For newcomers to investing, tech stocks may have earned themselves a certain reputation in 2020. While this asset type has always been packed with momentum and based on speculative trends, this year has seen the space overheating. However, the tech space is richly varied, spanning everything from reliable and established names to startups and from food delivery to logistics.
Weighing that near-term growth potential
The pandemic has seen the sudden ratcheting up of several trends in tech that were already in existence. Remote learning, home shopping, entertainment, and the streamlining of shipping are a few of these. The “work-from-home” trend is covered by Docebo (TSX:DCBO), for instance. This recent IPO rocketed out of nowhere to corner a gap in the market that barely registered pre-2020.
The problem now, though, is that Docebo is firmly into overvalued territory. The remote training name is overpriced, with around 370% share price growth since this time last year. Ordinarily, this might not matter too much. But upside theses based on short-term conditions do not make for a sustainable high-growth environment. However, the potential for social distancing to outlast the pandemic makes this one to buy on a pullback.
Speculative stocks to buy for the long term
Edge computing is beginning to pick up steam. Names such as Fastly and Cloudflare satisfy a tech growth strategy based on this hybrid of localized cloud computing. Meanwhile, both gaming and AI can be covered by one exemplary stock. Nvidia has already been on the radar of semiconductors investors. However, Nvidia is picking up speed, as investors in artificial intelligence gravitate towards it.
E-commerce investing found its hero early on in Shopify, with Lightspeed quickly following in its footsteps as a hot point-of-sale alternative. The issue with ecommerce names is that they are susceptible to vaccine rallies and often head in an opposite direction to the rest of the market. While this has been great for contrarian investors during the pandemic, a reversal could be forthcoming.
Space technology and satellites can be accessed through Maxar Technology. This NASA-partnered businesses is thoroughly diversified and also pays a dividend. While Maxar currently yields less than 0.5%, its payout ratio in three years is expected to be around 12%. That makes this a top tech name to buy cheap and hold for both share price appreciation and dividend growth.
Tech stocks to buy on weakness
Meanwhile, other tech segments are doing less well. Netflix has barely been out of the headlines, with its share price tumbling 6.4% midweek on a subscription loss shocker. Even the mighty Disney has succumbed to the souring of the content-streaming space.
However, since Netflix and Disney are also both movie studios, an end to the pandemic could see these names rally on a vaccine breakthrough. This effectively puts them in the same class as Cineplex. Gauging risk and reward in a digitalized Hollywood comes down to an investor’s level of bullishness on a recovery, therefore. It also makes any name in this space liable to bounce back.
Still looking for top TSX stocks? Read the following report before it’s gone…