconductor manufacturing relationships, SMCI is becoming a global tech leader that offers diverse systems, designing the newest tech innovations to optimize products. In addition to its vast portfolio, SMCI is making strides for the environment through its \"green computing,\" which offers customers cost-friendly, more energy-efficient, and environmentally-friendly solutions while trading at an extreme discount.
SMCI has been a resilient and top-performing stock in a beaten-down sector. Not only is it my top tech stock, I included SMCI in my Top 10 Stocks for 2023, and it was one of November's two Alpha Picks.
Continuing to outperform the S&P 500 and Nasdaq, SMCI offers one of the best valuation frameworks in the IT sector. SMCI showcases a forward P/E ratio of 8.87x, a more than 62% difference to the sector, and a forward PEG of 0.28x, a -82.05% difference to its peers.
Despite a one-year decline of 35% and geopolitical risks, Taiwan Semiconductor is a chip stock that managed to withstand the substantial drawdowns that hurt other tech stocks in 2022. As the world's largest chip maker, having manufactured more than 12,300 products that include smartphones, automotive, and digital consumer electronics, although the semiconductor industry and fabrication can be very cyclical, TSM's bullish momentum continues to allow this stock to outperform. Taiwan Semiconductor has managed to maintain its pricing power in a popular industry while continuing to trade at a discount, all while garnering the interest of Warren Buffett, whose Berkshire Hathaway disclosed its $4.1B stake in November.
Another quant rated strong buy rated IT company involved with semiconductors is Amkor Technology. AMKR is a leader in integrating memory and storage for computing and automotive products, offering flip-chip solutions, including turnkey packaging for smartphones, tablets, and other mobile devices. On an uptrend following stellar Q3 earnings, the stock is trading near its 52-week high but still offers upside potential given the demand for Big Data and chips, which is why I've selected it as one of my top 10 tech stocks.
As evidenced in its performance over the last year, +22.84%, AMKR is strongly bullish. Its quarterly price performance significantly outperforms its sector peers, so much that many analysts call the stock overbought as investors continue to actively purchase shares, driving its price higher. With a Q3 2022 EPS of $1.24 that beat by $0.31 and revenue of $2.08B that beat nearly 24% year-over-year despite macroeconomic headwinds, AMKR continues to grow. Its advanced packaging technology made up nearly 80% of its Q3 business. As its CEO, Giel Rutten, stated, \"Amkor continues executing on its strategy to leverage a leadership position in advanced packaging and its broad geographical footprint to capitalize on the industry megatrends of 5G, IoT, automotive, and high-performance computing.\"
Headquartered in Phoenix, Arizona, this semiconductor stock has been one of my favorites for a while. Offering premier intelligent technology for automotive, industrial, and 5G cloud power, ON Semiconductor is paving the way for global lighter and longer-range systems. With tremendous earnings growth, EPS, and fundamentals, consider this stock for a portfolio, especially as it trades at a discount.
On a longer-term uptrend, ON shares are trading above the 200-day moving average, with investors paying higher prices for shares. Showcasing a quarterly price performance for six- and nine-months substantially better than its sector peers, it's no surprise given the tremendous growth and profitability the company has displayed.
Despite trading near its 52-week high of $97.43 per share, ACLS is undervalued. Forward P/E of 18.34x is a -24.98% difference to the sector 24.45x, and its forward PEG of 0.92x is more than -40%. With bullish momentum showcasing substantial quarterly price-performance beats, analysts call the stock overbought as shares are actively being purchased and the 200-day moving average is upward sloping. In anticipation of Q4 revenues exceeding $250M, above its previous guidance of approximately $232M to $240M, Axcelis raises Q4 guidance, indicating solid growth and profitability anticipated.
Expecting to achieve nearly $1B in revenue over the next few years on the heels of growth drivers like the electrification of automobiles and advancements in communications technology. ACLS's targeting of specific markets has helped advance its revenues.
With over 3,000 active patents and a dominant force in the automotive industry, Himax's Q3 earnings showcased an EPS of $0.17, beating by $0.09, with revenue of $213.63, beating by $14.81M. HIMX had better-than-expected sales, and the company implemented greater inventory control measures in anticipation of a slowdown. Representing more than 35% of sales was HIMX's auto business, HIMX offers a diversified mix of products which includes imaging and 3D technologies. With plans to introduce an ultralow power Ai batter-operated surveillance camera, HIMX is looking toward the future, and as Himax President & CEO, Jordan Wu said,
Offering cloud revenue management solutions to help minimize overpayments and risks involved in payment processing, Model N, Inc.'s business model is helping curb the price erosion of products for high-tech and life science companies. By implementing artificial intelligent controls, MODN can control price concessions for deals, and its revenue solutions utilize enterprise resource planning (ERP) and customer relationship management (CRM) to maximize workflows to help grow revenue.
MODN has strongly bullish momentum with an A+ grade, as its 200- and the 10-day moving average is rising. One of the few tech stocks that experienced a rise in share price in 2022, MODN is trading near its 52-week high of $42.45 per share. Despite this, the stock still is relatively undervalued, posting a C+ valuation grade. Despite less-than-ideal underlying valuation metrics, MODN's earnings continue to impress, an indication that there may be continued upside with this stock offering solid overall fundamentals, including growth and profitability.
Streaming is the dominant form of U.S. TV viewing, according to a July 2022 Nielsen report, and HLIT has managed to take advantage, gaining +32% over the last year. With over 5,000 media companies spread across the globe, HLIT provides next-gen technology that has allowed it to profit and grow.
\"Latin America is the second fastest-growing streaming market in the world, and we're excited to help DirecTV GO unlock the power of the cloud while delivering video content to more screens. As DirecTV GO expands its streaming service, our cloud Sa