3 Portfolio-Worthy Tech Stocks

Last week brought a bumpy ride for the financial markets. While we saw sharp selloffs on Tuesday and Wednesday, the S&P 500 found its footing on Thursday and mounted a promising recovery.

While most of the attention on the tech side of things was focused on the SpaceX IPO, the wider tech outlook presents an interesting opportunity. Tech stocks have hit a speed bump — most of the Mag 7 posted losses for the week, as widespread profit-taking abounded in the sector.

This speed bump wasn’t a result of deteriorating fundamentals; investors simply decided to take profits on names that have run far and fast. The longer-term narrative seems to still have steam, but investors are becoming pickier. Being ahead of the curve and investing in underappreciated tech tickers could be a great way to benefit from the next leg up.

As simple as that sounds in theory, it’s a tad harder to pull off in practice. Thankfully, there’s a simple way to surface tech stocks with strong fundamentals — all you have to do is turn to …

Technology Stock Strategy

Our in-house quant system evaluates 4,600 stocks on a daily basis, and rates them on the basis of 115 metrics, split across 7 categories. That data is distilled into a simple, approachable metric — a stock’s Zen Rating.

Only the stocks that score in the top 5% on overall fundamentals are given a Zen Rating of A, equivalent to a Strong Buy recommendation. That already narrows down the playing field — but you’re still left with roughly 230 stocks to evaluate on any given date. That’s not the end of it, however — you can speed things along by taking a look at one of our exclusive Zen Strategies.

Each strategy is a portfolio consisting of just 7 stocks, hand-picked to deliver market-beating returns. There are 11 portfolios in total — today, we’ll be taking a look at a Strategy that has already delivered a 44.27% return since the start of the year, blowing the S&P 500’s 8.3% gain in the same timeframe out of the water. This week, the spotlight is on our Technology Stock Strategy.

Without further ado, let’s take a closer look at 3 very interesting tickers from the portfolio…

Commerce.com (CMRC)

Commerce.com is, unsurprisingly, in the business of e-commerce. They help businesses build online stores, manage product data, and sell products across multiple digital channels. Right now, CMRC ranks in the top 1% of all the stocks we track, and it’s the 2nd highest-rated stock in the App industry, which has an Industry Rating of A.

The fundamental profile here is incredibly strong on multiple fronts. Commerce.com ranks in the top 3% for Growth, the top 5% for Financials, and the top 9% for Value. To boot, it’s in the top 30% of stocks for Sentiment, indicating a fair dose of smart money accumulation. The average price target for the stock implies an upside of roughly 90%, based on a panel of 4 analysts.

There’s only one real weakness here, and that’s Momentum. CMRC ranks in the bottom 24% of stocks in that category. 

With that being said, there’s reason to believe things will improve on that front. CMRC’s latest quarterly report was the first GAAP-profitable one in its history — and the company has beaten estimates for 16 quarters in a row. That mixture of fundamental strength and fresh profitability could easily put the stock in the spotlight going forward.

RingCentral (RNG)

RingCentral is a cloud communications business that offers business phone systems, video meetings, messaging, and contact-center software. RNG ranks in the top 1% of the equities we track for overall fundamentals, and it's the 3rd highest-rated stock in the App industry, which has an Industry Rating of B.

The same trifecta that makes CMRC special is at play here. RNG is in the top 1% for Financials, the top 3% for Value, and the top 5% for Growth. The stock is trading at a price to earnings growth (PEG) ratio of just 0.47x, and analysts estimate that earnings will grow at a pace of 86% per year, far ahead of the industry average of 34%.

RNG is another steady outperformer. It ranks in the top 9% for Safety, and it has outperformed EPS estimates for 20 quarters in a row, having marked a YoY increase in EPS in every quarter. On the flipside, the stock’s Momentum, Sentiment, and Artificial Intelligence scores read as average.

So, why get in on it now? In the last quarterly report, management raised full-year revenue, margin, EPS, and free cash flow guidance. On top of that, AI product adoption doubled compared to last year. Despite that, the stock is down 14.8% since the report on account of profit taking, although it is still up 40% year-to-date (YTD).

Ooma (OOMA)

Our final pick is Ooma, a company focusing on affordable cloud phone and VoIP systems for small businesses and residential customers. OOMA ranks in the top 1% of the stocks that we track, and it’s the top-rated stock in the Telecom industry.

In terms of Value, the stock ranks in the top 19%, thanks to a PEG ratio of 0.8x. Sentiment is another strong point — a placement in the top 4% indicates significant smart money accumulation. However, the star of the show is Growth — a category where OOMA ranks in the top 1% of the market. Analysts forecast that the company’s earnings will grow by 66% per year, compared to the industry average of 8.9% and the wider market average of 34.56%.

The balance sheet also looks pretty healthy, putting OOMA in the top 17% for Financials. When it comes to our Artificial Intelligence rating, which uses a neural network trained on more than 20 years of fundamental and market data to identify likely outperformers, OOMA is in the top 5%.

What about drawbacks? Well, there are no glaring red flags here. The stock’s weakest areas, Momentum and Safety, read as slightly above-average and average, respectively. OOMA is a strong, quiet outperformer, having beaten estimates for 11 quarters in a row. The combination of an appealing valuation and strong Growth metrics is simply too good to pass on.

Interested In More Great Stock Picks? 

The 3 stocks highlighted above are just a fraction of what you get from our proven Technology Stock Strategy.

That’s because each day our system recalibrates — and Zen Strategies members get access to the top 7 technology stocks based on 115 different parameters that point to outperformance. 

See all Top 7 Technology Stocks here > 

However, maybe none of the stocks you’ve seen here have caught your eye. Perhaps you would like to see all 11 of our market beating strategies including Growth, Momentum, Value, and our coveted AI Factor model. 

Each featuring the top 7 stocks.

Each featuring tremendous performance

We spell it all out in this timely presentation below that lives up to its name:

10 Minutes a Month to Beat the Market > 

What to Do Next?

• 77 Best Stocks NOW! >
• Options Trading with the Zen Ratings >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.