Facebook (FB) And 4 Other Tech Stocks Testing New Highs

One of the most successful trading strategies is investing in stocks that are trading near their 52-week highs and have solid fundamentals and strong growth prospects to back their share price movement.

One such stock is Facebook Inc. (NASDAQ:FB) . Facebook closed at $124.37 yesterday, trading near its 52-week high of $128.33. Year-to-date, its shares are up nearly 22%. The good show on the trading front has largely been due to phenomenal results in back-to-back quarters. Stellar revenues from mobile ads and its video efforts remain primary growth catalysts.

Also, Facebook’s consistently expanding user growth remains one of its biggest strengths. Facebook has an unparalleled user base of 1.71 billion monthly active users (MAUs). In addition, its mobile MAUs, Daily Active Users (DAUs) as well as Mobile DAUs exceed 1 billion. Not just great fundamentals, but Facebook has equally strong future growth prospects.

Given that Facebook has hit a jackpot with the monetization of Instagram, investors are now looking forward to how Facebook monetizes its other subsidiaries Messenger, Oculus and WhatsApp. Recently, Messenger crossed the 1 billion user milestone. It is the third 1 billion plus user platform for the company after Facebook and WhatsApp. Plus, Messenger’s bot platform reportedly boasts over 18K chatbots. Chatbots could serve as a powerful strategy to monetize the platform.

One of the advantages that Facebook has is its leadership. CEO Mark Zuckerberg has come a long way since his Harvard days. It’s his vision for the company that impresses us. At the F8 conference, he clearly highlighted Facebook’s ambitions of becoming more than just a social network. Zuckerberg outlined plans for the next decade, with a strong focus on AI and AR/VR technology. Both these technologies are going to emerge as the next big business opportunities.

We continue to believe that the Facebook juggernaut is unstoppable despite its fair share of challenges like moderating ad revenue growth rate and increasing expenses. As a result Facebook sports a Zacks Rank #1 (Strong Buy).

Many would argue that Facebook with its hefty forward P/E valuation of 39.7 compared with the industry average of 36.0 is a risky bet. We beg to differ as hefty valuations and increasing share prices do not necessarily imply that the stock doesn’t have much upside potential left.

However, as it may not be the case always we have added a couple of more parameters to make the strategy more “fail-safe.”

Help from the Zacks Style Score Comes in Handy

With the help of our new style score system, we pick stocks that have a solid upside potential.

This is where our VGM score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. The Growth Style Score concentrates the vital metrics from the company’s financial statements to get a true picture of the quality and sustainability of its growth. Our Momentum Style Score is a suggestion of the time to buy a stock to benefit from increasing share prices.

Our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or Zacks Rank #2 (Buy) emerge as good investment opportunities.

4 Stocks to Consider

With the help of the Zacks Rank and our style score system, we are picking four stocks that not only are trading near their 52-high levels but still have potential for further upside.

Datalink Corp. (NASDAQ:DTLK) analyzes, designs, implements and supports information storage infrastructures that store, protect and provide continuous access to information. The stock is currently trading near its 52-week high of $10.74.

Zacks Rank: #1

VGM Score: A

Long Term EPS Growth Rate: 20%

QUALCOMM Inc. (NASDAQ:QCOM) develops and delivers innovative digital wireless communications products and services based on the company's CDMA digital technology. The stock is currently trading near its 52-week high of $62.82.

Zacks Rank: #2

VGM Score: B

Long Term EPS Growth Rate 10.8%

Silicon Motion Technology Corp. (NASDAQ:SIMO) designs, develops and markets universally compatible and low-power semiconductor solutions for the multimedia consumer electronics market. The company sells its semiconductor solutions to original equipment manufacturers and design manufacturers worldwide. The stock is currently trading near its 52-week high of $56.21.

Zacks Rank: #1

VGM Score: B

Long Term EPS Growth Rate: 20%

Intel Corp. (NASDAQ:INTC) is one of the world's largest semiconductor chip makers. The company develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications. The stock is currently trading near its 52-week high of $35.93.

Zacks Rank: #2

VGM Score: B

Long Term EPS Growth Rate: 7.4%