6 Technology Stocks Near 52-Week Highs Worth Investing In

The stock market has had a remarkable run so far this year. The Nasdaq Composite (IXIC), S&P 500 (GSPC) and Dow Jones Industrial Average (DJI) have gained 16.1%, 8.9% and 8.3%, respectively year to date.

Among the various sectors, the performance of the technology sector was rather impressive, with the Technology Select Sector SPDR ETF (NYSE:XLK) XLK returning 16.7% in the year-to-date period. Notably, the ETF gained 12.9% last year.

Launched in Dec 1998, XLK is a passively managed fund designed to deliver the returns of the U.S. technology stocks. The fund, before expenses, is expected to remain on par with the returns and characteristics of the S&P Technology Select Sector Index.

More Upside Left for Tech Stocks

The technology sector is likely to grow further, as evident from the recent forecast on worldwide IT spending provided by Gartner Inc. (NYSE:IT) . The latest report from the independent research firm projects global IT spending to reach $3.5 trillion this year, representing an increase of 1.4% from $3.4 trillion anticipated in 2016.

The technology space continues to be investors’ favorite due to its dynamic nature. It is expected to grow faster than ever before as evident from Gartner’s latest forecasts as well as improving U.S. economic data.

Naturally, investing in the tech space makes perfect sense at this point. However, making the right choices is a tough task.

No matter how disciplined and systematic an investor you are, equity market volatility will always be a concern. Only a few lucky ones would rake in the moolah, while others fall victim to ad hoc strategies.

So, wouldn’t it be safer to bet on stocks that are winning currently and have the potential to gain further?

Here, we will discuss one tried and tested technique – picking stocks near their 52-week highs.

Why These Stocks are Good Bets

Investing in stocks near their 52-week high is akin to following the momentum strategy, which is based on the understanding that once a trend is established, it is likely to continue. The surge is driven by a broad set of factors including impressive sales, robust profitability and bullish earnings prospects. Major developments may also send stocks soaring.

However, stocks that are trading near their 52-week highs bear the risk of falling fast as the market might consider them overvalued. But the positives seem to outweigh the drawbacks.

Notably, momentum investors strongly believe in “the trend is your friend”, which means stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to continue and the chances of a reversal are minimal.

Thus, picking such stocks might help investors earn higher returns in the short term. However, this is only a speculative strategy and not meant for the faint hearted.

Where to Put Your Money?

Given their strong earnings history and great value metrics, we believe these six tech stocks, all of which are near their 52-week highs, will continue their uptrend for now. The stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) and have a Momentum Style Score of “A” or “B”.

Coherent Inc. (NASDAQ:COHR) designs, manufactures, and supplies electro-optical systems and medical instruments utilizing laser, precision optic and microelectronic technologies. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “B”. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 12.6%. The company has an expected earnings growth rate of 19.3% for fiscal 2018. Closing at $237.21 yesterday, the stock has gained 72.7% so far this year and is near to its 52-week high of $269.18. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Limited (NASDAQ:AVGO) is a designer, developer and supplier of analog and digital semiconductor connectivity solutions. The stock carries a Zacks Rank #2 and has a Momentum Style Score of “A”. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 6.7%. The long-term expected earnings growth rate for Broadcom is 13.6%. Closing at $242.75 yesterday, the stock has gained 37.4% so far this year and is near to its 52-week high of $256.78.

Red Hat Inc. (NYSE:RHT) is a leading developer and provider of open source software and services, including the Red Hat Linux operating system. The stock carries a Zacks Rank #2 and has a Momentum Style Score of “A”. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 11.1%. The long-term expected earnings growth rate for Red Hat is 14.9%. Closing at $98.19 yesterday, the stock has gained 40.9% so far this year and is near to its 52-week high of $100.80.

EPAM Systems, Inc. (NYSE:EPAM) is engaged in providing software product development services, software engineering and custom development solutions. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “B”. The company has surpassed the Zacks Consensus Estimate thrice while matching the same on one occasion in the last four quarters, with an average beat of 3.2%. The long-term expected earnings growth rate for EPAM Systems is 20%. Closing at $84.42 yesterday, the stock has gained 31.3% so far this year and is near to its 52-week high of $86.98.

MKS Instruments, Inc. (NASDAQ:MKSI) is a leading worldwide developer, manufacturer and supplier of instruments, components and subsystems used to measure, control and analyze gases in semiconductor manufacturing and similar industrial manufacturing processes. The stock carries a Zacks Rank #1 and has a Momentum Style Score of “B”. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 22.2%. The long-term expected earnings growth rate for MKS Instruments is 15.7%. Closing at $72.75 yesterday, the stock has gained 22.5% so far this year and is near to its 52-week high of $88.40.

Advanced Energy Industries, Inc. (NASDAQ:AEIS) is a global leader in the development and support of technologies critical to high-technology, high-growth manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, solar cells, architectural glass, and other advanced product applications. The stock carries a Zacks Rank #2 and has a Momentum Style Score of “A”. The company has surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the last four quarters. It has an average positive surprise of 10.5%. The long-term expected earnings growth rate for Advanced Energy is 12.2%. Closing at $68.51 yesterday, the stock has gained 31.3% so far this year and is near to its 52-week high of $86.25.

Looking Ahead

These stocks have managed to grab the spotlight with notable performances, supported by solid earnings and impressive growth projections. These factors make us more or less confident that investing in these stocks will yield strong returns in the short term.

Sell These Stocks. Now.

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