15 Hot, Highly Rated Technology Stocks of 2012
And information-technology prices hit highs not seen since 2001 at the end of last week, according to S&P's MarketScope Advisor.
The gains are due to investors' renewed confidence in worldwide economic growth this year and an outlook for a rise in corporate IT spending as firms update their technology after several years of making do with what's now outdated technology.
But investors need to be cautious as the market may have gotten ahead of itself amid lingering concerns over both the economic impact of a resolution to the European sovereign debt crisis and the strength of the U.S. economy.
In light of that, S&P MarketScope Advisor downgraded its IT sector recommendation to "marketweight" from "overweight" earlier this week.
The firm's Feb. 15 research note said that although there continue to be "decent fundamentals, attractive valuations and strong balance sheets across the sector, we see risks related to the expiration in December 2011 of some beneficial government actions and some potentially unfavorable upcoming seasonality."
Nevertheless, S&P noted that it has "dozens" of technology stocks rated "buy," and eight rated "strong buy," indicating there are bargains to be had, despite the uncertainties, and so long-term investors should consider buying on dips.
To find the better-rated fast growers in the category, we screened a stock database for aggressive growth technology stocks -- those with several years of strong sales and earnings growth -- that have solid fundamentals, a market value of at least a $1 billion, and share-price gains of at least 20% this year and came up with 15 stocks.
And, no, Apple(AAPL ), isn't one of them, as it is considered a large growth, cyclical stock.
Here are the 15 top-performing technology stocks with returns of 20% or more this year ranked inversely by return:
15. Tyler Technologies(TYL)
Company profile: Tyler Technologies, with a market value of $1.1 billion, provides information management for cities, counties, schools, and other local government offices. It includes accounting and financial management, managing public records and judicial cases and automates appraisals and assessments.
Investor takeaway: Its shares are up 21% this year and have a three-year annualized return of 40%. S&P's survey of analysts found three "buy" ratings, and four "holds." Those analysts expect the company's earnings will grow 22% this year to $1 per share.
14. Quality Systems(QSII)
Company profile: Quality Systems, along with its wholly-owned subsidiary NextGen Healthcare Information Systems, sells customized information-processing systems to a wide range of medical services providers.
Investor takeaway: Its shares are up 21% this year and have a three-year annualized return of 33%. Fidelity is the largest shareholder with 6% of its shares at the end of 2011. S&P has its shares rated "buy," with a $47 price target, which is a 7% premium to the current price. In fiscal 2013, its earnings are expected to grow 23%, to $1.74 per share.
13. Mettler-Toledo International(MTD)
Company profile: Mettler-Toledo supplies weighing and precision instruments and supplies to customers in the life sciences, industrial, and food retail industries. It has a 50% share of the weighing-instrumentation market.
Investor takeaway: Its shares are up 21% this year and have a three-year annualized return of 43%. Fidelity and Columbia Wanger Asset Management each owned 12% of its shares at the end of 2011. In fiscal 2012, its earnings are expected to grow 15% to $9.39 per share. S&P found four "buy" ratings, two "buys," five "holds," and one "weak hold," in a survey of analysts.
12. Citrix Systems(CTXS )
Company profile: Citrix develops and sells software tools that enable organizations to efficiently manage and deliver diverse software applications over computer networks.
Investor takeaway: Its shares are up 22% this year and have a three-year annualized return of 47%. Fidelity owns 14% of its shares, more than three times that of the next largest investor. S&P has it rated "hold," on valuation concerns, but it found 11 "buys," nine "buy/holds," 13 "holds," and two "weak holds," in a survey of other analysts.
11. Bruker Corp.(BRKR)
Company profile: Bruker makes mass-spectrometry instruments for use in laboratory research, and kits that purify DNA fragments and collect and process samples used in substance detection and pathogen identification.
Investor takeaway: Its shares are up 24% this year, lost 16% last year, but have a three-year annualized return of 45%. Analysts surveyed by S&P give it three "buy" ratings, two "buy/holds," four "holds," and one "weak hold." For 2012, analysts expect earnings to rise by 17% to 96 cents per share. T. Rowe Price owns 11% of its shares, more than double that of the next largest institutional investor.
10. Ancestry.com(ACOM)
Company profile: Ancestry.com is a provider of Web-based services to aid family history research.
Investor takeaway: Its shares are up 24% this year, but lost an equal amount in 2011. The company has a market value of $1.3 billion. Manulife Asset Management(MFC) owned 8% of its shares at year-end.
9. Agilent Technologies(A)
Company profile: Agilent, with a market value of $15 billion, is the world's largest test and measurement company, both in terms of size and product offerings, led by its electronic measurement segment which makes up half of sales.
Investor takeaway: Its shares are up 25% this year and have a three-year annualized return of 33%. On Tuesday, it reported that fiscal first-quarter profit grew 19% as sales rose in its life science and chemical analysis divisions, but the company's stock dropped after it narrowed its fiscal-year profit and sales forecasts.
S&P has a "buy" recommendation on its shares and gives the company's financial health a four-star rating out of a possible five. The rating firm's survey of analysts found 10 "buy" ratings, five "buy/holds," and one "hold."
8. Qlik Technologies(QLIK)
Company profile: Qlik Technologies makes QlikView software that helps business users make better and faster business decisions using analytics and search functionality with office productivity tools.
Investor takeaway: Its shares are up 26% this year and the company has a market value of $2.5 billion, making it a small-cap stock. Accel Europe Associates owns 15% of its shares and Fidelity 13%. Jefferies upgraded its shares to "buy" from "hold" one month ago, and said it expects that spending "on next generation analytics is high priority (and) QLIK is one of best pure-plays on that theme for 2012."
7. Rackspace(RAX)
Company profile: Rackspace, with a $7 billion market value, is a big player in the fast-growing field of cloud computing and managed hosting, the latter generating more than 80% of its revenue.
Investor takeaway: Its shares are up 26% this year and have a three-year annualized return of 127%. They gained 289% in 2009. Fidelity owned 12.7% of its shares at the end of 2011, more than double that of the next largest shareholder. In a survey of analysts, S&P found six "buy" ratings, five "buy/holds," eight "holds," and one "weak hold."
6. II-VI(IIVI)
Company profile: II-VI, pronounced "Two-Six," develops and sells electro-optical components for use in industrial, military, and radiation detection applications. It has a $1.5 billion market value, making it a small-cap stock.
Investor takeaway: Its shares are up 27% this year and have a three-year annualized return of 32%. Analysts give its shares two "buy" ratings, one "buy/hold," and two "holds," according to S&P. Columbia Wanger Asset Management owned 20% of its shares at year end, double that of the next largest shareholder.
5. Informatica(INFA)
Company profile: Informatica sells enterprise data integration software, which helps companies gather, analyze, and order data located in disparate systems and databases.
Investor takeaway: Its shares are up 29% this year and have a three-year annualized return of 51%. T. Rowe Price, Fidelity and Columbia Wanger Asset Management each owned 11% of its shares at the end of 2011. S&P found five "buy" ratings, five "buy/holds," 11 "holds," and one "sell," in its survey of analysts.
4. Salesforce.com(CRM)
Company profile: Salesforce.com is the leading provider of hosted customer relationship management (CRM) software services, which includes its lead product, its salesforce automation software.
Investor takeaway: Its shares are up 29% this year and have a three-year annualized return of 69%. Fidelity owns 14.8% of its shares, more than double that of the next largest shareholder. S&P downgraded the shares to "strong sell" from "hold," on Feb. 14, as its shares have exceeded S&P's price target and because it is facing increased competition.
But many other analysts remain bullish as it has 17 "buy" ratings, 14 "buy/holds," seven "holds," one "weak hold," and five "sells," according to S&P's survey.
3. SolarWinds(SWI)
Company profile: SolarWinds, with a $2.7 billion market value, is a developer of software products aimed at serving the needs of small and medium-size business users of network, storage and virtualization management tools.
Investor takeaway: Its shares are up 32% this year and 72% since its public launch in 2009. Analysts expect its earnings will grow 15% to $1.14 per share this year. S&P's survey of analysts' ratings found five "buy" ratings, three "buy/holds," five "holds," and one "sell." Fidelity owns 8.3% of its shares, almost double that of the next largest shareholder at the end of 2011, and it almost doubled the number of shares it owns to 6 million in the fourth quarter.
2. Rovi(ROVI)
Company profile: Rovi is a provider of interactive programming guides and search services that are embedded into consumer electronics products. Customers include movie studios, record labels, and hardware manufacturers.
Investor takeaway: Its shares are up 39% this year and have a three-year annualized return of 32%. S&P found nine "buy" ratings, four "buy/holds," three "holds," and one "sell," in its survey of analysts. For fiscal 2012, those same analysts expect Rovi's earnings to grow by 6% to $2.60 per share.
1. Parametric Technology(PMTC)
Company profile: Parametric Technology, with a market value of $3.2 billion, licenses computer-aided design, product life-cycle management, and enterprise content management software that allows clients in several industries to design and build products faster.
Investor takeaway: Its shares are up 47% this year and have a three-year annualized return of 39%. Columbia Management owned almost 11% of its shares at the end of 2011, almost double that of the next largest investor. The biggest customers for its product life-cycle management (PLM) products are in the aerospace and auto industries, which are subject to cyclical downturns, but they appear to be in an up-cycle now.
S&P has its shares rated "hold" on valuation concerns, but its survey of analyst found four "buy" ratings, four "buy/holds," and four "holds."
Frank Byrt
02/17/12 - 05:00 AM EST
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