Market outsiders generally assume the big-name tech stocks are a sure thing – Apple (AAPL, Financial), Facebook (FB, Financial), Twitter (TWTR, Financial) or Amazon (AMZN, Financial) – but it is not that simple. In fact, the biggest names are often the most vulnerable to market fluctuations. That is why investors felt the pressure last week in the face of President Trump’s immigration ban, which sent some of the largest tech stocks tumbling a full 1%. Stocks affected included Apple, Alphabet (GOOG, Financial)(GOOGL) and Microsoft (MSFT, Financial).
Meanwhile, although current events have shaken these prominent tech names, Twitter has been on a downturn since peaking in 2014. With decline of 30% in 2016, investors are turning their backs on Twitter. It is time to diversify those tech holdings.
To better insulate your portfolio in 2017, consider shifting your focus from the big names to smaller rising stars in the industry. These four stocks have the potential for major returns, but get in before they nab mainstream attention.
The big data business
Unlike social media, big data does not offer investor intrigue and appeal, but the field is growing rapidly and demand is high. Choose Nvidia Corp. (NVDA, Financial) for the powerful graphics cards that are powering its data visualization program. Although the company formerly fueled gamers, it is now bringing vital metrics to everything from self-driving cars to health tech.
Nividia is up 7.16% year to date and its work in big data positions the company well for 2017. Now, it is up to the company to make good on its potential to expand into a larger market subset.
Crashing the Chinese crisis
A Chinese crisis? No, you have not missed a major international political event. Rather, the Chinese crisis in question stems from a common if incorrect statement, that the Chinese character for crisis comprises two others: the characters for danger and opportunity. This may not be true, but when a crisis emerges, a smart investor can turn one company’s struggle into their moment of profit.
That is exactly what is happening when investors opt for Broadcom Ltd. (AVGO, Financial) in light of Qualcomm’s (QCOM) impending collapse. Alhough Qualcomm has always been a leader in semiconductors and digital communications, the company has recently been rocked by scandal, and Broadcom – up 16% year to date, which shares the sector, has crafted that scandal into opportunity.
Make memory matter
As with data and semiconductors, computer hardware – like solid state drivers, flash memory and traditional hard drives – are not exactly alluring, but that does not mean it is not profitable. That is why 2017 will be a good year for Western Digital Corp. (WDC, Financial), the PC powerhouse that acquired SanDisk last year. Although everyone is talking about the cloud, industry insiders will tell you hard drives are not going anywhere.
What makes Western Digital such a strong bet in the coming year, however, is not just the future potential of the company’s tech, but the stock’s past performance. Recently, the company beat its competitors for 12 consecutive weeks by margins as high as 44.2% and it is up 16.45% year to date. Western Digital is one to watch.
An old school evolution
Finally, it is time to reevaluate a pick with roots that reflect Apple and Microsoft, an old school stock born in a garage – Coherent Inc. (COHR, Financial). While Coherent’s history makes the company seem like it is an also-ran likely to be making subpar computers, the truth is strikingly different. Currently, Coherent is building the first commercial CO2 laser and making waves in the medical tech world.
What is more, unlike those other garage-era creations that have shown only marginal growth, Coherent is up over 100% year to date and is trading near a 12-month high. Additionally, with medtech on deck to be one of the fastest-growing sectors and a groundbreaking invention in development, Coherent is set to make waves.
A good tech portfolio is not built on the backs of high-profile stocks, but rather through smart diversified choices that can support market-wide fluctuations. The big names will always be vulnerable to shifts, but small powerful stocks will always pave their own way.
Disclosure:Â I do not own shares of any companies discussed in the article.
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