The 2020 Tech Market
This has been a rather unique year. The COVID-19 pandemic has changed how we work and connect with each other, while markets around the world dwindle and uncertainties reign. Yet the top ten tech stocks (comprising goods and services in software, electronics, computers, AI, and IT) have given investors a total return of 32.2% over the past 12 months.
The three best-valued stocks of 2020 were digital printing technology giant Xerox Holdings Corp. (3.2 12/month trailing P/E ratio), cyber safety business NortonLifeLock Inc. (3.4), and data-storage company Seagate Technology PLC (7.4).
The fastest-growing were AMD (an impressive 1,300% EPS growth), NortonLifeLock Inc. (620%) and Gartner Inc. (260.9%). In terms of momentum, measured as total return over the last 12 months, the top three performers were NVIDIA Corp. (144.4%), Apple Inc. (90%), and AMD (88.1%).
One of the reasons this sector has done so well is because the technologies it develops have had, and continue to have, a synergistic effect. Each advance makes it possible to innovate in even more products due to increased revenues, combined talent and technology, and cost reduction.
For example, the Internet of things (IoT) and cloud computing have become a permanent part of the modern technology landscape, while blockchain continues to grow as an enabling technology. Also, even though it’s still a few years away, quantum computing has already allowed companies to start planning for a type of exponential development that was previously unthinkable.
Top Tech Sectors
Tech enterprises all across the board are having a positive year. Still, some areas are doing particularly well: IoT (as mentioned above), cloud computing, artificial intelligence (AI), 5G, and blockchain, but also electric vehicles and spaceflight, among others.
This all makes for a perfect environment to invest in the tech sector.
Of course, investment never comes without some degree of risk. The dot-com crash shows us how companies can become irrelevant overnight if someone else makes a breakthrough. One of the tech sector’s caveats is that they must consistently invest large sums of money to keep up with the fast pace. However, tech stocks offer enough of a variety of opportunities that can suit both fresh and experienced investors.
Advice for New Investors
If you’re new to investing, you should first decide if you want to invest or to trade. If you invest, you’ll be buying shares and receiving any payouts made by the business. If you trade, you’ll be speculating about the future direction of prices.
In both cases, it’s recommended that you open a demo account first. Demo accounts let you simulate real trading using pretend money, and they can help you familiarize yourself with the way investing works without assuming any of the risks. Some popular apps are FXTM, AVA, Plus500, and eToro.
Investment comes in many shapes and forms, and you can find the one that best suits your personality and goals, depending on whether you prefer more risk or smaller yet steadier gains. Below you will find some of the most interesting tech companies of 2020, chosen based on growth, stability, and momentum. There are many others, but if you’re new to investing, these names might sound more familiar. The first thing you can do is take a look at them and familiarize yourself with this sector’s possibilities.
Once you’ve decided on an approach, picked a few possible candidates, and tested the waters using a demo, we advise that you develop the following habit: Every month, put money away and automate your investment plan. Then, sign up for a robo-advisor such as M1 Finance, Wealthfront, or Betterment, or install a stock trading app like Public or Robinhood and turn 2020 around!
Top Tech Companies of 2020
The year 2020 has been an excellent one for Microsoft. This upward trend, initially fueled by the acquisition of LinkedIn in 2016, continues with the guaranteed recurring revenue provided by the Windows upgrade cycle and the Microsoft Office cloud-based subscription model, as well as the steady growth of their Xbox games ecosystem.
Microsoft’s cloud computing division Azure soared an impressive 59% last quarter, while Microsoft Teams is being adopted globally with much success. Microsoft is not only attractive because of its steady growth. It’s also just won a lucrative contract with the U.S. Department of Defense worth up to $10 billion over the next ten years.
Tesla specializes not only in electric vehicles but also in energy storage and solar panels. The company’s mission is to “accelerate the world’s transition to sustainable energy.” The Model 3 was voted the best electric car available in 2020, which is impressive considering Tesla was a pioneer that inspired many successful rivals.
Tesla is at the vanguard of an inevitable global shift toward sustainable energy and is already producing photovoltaic modules and solar cells in “gigafactories” built in the US and abroad. Their philosophy of constantly innovating places them high in our list of outstanding tech stocks.
Adobe is behind a suite of iconic widely-used applications that include Photoshop, Illustrator, Premiere, InDesign, and many others. Adobe works with a cloud-based, software-as-a-service subscription model, which guarantees a stable group of professional users committed to their products. One of Adobe’s main attractions is that it grows steadily year after year, between 15 and 20%.
The company’s stock has risen considerably due to work-from-home during COVID-19 times. Adobe is on both the IBD 50 list of top growth stocks and the IBD Long Term Leaders list, which spotlights companies with superior performance and stable earnings growth.
Dell started as a computer company. However, in recent years, it has expanded into a diversified portfolio that includes storage, data center, servers, and the cloud — not to mention the acquisition of an 80% stake in VMWare, currently valued at around $50 billion.
The commercial PC business grew 60% last year, and the success of VMWare shot its shares from $25 in March to $50 in July 2020. Dell is that legacy hardware business, so its decision to go with VMWare is definitely a consistent one.
Facebook, which also encompasses WhatsApp, Instagram, and Messenger, is expected to grow 35% next year. Not only does it have over 2.6 billion users, but it’s been growing steadily, around 8% annually. Even if the business is broken down into segments after the 2020 election, each segment will most likely maintain its value.
Facebook’s biggest asset is its enormous ability to gather data. They know everything about their users and use that knowledge to create apps, giving businesses the capability to generate quality leads and close sales. Although Facebook faces some challenges in terms of government regulation, it still has considerable untapped growth capabilities.
This media company is the top-performing tech stock of 2020. Run by media legend Barry Diller, IAC’s stock grew from $2 a share in 1995 to $250 at the beginning of 2020.
Its stakes include online dating giant Match Group (Tinder, Match, OkCupid, PlentyOfFish, and others), Expedia, Live Nation, and Lending Tree, as well as Vimeo and Dotdash. In an era of social distancing, the market for IAC’s products is likely to keep growing.
Disney’s business model is rather expansive. Its income is generated mainly by its Media Network division (Disney Channel, ABC, ESPN, and National Geographic). It also runs film and studio businesses such as Pixar Animation Studios and 20th Century Fox and owns the successful Marvel and Star Wars film brands. Not to mention that Disney also runs several resorts and theme parks.
One of its newest additions is the streaming service, which capitalized on an enormous amount of exclusive content. Thanks to all these divisions, Disney continues to grow steadily and makes for a great investment opportunity.
Alibaba Group Holding
The closest analog to Amazon in China, Alibaba, generates over $70 billion annually in revenue. Their focus is set on its retail division, particularly electronic retailing, whose earnings fund other business endeavors that in 2020 include cloud computing and a booming entertainment division.
Alibaba has also expanded into food delivery, merging its service Ele.me with its lifestyle app Koubei in 2018. The group has been trading tightly near highs since July.
Although most popular because of the Google search engine, Alphabet comprises the Android operating system, its own cloud computing division, and enormous services like Google Play, Google Maps, and YouTube.
While they are less known, Alphabet also has a few hardware projects and investments in firms like Waymo, makers of autonomous vehicles. Mostly focused on growth, Alphabet has been reliably gaining share price since 2015 and seems to continue that trend in the foreseeable future.
Amazon is indisputably the king of commerce. It not only ships products around the world quickly and cheaply but also owns the largest cloud-computing company in the world: Amazon Web Services (AWS), which accounts for 9% of their revenue.
Amazon also holds a diversity of businesses such as Whole Foods, Kindle e-readers, and Echo smart speakers, not to mention Amazon Prime, which offers video, music, and audiobooks. If you had bought $1,000 Amazon stock in 2010, your investment would be worth $14,400 today.
Finally, Apple is most popular for its hardware, including the iPhone, iPads, Macs, and the Apple Watch. Slowly turning toward software and services, Apple already has successful proprietary operating systems and applications like iCloud and Apple Pay and is working on growing its own music and TV services, including a new streaming app. Although there was a slowdown in phone sales, more growth is expected, and dividends have shown steady increases. It seems that Apple is not going anywhere for a while.
About the Author
Yisela Alvarez Trentini is an Anthropologist + User Experience / Human-Computer Interaction Designer with an interest in emerging technologies, social robotics, and VR/AR.