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The Last Three Months Have Been Smooth Sailing for These Five “Buys”

4 | By Michael A. Robinson

When it comes to a down market like the one we’ve been seeing since mid-August, investors like you have to hone their stock-selection skills.

Here’s why.

During the third quarter, most stocks sold off, including many tech leaders. The Dow Jones Industrials, S&P 500 and Nasdaq Composite have all spilled more than 8%.

On the other hand, like I showed you back in late August, the U.S. economy itself is in good shape. And the new numbers rolling in still show a growing economy as employers hire more workers and consumers load up on homes and cars.

In other words, this downturn has little to do with the U.S. economy. And that means there are plenty of companies – and stocks – that are bucking the market trend.

You just have to know how to peer through the “noise” and pick them.

And today, I’m going to show you five tech leaders that sailed peacefully through the third-quarter sell-off.

How They Did It


I’m well aware that Wall Street is worried about the Federal Reserve’s intent to raise interest rates by the end of the year – and you bet I know that China’s growth has cooled.

But there are still loads of reasons to be optimistic about the U.S. economy – and about your ability to pick good investments.

Let’s start with the macro view.

The U.S. Department of Commerce says the economy entered the third quarter on a strong note. Last week, the agency revised its GDP estimates upward to show seasonally adjusted growth of 3.9%.

The revised forecast comes as we continue to see strength in two of the economy’s more important sectors – housing and autos.

Commerce department officials say sales of new single-family homes ran at an annual pace of 552,000 in August. That’s the strongest showing in 7.5 years and represented a 22% annual gain.

On top of that, the auto industry said September sales came in at an annual rate of 18 million cars and light-duty trucks. The industry is now on pace to achieve its highest sales since 2000.

But consumers aren’t just buying autos and homes. They’re also picking up smartphones, tablets, laptops, Wi-Fi routers, set-top boxes and digital cameras – and their insurance companies are picking up the tab for plenty of prescription drugs and medical devices.

Given these economic trends, it should be no surprise that several tech stocks absolutely crushed it in the otherwise dreary third quarter.

Take a look…

Tech Market Crusher No. 1: The Medicines Co.

While I remain upbeat about biotech for the long haul, the sector was down 18% in the quarter as measured by the bellwether iShares Nasdaq Biotechnology ETF (Nasdaq: IBB). Much of the carnage occurred just a couple of weeks ago after leading Democrats criticized high drug prices.

But The Medicines Co. (Nasdaq: MDCO) soared some 44% in the seven sessions ended Sept. 2 after the mid-cap leader reported that a new drug it’s developing, called ALN-PCSsc, improved “bad” cholesterol levels by 83% in early clinical trials.

That prompted Jeffries to upgrade the stock on Aug 28 to a “Buy,” which helped MDCO hold onto most of those gains (it’s up 32.7% for the entire quarter).

Tech Market Crusher No. 2: Activision Blizzard Inc.

Founded in Southern California in 1979, Activision Blizzard Inc. (Nasdaq: ATVI) is one of the world’s leading publishers of computer games. It has been coming on strong over the last two years with a series of winning titles that take advantage of the upgrade cycle for gaming consoles.

Activision boasts winning titles for both Xbox from Microsoft Inc. (Nasdaq: MSFT) and PlayStation from Sony Corp. (NYSE ADR: SNE). This helps explain why the stock is up 84% in the past two years – and 27.6% in the quarter.

The third quarter was so successful because investors anticipated surging sales for the holiday shopping season. Activision will release the latest installment in its popular Call of Duty game series Nov. 6.

Tech Market Crusher No. 3: CDW Corp.

CDW Corp. (Nasdaq: CDW) benefited from three main catalysts in the quarter, during which it gained 19.2 %.

First, the information technology (IT) sales and service firm has little exposure to China. Second, in mid-July it reported a 25% annual earnings increase. And third, there’s a tech upgrade cycle among businesses, particularly healthcare firms that need to improve their tech systems to meet the reporting requirements of Obamacare.

Besides healthcare, CDW’s 250,000 clients span the spectrum of business sectors as well as education and government.

Tech Market Crusher No. 4: Motorola Solutions Inc.

Motorola Solutions Inc. (NYSE: MSI), a mobile communications and infrastructure firm, is closing in on its fifth anniversary as an independent company following its January 2011 spin-off from Motorola Inc.

It’s benefiting from increased sales of two-way radios, cellular communications and networking gear for public agencies and first responders. Part of that stems from a years-long national program to upgrade wireless communications for public safety agencies in the aftermath of 9/11 and Hurricane Katrina.

In August, private equity firm Silver Lake said it will invest up to $1 billion in Motorola Solutions to help fund the company’s growth. The company, which saw gains of 19.3% in the quarter, recently announced a new Wi-Fi -enabled radio and a smartwatch.

Tech Market Crusher No. 5: Google Inc.

Google Inc. (Nasdaq: GOOGL) outperformed the market – gaining 18% in the quarter – for several reasons.

At the top of the list is a corporate restructuring, including a new parent company called Alphabet Inc. With the corporate facelift, Google’s futuristic projects – including driverless cars and space exploration – will be housed in separate companies under the Alphabet umbrella.

Google also announced second-quarter earnings gains of 38%. During a conference call with analysts, new Chief Financial Officer Ruth Porat wowed Wall Street with her emphasis on cost control.

And the company named a new CEO for Google, Sundar Pichai, who will run the core businesses: the Android operating system, the mammoth search operation and YouTube.

The huge gains these five stocks racked up over the past three months proves that if you focus on finding the right stocks, you can make money in good times and bad.

And we’re going to keep on doing that here at Strategic Tech Investor.

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4 Responses to The Last Three Months Have Been Smooth Sailing for These Five “Buys”

  1. Rob says:

    Who the hell would believe a billionaire , Do you believe they got that way by being honest and truthful ? Oh well, It might sell books…

  2. Bob Baker says:

    Mike,

    You often talk about APPLE. There recent sales have been great.
    Tim Cook has said sales are great in China. WHY ARE INVESTORS
    NOT TRUSTING MGT.?

    Bob B

  3. ODS says:

    Sell high, but low get it. Don’t over think it.
    The market works on that principle alone. Forget everything else. Programs are written to buy and sell on that basis.That explains the volatility in the market and all the happenings going on.

  4. Houyhnhnm says:

    Of these 5 stocks, I only have a record of GOOGL being recommended in a previous column. Did I miss the other 4?

    We never seem to hear about recommendations that go down. Should AMBA, SLCA, TROV, TAS and RGEN be sold, held, or averaged down?

    Houyhnhnm

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