Technology has always driven the economy and the winners in tech have been the winners in the stock market. This was recently highlighted in a report from Barclays that noted total output per hour across both the UK and the USA from 1760 onward, using an index where that year is considered to be 100. Productivity in 2018 is around 3,000 on this index.
The increase in output has led to dramatic improvements in the quality of life for people all around the world. Those gains in the quality of life often result form changes in technology. For example, the development of the steam engine and the sewing machine in the late 1700s were large advances.
Steam engines increased the ability to move goods to markets and allowed cities to benefit from production of distant farms. Farmers benefitted from increased markets. Sewing machines allowed for the mass production of clothing and freed up hours of time required to produce clothing for family members.
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The report included a chart showing the advances over time. It also demonstrates the breadth of technology and how many technologies have contributed to the quality of life we enjoy today.
Source: Barclays via Business Insider
This report inspired us to look for companies positioned to deliver tomorrow’s technology winners.
We began our screen by focusing on stocks that trade at a low price. These stocks could be appealing for two reasons. One reason is that the low price means they have little down side risk in dollar terms. The second reason is that low priced stocks are generally the ones that deliver the largest short term gains.
One study looked at how low priced, or cheap, stocks performed relative to more expensive stocks. The study found that cheap stocks delivered more than six times the average return of the more expensive stocks in a typical quarter.
That’s why we limited our search for potential bargains by focusing on stocks priced at less than $3 per share.
Then, we limited our potential buys to companies that are in the technology sector. The sector level is the broadest classification of a company’s operations and it includes biotech companies along with software developers, hardware companies and a host of other companies.
This casts a wide net and to narrow that list, we then required the stocks to have a buy rating from analysts. According to one study, more than 3,000 analysts work for more than 350 sell-side investment firms in the United States. They provide analysis, earnings forecasts, and buy and sell recommendations on individual companies.
Analysts are biased and tend to rate almost stocks as buys. But, they do show a degree of conviction by ranking some stocks as stronger buys than others. In general, studies find that the strongest ranked buys do outperform the market, on average.
One way to find stocks meeting these requirements is with the free stock screening tool available at FinViz.com. At this site, you could screen for a variety of fundamental factors, high levels of institutional ownership and bullish institutional transactions. An example is shown below.
Five Stocks Meet Our Strict Requirements
Remember, there is no guarantee any stock will increase in value. Also, it is important to remember when we search for stocks using quantitative measures, our goal is to identify stocks that meet those criteria. The screens we develop could be used as the cornerstone of long term investment strategies but any individual stock in the list could be a winner or loser.
MicroVision, Inc. (Nasdaq: MVIS)
MicroVision, Inc. develops PicoP scanning technology that provides high-resolution miniature projection, and three-dimensional sensing and image capture solutions in the United States.
Its PicoP scanning technology comprises micro-electrical mechanical systems, laser diodes, opto-mechanics, and electronics.
The company also develops a light detection and ranging engine for consumer electronic applications and automotive collision avoidance systems. The company licenses its products primarily to original design manufacturers and original equipment manufacturers.
The long term stock chart shows the potential of this company.
MVIS traded at more than $85 a share in 2004. The fact that the company has survived demonstrates there is potential in its technology.
Nano Dimension Ltd. (Nasdaq: NNDM)
Nano Dimension Ltd. develops three-dimensional (3D) printed circuit board printers. It also develops conductive and dielectric ink.
Although this stock passed our quantitative screen, the chart indicates the stock is in an accelerating down trend. Investors might want to wait for better news before considering buying NNDM.
Helios and Matheson Analytics Inc. (Nasdaq: HMNY)
Helios and Matheson Analytics Inc. provides a range of information technology (IT) consulting solutions, custom application development, and analytics services to Fortune 1000 companies and other organizations in the United States.
Its services include application value management, application development, integration, independent validation, infrastructure, information management, and analytics services.
In addition, it develops RedZone Map, a GPS-driven real-time crime and navigation map application that provides users with real time crime data and a platform for alerting other users to criminal and other safety related occurrences in a navigation map format, as well as allows users to report a crime and upload videos of live incidents.
That technology could make the company appealing to larger companies. The chart, again, shows that the market once valued the technology at a significantly higher price.
Analysts expect the company to make steady progress towards profitability, narrowing its loss from more than $6 this year to less than $2 in two years.
IZEA, Inc. (Nasdaq: IZEA)
IZEA, Inc. operates online marketplaces that facilitate transactions between marketers and content creators. Its technology solutions enable the management of content workflow, creator search and targeting, bidding, analytics, and payment processing.
The company helps brands to engage online influencers for influencer marketing campaigns, or to create content for distribution through their channels. It primarily sells social sponsorship and content campaigns through sales team and self-service platforms, as well as through distribution relationships, such as resellers, affiliates, and white label partners.
The stock appears to be bouncing off support which could provide a low risk entry point.
Dolphin Entertainment, Inc. (Nasdaq: DLPN)
Dolphin Entertainment, Inc. produces and distributes online digital content in the United States. The company also develops online kids clubs, as well as operates as a content producer of motion pictures.
In addition, it operates an entertainment public relations agency, which offers talent publicity, strategic communications and entertainment, and content marketing services, as well as brand and digital marketing services.
Analysts expect the company to report earnings of $0.22 per share this year and $0.36 next year. At just ten times next year’s expected earnings, the stock could gain more than 20%.
Any of these stocks could be a potential winner and all worth further research. If you are uncomfortable doing your own research, there is a TradingTips.com trading service, Triple-Digit Returns, which uses a very specific system for choosing the right stocks to trade.
Triple-Digit Returns looks for companies that are misunderstood and potentially undervalued, lost darlings, mergers or spinoffs that could benefit share holders, or companies that show signs of strong interest by insiders who know the company best and see value.
This service provides a recommendation once a week. It could be used for trading or learning how to analyze stocks since each recommendation includes a detailed explanation of the company. To learn more, you can click here.