The Strategist

Four tech companies to invest in

12/05/2016 - 14:59

The tech sector remains one of the most profitable and fastest growing part of S&P 500, yet it is quite expensive. Moreover, victory of Donald Trump gave investors jitters about fate of some of the biggest players, such as Amazon or Facebook. However, technology investor Paul Wick says there are exceptions in the general trend, especially in less fashionable but equally important sectors of the industry.

Four tech companies to invest in
LAM Research

LAM Research produces not microchips but equipment for giants like Samsung (one of its main customers) to install flash memory chips in their production. They are indispensable in production of large number of various devices ranging from iPhone and fitness trackers to Tesla cars. Over the past three years, LAM has grown each year by increasing sales by 18%. Average profit growth was 56%. Wick predicts preservation of growth rates in 2017 as acceleration of innovations is bombarding the sector with orders. 

Besides, LAM Research pays dividends at a rate of almost 2%, and holds nearly two-thirds of their assets abroad. The company could greatly benefit from would-be tax amnesty in the United States.

Palo Alto Networks

As number of Internet-connected devices is increasing, concern about data security is growing, too. Spending on cyber security, including firewalls, in 2016 jumped by almost 13%, to 10.6 billion dollars. In the next few years, pace of growth is expected to slow to 8%. However, it does not interfere with Palo Alto Networks’s plans to actively increase sales. The company develops unique safety system, known as next-generation firewalls.

While ups and downs on the cyber security spending may indicate some instability of Palo Alto’s profits and its shares, the company expects to increase its revenues by 31% in the next fiscal year.

Check Point Software Technologies

Founded in Israel in the early 90's, Check Point has proven its "friendly attitude to shareholders" in contrast to other companies. Over the past 13 years, the company has consistently been buying back shares.

Vail Resorts

Once it was a small elite ski resort in Colorado. Then, Vail has implemented a model for paid subscriptions, similar to that which Salesfortse applied to software, and ClassPass - to sales of tickets for yoga and exercise bikes. Just think: a buyer gets seasonal unlimited access to 13 different mountain slopes in the six states of the USA, Canada and Australia. The company has released a special supplement to increase efficiency of chairlifts - a great way to keep customers satisfied. In addition, Vail regularly acquires new objects and integrates them into its network. All this gives the company special scope of activities and ensures unique to the industry return on capital.