10 of the Best Tech Stocks to Buy for 2020 | Stock Market News

The 2010s, among other things, were characterized by the rapid rise of “Big Tech,” which brought Wall Street its first trillion-dollar empires. Entering 2020, the five most valuable companies traded on U.S. exchanges were all tech stocks. The specter of antitrust regulation is real, but the idea that regulation will bring Silicon Valley to its knees is a fantasy. In another 10 years, technology will play an even larger role in everyday life and markets than it does today, so investors may as well come along for the ride. Without further ado, here are 10 of the best tech stocks to buy for 2020 – and how those picks have fared in a market marred by volatility.

One of the first trillion-dollar companies on earth, Microsoft is still enjoying the long-term benefits it cemented in the ’90s. The Redmond, Washington-based software giant is still one of the best tech stocks to buy for 2020, a quarter-century after Windows 95 introduced millions to personal computers. That proves MSFT has longevity, but the company has also invested its cash brilliantly: It got into tablets with the Surface, video games with Xbox and social networks with its LinkedIn acquisition. The Windows upgrade cycle allows for guaranteed recurring revenue, as does the brilliant decision to make Microsoft Office a cloud-based subscription product. Azure, its cloud computing division that is second only to Amazon.com’s (AMZN) AWS by market share, highlights MSFT’s growth prospects, with revenue soaring 62% last quarter.

Year-to-date return (through 3/13/20): +1%
YTD return of Nasdaq: -12%

Another well-known business from the 1990s that helped PCs go mainstream is Dell, which, after evolving and diversifying, is attractive enough to be one of the best tech stocks to buy for 2020. Dell isn’t just a computer company anymore: It has tentacles in the data center, storage, servers and the cloud – a diversified portfolio of modestly growing business units. Its commercial PC business picked up steam last fiscal year, driving operating income growth of 60% on the year in the client solutions group. Most importantly, Dell acquired a roughly 80% stake in VMWare (VMW) in 2018, a stake currently valued around $22 billion. Dell’s current market cap isn’t much higher than that, at roughly $28 billion. Trading for just over 6 times earnings, Wall Street still seems to be dramatically mispricing this stock.

YTD return: -30%
YTD return of Nasdaq: -12%

For a second consecutive year, application software giant Adobe makes the cut as one of U.S. News’ best tech stocks to buy. ADBE stock gained 46% in 2019, but there’s still long-term upside in Adobe, the company behind the suite of iconic creativity apps that includes Photoshop, InDesign, Illustrator, Acrobat and Premiere, to name a few. Simply put, this is a must-have software for many industries and professionals, and Adobe’s cloud-based software-as-a-service model helps bring high-margin recurring revenue – an investor’s dream. At around $150 billion, ADBE is still growing sales by about 15% to 20% a year. Keep in mind, ADBE might not insulate you from short-term volatility like low volatility and minimum volatility ETFs can, but it’s about as volatile with the wider market and with better long-term prospects.

YTD return: +2%
YTD return of Nasdaq: -12%

Communications and media giant AT&T also has an entrenched business, but it isn’t growing like an Adobe or Microsoft. Across the U.S., AT&T boasts more than 100 million U.S. customers paying for TV, mobile or broadband services. After acquiring WarnerMedia the company became an entertainment empire; it’s the parent company of Hollywood studio Warner Bros., DC Comics, HBO, CNN, TBS, TNT and many more. Trading around 10 times forward earnings and paying a sustainable 6% dividend, AT&T brings relative stability to the list of the best tech stocks to buy for 2020. It expects about $28 billion of free cash flow in 2020.

YTD return: -12%
YTD return of Nasdaq: -12%

As one of several tech names on U.S. News’ list of best stocks to buy for 2020, Facebook is automatically one of the best tech stocks to buy for 2020 as well. Due to the market sell-off, FB trades for just 28 times earnings – not bad for a company expected to grow profits 41% this year. Although Facebook boasts 2.5 billion monthly active users, it’s still growing that figure by about 8% annually. Almost 2.9 billion people use either Facebook, WhatsApp, Instagram or Messenger at least once a month. Even if a Democrat is elected in 2020 and pushes for the breakup of Facebook, investors might still benefit as Wall Street would be better suited to fully value each business segment. FB is a better buy now than it was on Jan. 1.

YTD return: -17%
YTD return of Nasdaq: -12%

You’ll be forgiven if you haven’t heard of STMicroelectronics, a $20 billion Swiss semiconductor company. But for investors currently digging around for the best tech stocks to buy, STM is a contender. Its chips help power some interesting end-markets, including the automotive sector, where STM chips will help the accelerating adoption of electric vehicles. STM also makes wireless charging, touch and display products for smartphones, as well as data center power solutions needed for the transition to 5G. Trading for a lowly price-earnings-growth (PEG) ratio of 0.44, analysts expect earnings per share to grow 49% annually for the next five years, making its P/E of 22 look like a steal.

YTD return: -21%
YTD return of Nasdaq: -12%

If you’re in the habit of seeking out the top tech stocks to buy, odds are you’d like one or two of them to provide some impressive growth. Alibaba, despite already pulling down over $70 billion annually in revenue, still qualifies as an out-and-out growth stock as the closest analogue to Amazon in China. Alibaba’s top line is growing faster than Amazon’s, however, surging 38% last quarter. Unlike Amazon, whose cash cow is its cloud computing division despite being dwarfed in size by its retail division, Alibaba’s profit center is its core electronic retailing division, using those earnings to fund other business endeavors, which now include a booming cloud computing business of its own as well as a thriving entertainment division.

YTD return: -9%
YTD return of Nasdaq: -12%

New York, New York-based IAC is an $14 billion media and internet company that operates almost like a publicly traded incubator. Media legend, former CEO and current IAC Chairman Barry Diller has created enormous wealth for shareholders, guiding the stock from $2 a share in 1995 to $250 at the dawn of 2020. Management’s bold and rewarding philosophy has resulted in the cultivation and spin-off of companies like Expedia (EXPE), Lendingtree (TREE) and Live Nation (LYV). The next to be spun off is online dating giant Match Group (MTCH), which IAC owns over 80% of. IAC’s stake in MTCH and ANGI Homeservices (ANGI) alone is worth more than all of IAC at current valuations. That implies IAC holdings and fast-growing media companies Vimeo and Dotdash are worth less than nothing, which can’t be true. This leaves an arbitrage opportunity for 2020, despite the sell-off.

YTD return: -31%
YTD return of Nasdaq: -12%

While it doesn’t get the ink that a company like Alibaba does, Chinese online classified company 58.com also makes the cut as one of the best tech stocks to buy for 2020. In fact, being less in the spotlight may be one reason WUBA appears overlooked at a lowly PEG ratio of around 0.6. Sometimes colloquially called “China’s Craigslist,” WUBA is expected to grow sales in the mid-teens going forward as China’s rising middle class continues to boost demand for jobs, goods, real estate and other services. Although clearly the Chinese economy’s 2020 hopes have been altered with the rapid spread of COVID-19, WUBA looks more attractive today to a risk-tolerant, long-term investor than it did at the start the year.

YTD return: -21%
YTD return of Nasdaq: -12%

Last and absolutely least by market cap is the roughly $400 million Rubicon Project, a volatile yet promising stock in the digital advertising space. The company’s software helps automate the buying and selling of online advertising en masse, over both mobile applications and the wider web. Programmatic advertising is only gaining ground, and RUBI is benefitting, going from declining sales in 2018 to 25% growth in 2019. RUBI hasn’t been profitable historically, but analysts expect it to break into the black in 2020 and then grow earnings extremely rapidly in 2021. RUBI likely has the highest risk-reward on this list, so it’s not ideal for blue-chip investors.

YTD return: -26%
YTD return of Nasdaq: -12%

• Microsoft Corp. (MSFT)
• Dell Technologies (DELL)
• Adobe (ADBE)
• AT&T (T)
• Facebook (FB)
• STMicroelectronics (STM)
• Alibaba Group Holding (BABA)
• IAC/Interactive Corp. (IAC)
• 58.com (WUBA)
• The Rubicon Project (RUBI)