What are we looking for?
With the S&P 500 now up more than 11 per cent from its February lows, investors are pouring back into U.S. stocks as fears of a U.S. recession have lifted.
All market sectors except energy are up in the past month, with some sectors, such as telecom and consumer discretionary, showing large gains.
The U.S. tech sector, which is normally a leader, has so far lagged the rest of the market, remaining essentially flat in the past month. Technical indicators now show price momentum in many tech stocks, which may indicate the start of a period of outperformance.
The screen
We will be using the Recognia Strategy Builder to search for large-capitalization U.S. technology stocks with a strong four-week price performance, reasonable valuations and low debt.
We begin by setting a minimum market-cap threshold of $10-billion (U.S.).
Next, we will screen according to valuation based on forward price-earnings ratio. We will limit our screen to companies with forward P/E of less than 50.
Rising U.S. interest rates also are of concern for companies with significant debt levels. We will therefore limit our screen to companies with debt-to-equity ratios of less than 1.0.
Finally, to look for companies with upward price momentum, we will screen for stocks that have had a technical analysis momentum oscillator crossing zero in the upward direction.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, foreign exchange, options and commodities.
What did we find?
PayPal Holdings Inc. tops our list with a $48-billion market cap and a 9.6-per-cent price surge in the past four weeks. The stock has been on a strong uptrend since Jan. 28 when the company announced fourth-quarter results that beat analyst expectations in nearly all areas.
The company also announced a $2-billion buyback of its stock or nearly 5 per cent. The company currently has $5.7-billion in cash and no debt.
Citrix Systems Inc. has the best four-week price performance on our list; up almost 11 per cent in the past month.
The company soundly beat analyst estimates when it announced fourth-quarter results on Jan. 27. The stock also has a P/E of 19.8 – quite reasonable by tech stock standards.
Alphabet Inc., the holding company for Google, is the largest on our list with a market cap exceeding $490-billion. The stock hit a 52-week high on Dec. 30 before declining almost 14 per cent in the following weeks. The stock is now up 6 per cent in the past month.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.