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It’s easy to say investors should buy low and sell high, and you might think an opportunity to do so has escaped you because of the U.S. stock market’s remarkable recovery from its March lows. But there are still opportunities in the most highly regarded sector.
The information technology sector has been the best performer in the S&P 500 Index this year. Trends including cloud collaboration and software-as-a-service are impervious to the coronavirus lockdown, and even accelerated by it. People who are new to working at home have needed to upgrade computers, peripherals and communications equipment.
But the IT sector includes plenty of stocks that have declined significantly, some of which are expected by analysts to roar over the next 12 months.
The S&P 500 SPX, -0.65% hit a 2020 closing low March 23, when it was down 31% for the year. Since then, it has risen 28%, so it is now down 11.2% this year through May 12. (All price changes in this article exclude dividends.)
Of the 11 sectors in the benchmark index, only information technology has risen this year:
| S&P 500 sector | Price change – 2020 | Price change – 2019 |
| Information Technology | 1.9% | 48.0% |
| Health Care | -2.4% | 18.7% |
| Consumer Discretionary | -5.5% | 26.2% |
| Communication Services | -5.8% | 30.9% |
| Consumer Staples | -8.9% | 24.0% |
| Utilities | -14.4% | 22.2% |
| Materials | -17.0% | 21.9% |
| Real Estate | -18.6% | 24.9% |
| Industrials | -25.6% | 26.8% |
| Financials | -31.0% | 29.2% |
| Energy | -38.0% | 7.6% |
| Source: FactSet | ||
The sector’s impressive year-to-date price increase reflects the solid performance of some very large companies (the S&P 500 is weighted by market capitalization). Six of this year’s “tech winners” have market capitalizations of more than $100 billion:
| Company | Ticker | Market capitalization ($ millions) | Price change – 2020 | Price change – 2019 |
| Nvidia Corp. | NVDA, +1.88% | 191,984 | 33% | 76% |
| PayPal Holdings Inc. | PYPL, +1.99% | 165,567 | 30% | 29% |
| Microsoft Corp. | MSFT, -0.04% | 1,384,054 | 16% | 55% |
| Adobe Inc. | ADBE, -0.73% | 175,906 | 11% | 46% |
| Salesforce.com Inc. | CRM, -4.25% | 159,682 | 9% | 19% |
| Apple Inc. | AAPL, +0.53% | 1,349,755 | 6% | 86% |
| Source: FactSet | ||||
Among the 71 stocks in the S&P 500 IT sector, 22 are down at least 15% this year, and analysts polled by FactSet see double-digit upside potential as high as 89% over the next 12 months for 10 of them:
| Company | Ticker | Price change – 2020 | Price change – 2019 | Closing price – May 12 | Consensus price target | Implied 12-month upside potential |
| Micron Technology Inc. | MU, -1.92% | -15% | 69% | $45.69 | $59.92 | 89% |
| Western Digital Corp. | WDC, -2.36% | -35% | 72% | $40.98 | $61.82 | 67% |
| FleetCor Technologies Inc. | FLT, -2.32% | -21% | 55% | $228.46 | $272.22 | 47% |
| CDW Corp. | CDW, -2.44% | -29% | 76% | $101.98 | $116.86 | 44% |
| Microchip Technology Inc. | MCHP, -1.47% | -18% | 46% | $85.99 | $102.79 | 43% |
| Motorola Solutions Inc. | MSI, -0.19% | -19% | 40% | $131.23 | $161.67 | 41% |
| Seagate Technology PLC | STX, -1.48% | -18% | 54% | $48.62 | $53.95 | 40% |
| Automatic Data Processing Inc. | ADP, -2.70% | -17% | 30% | $141.73 | $156.19 | 19% |
| Western Union Co. | WU, -1.53% | -30% | 57% | $18.87 | $20.06 | 18% |
| Amphenol Corp. Class A | APH, -1.85% | -22% | 34% | $84.27 | $94.00 | 16% |
| Broadcom Inc. | AVGO, -0.84% | -15% | 24% | $268.45 | $293.67 | 15% |
| Source: FactSet | ||||||
You can click on the tickers for more about each company.
You will have to scroll the table to see all of the data.
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