By some estimates, more than 10 million newly minted investors have come into the market, guns blazing, since the pandemic began to shut the country down a year ago.
These folks have made their presence known in more ways than one – GameStop Corp. (NYSE: GME) comes to mind, as does the 4% jump in trading volume we saw in 2020.
That fresh investing “firepower” has helped push stocks to highs that were virtually unthinkable on March 23, 2020, the markets’ COVID-19 Crash nadir. In the year since, the Nasdaq Composite, the market’s “home of tech,” has gone as far as 105%; in my view, that’s the perfect illustration of just how powerful a wealth-building machine tech is.
But notice I said, “as far as” there.
The Nasdaq peaked on Feb. 12 and has fallen as low as 10.5%, into a textbook market correction. Capital is, for the moment, rotating out of many tech stocks and into cyclicals, energy, materials – “recovery stocks” ahead of the rapidly unfolding pandemic recovery.
But the Nasdaq rallied with conviction [last week], which tells me the next leg up may begin sooner than most realize. There may not be much time to move on the stocks I’m going to name in a second.
Let me be clear: This is nothing less than the buying opportunity of the year. If you’re one of the new 30 million investors, this is your big chance to add some truly foundational tech stocks to your holdings.
And if you’ve been around the block a few times or this isn’t your first connection, you’ve got a rare chance to build on these positions for even bigger profits during the rest of 2021…
$9.1 Trillion in Wealth-Building Power Just Went on Sale
Owning the kinds of tech stocks I research for my Nova-X Report subscribers can be a great place to get a crack at building tech wealth, and there are three that I recommend for absolutely everybody, no exceptions. With two investments, you stake a claim to the cream of the tech sector. After all, like I always say, the road to wealth is paved with tech.
Each one of these investments is trading at a nice discount right now, and all boast expense ratios well south of 0.5%.
My go-to tech ETF has always been the iShares Expanded Tech Sector ETF (NYSEArca: IGM). The fund’s management likes to go heavy on market leadership, light on market froth.
IGM is a way to get exposure to tech’s biggest, richest companies – the same ones that have helped the Nasdaq double in a year – for a little more than a tenth of the cost of a single share of Amazon.com Inc. (NASDAQ: AMZN).
Holding some 314 stocks, IGM trades at roughly $353 and has a 0.46% expense ratio. Over the past five years, it’s returned 224.89%.
That performance has come from firms like Facebook Inc. (NASDAQ: FB), Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT), and Amazon, which make up around 30% of its portfolio.
But there’s some extraordinary tech-sector depth here. IGM also owns new powerhouse stocks like Zoom Video Communications Inc. (NASDAQ: ZM) and Activision Blizzard Inc. (NASDAQ: ATVI), which have staked out a permanent, prominent place in the U.S. market.
While many of the firms IGM holds have done a great job reaching into global markets, they all count on North America as their major focus. That’s a great place to be right now, given the powerful impending economic surge here.
How to Get the Absolute Most from Tech
The SPDR S&P Software & Services ETF (NYSEArca: XSW) is complimentary to IGM when you think about it. When it comes to racking up high profit margins, it’s hard to beat the software sector and its locked-in stream of licensing revenue. Even better, many of these firms are moving to cloud-based business models that yield even higher earnings.
In other words, XSW has a built-in one-two punch. With 179 stocks in its portfolio, you own software and Cloud computing firms across the sector. You even get exposure, with XSW’s Riot Blockchain Inc. (NASDAQ: RIOT) holdings, to the high-flying cryptocurrency segment and Bitcoin’s remarkable strength.
It also includes firms involved in e-commerce, social networking, data processing, Internet software, Big Data, and information technology consulting and services. It’s heavily weighted with the dynamic small caps that function as the bread and butter of the American tech sector – again, this exposes investors to the building recovery.
Trading at roughly $153.24 a share, XSW has returned around 215.6% to investors over the past five years. That’s about 132.1% better than the S&P 500 over the same period.
At the moment, thanks to the Nasdaq’s correction, XSW is trading at a slight discount to net asset value (NAV). Buy this when the market opens today; I really don’t expect that discount to last long.
The last foundational, must-own stock I’m going to name might seem a little out of left field for a tech guy, but bear with me – you’ll be glad you did.
I’m talking about the iShares U.S. Medical Devices ETF (NYSEArca: IHI), a fund I believe is firmly rooted in the tech sector.
Medical devices are on the front lines of healthcare innovation. And it’s a field that covers everything from in-vitro diagnostics to remote heart monitoring to deep brain stimulation.
A lot of the innovation in this sector is taking place right here in the United States, which accounts for about 40% of the global medical device market. That market was worth $425.5 billion as far back as 2018, and it’s projected to reach $612.7 billion by 2021, according to Fortune Business Insights.
So IHI is simply a cost-effective way to play the high-tech medical devices segment. Nearly 70% of this portfolio is anchored by 10 of the world’s most innovative device makers, such as Medtronic Plc. (NYSE: MDT), Abbott Laboratories (NYSE: ABT), and Boston Scientific Corp. (NYSE: BSX).
If you’re new to the market and looking for a place to put your money to work, the tech sector, correction and all, has never looked better. And, of course, that holds true if you’re a seasoned investor looking to add double-digit yearly growth potential to your bag of tricks.
— Michael A. Robinson
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Source: Money Morning