What are we looking for?
U.S.-listed technology stocks with strong earnings and revenue growth, using a quantamental strategy.
The Nasdaq Composite index appears to be back on an upward trajectory following the release of robust earnings and revenue guidance by tech behemoth NVIDIA, surpassing market expectations. As technology shares regain attention from investors, we’ve activated our premier technology screen to identify outlier tech stocks using quantamental data, which is generated through AI and machine learning. This week we decided to dig into the tech sector in order to find outperformers from a price and earnings momentum perspective.
The screen
We used Trading Central’s Strategy Builder to scan for technology sector stocks listed on U.S. exchanges. Our focus was on identifying stocks exhibiting robust earnings growth, upward price momentum, and noteworthy TC Quantamental factor ratings, specifically targeting high scores in both growth and momentum factors.
We began by establishing a minimum market capitalization threshold of US$5-billion to concentrate on mid- to large-cap stocks within the sector, aiming to steer clear of smaller, potentially more volatile stocks.
Next, we screened for stocks indicating upside earnings momentum with both EPS and revenue growth above 10 per cent last quarter, compared with the same quarter a year ago.
Finally, we filtered for the top-rated stocks using Trading Central’s Quantamental rating method, which rates stocks on a scale of 0 to 100, with 100 being the most bullish and 0 being the most bearish. We set a minimum requirement of 50 out of 100 for both momentum and growth factors.
For growth investors, this approach aligns with their strategy of seeking out stocks characterized by ascending earnings and revenue figures. These investors are inclined toward companies poised for robust expansion and are comfortable with higher price/earnings ratios, anticipating future profitability.
Simultaneously, momentum investors aim to capitalize on recent price trends, anticipating that assets exhibiting strong past performance will continue to perform well in the short to medium term. By setting a minimum threshold of 50 for both momentum and growth factors, we aimed to pinpoint stocks that satisfy the criteria of both growth and momentum investors, ensuring well-rounded results.
For informational purposes, we have also included the recent stock price, four-week, year-to-date and one-year price return.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
Stocks are ranked based on the average of all screening criteria selected.
Topping our list is leading graphics chip maker NVIDIA NVDA-Q, which just released impressive fourth-quarter results that beat analyst’s estimates and raised its first-quarter revenue guidance. The stock has the second-highest market cap on our list at US$1.666-trillion. It has the highest TC Momentum factor rating on our list at 96 out of 100. Revenue growth increased an impressive 205.5 per cent last quarter compared with the same period a year ago, also the highest on our list.
Mobile advertising technology company AppLovin APP-Q has the highest 52-week and year-to-date price performance on our list at 265.3 and 39 per cent, respectively. The company operates a platform that helps mobile app developers monetize and promote their applications.
Microsoft MSFT-Q, the software giant, has the largest market cap on our list at US$2.968-trillion. The stock has a TC momentum factor rating of 91 out of 100, which is very strong. Revenue growth and EPS growth increased 17.58 and 33.18 per cent, respectively, last quarter compared with the same quarter a year ago.
Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described has a 25-per-cent annualized total return compared with 12 per cent for the S&P 500 index and 16 per cent for the Nasdaq Composite Index.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
Gary Christie