3 Highly Profitable Tech Stocks To Buy

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Technology stocks resumed their bullish momentum in the Spring as the Technology Select Sector SPDR Fund (XLK) has gained 19.6% since May 12th. While investors can’t predict how long this current run will last for tech stocks, a great way to limit your losses is to focus on highly profitable tech stocks. Picking high-profit stocks can lead to substantial gains. 

Studies have found that investing in profitable stocks can generate above-average returns. Profit margins can tell us how well a management team is running a business. It represents the percentage of sales that has turned into profits. While there are a few ways to look at net profits, I prefer net margin since it shows a company’s bottom line after other expenses have been taken out of revenue.  

As we’ve seen over the last couple of quarters, companies are generating billions in sales. But if the sales aren’t turning into profits, then a company may not be worth buying. So, I ran a screen for technology stocks rated a Buy in our proprietary POWR Ratings systems with a net profit margin of 20% or higher. The results included top stocks such as Cadence Design Systems, Inc. (CDNS), KLA Corporation (KLAC), and Skyworks Solutions, Inc. (SWKS).

Cadence Design Systems, Inc. (CDNS

CDNS was founded in 1988 after the merger of ECAD and SDA Systems. The company is electronic design automation, or EDA, firm specializing in developing software, hardware, and intellectual property that automates the design and verification of integrated circuits or larger chip systems.

The company benefits from strength across segments, including digital & signoff solutions and its functional verification suite. CDNS is also gaining from investments in emerging trends such as the Internet of Things (IoT), autonomous vehicle subsystems, and strength in the semiconductor end-market.

The firm’s frequent product launches are expected to help it generate revenues growth over the long term. It focuses on providing end-to-end solutions, which reduces the time required to introduce a semiconductor product to the market. The company raised its 2021 revenue guidance based on its strong performance in the second quarter.

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