Follow the Money - 3 Tech Stocks Showing Relative Strength
Zacks Investment Research | Dec 06, 2021 03:10AM ET
Growth and technology firms led the way in 2020, but many of last year’s winners are now in bear market territory. As of this past Friday only about 40% of Nasdaq 100 constituents were trading above their respective 50-day moving averages, indicating market breadth has weakened substantially from the November peak. While the QQQ ETF that tracks this index is only about 5% off its all-time highs, some notable growth and technology names are faring far worse as we can see below.
QQQ is presently testing support at its own 50-day moving average, and it remains to be seen if Santa will bring the Christmas sleigh and stocks will rally into December. There’s nothing magical about moving averages – they are simply reference points that investors should keep in mind. Despite the underperformance of some individual holdings, QQQ is still up over 23% for the year.
While the former leaders shown above have been in panic mode lately, three stocks we will analyze below are showing relative strength beneath the surface. When buying pressure is exceeding selling pressure for a stock – particularly during a time when most equities are falling – it’s a clear indication that institutional buying is strong and sellers are few and far between. Following the money is a good way to let the market do the talking instead of incorporating stories or opinions.
Let’s take a more detailed look at three market leaders that are showing some immunity to the recent volatility.
CDW (NASDAQ:CDW) Corporation (CDW)
CDW Corp. provides information technology products and services to government, business, education and healthcare customers. Headquartered in Vernon Hills, IL, CDW’s hardware products include notebooks, mobile devices, data storage, video monitors, printers and desktops. CDW also provides licensing management and software solutions.
The company believes that its addressable markets in the US, UK and Canada represent more than $325 billion in annual sales. Last year, net sales for CDW improved 2.4% year-over-year to $18.47 billion. Both revenues and earnings for CDW have been steadily trending upward, with current full-year estimates at $20.33 billion and EPS of $7.81 representing annual growth rates of 10.07% and 18.51%, respectively.
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These are the trends investors like to see when investing in the stock. CDW, a Zacks #2 (Buy) stock, has posted a trailing four-quarter earnings surprise of 12.17%, helping push the stock over 50% higher on the year. CDW has exceeded earnings estimates in each of the last twenty quarters.
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