In this piece, we will take a look at the 13 technology stocks to buy that are cheap to ignore. If you want to skip our analysis of the technology industry, then take a look at 5 Technology Stocks To Buy That Are Too Cheap To Ignore.
Technology has proven to be the most remarkable industry of our age since it has virtually (no pun intended) transformed every aspect of modern day living. We've written this article using technology, you're using technology to read this article, and the stocks that everyone is trading are now available through digital mediums that would have been unimaginable just a couple of decades back.
Before we get to the financial bit about the technology industry it's important to understand what the term actually means. Due to its near ubiquity in modern day living, technology is simply defined as the use of knowledge involving technical processes to achieve an objective. In a broad definition, this adaptability of technical processes to different use cases naturally affects a lot of different walks of life. At its very heart, technology can also be defined as using an electronic system to speed up data collection, analysis, and computation - three things that can power anything from the iPhone to a data center, an airplane, or a car.
Since computing sits at the heart of technology, one of the most important segments of the technology industry is the semiconductor sector. A semiconductor is a small piece of silicon with circuits made of different materials printed on top of it. The smaller these circuits get, the greater the semiconductor's performance since small feature sizes lead to greater power savings and electrical conductivity. This criticality of semiconductors, also called chips, to the global technological landscape has also made semiconductors one of the most controversial and risky industries these days.
This is because the high end technologies involved in making chips coupled with the billions of dollars in capital expenditure needed to set up a new chip manufacturing plant mean that the barriers of entry to this industry are among the highest in the world and stand in parallel to other high tech sectors such as rocket and aircraft manufacturing. Consequently, only three companies in the world, namely the Taiwan Semiconductor Manufacturing Company (NYSE:TSM), Intel Corporation (NASDAQ:INTC), and Samsung Electronics can make the latest chips, with others limited to older models. Out of these, only TSMC and Samsung sell their chips to third party customers such as NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) since Intel only makes and sells its own chips.
Why is this important? Well, TSMC is the biggest contract chip manufacturer in the world in terms of volume and all of its advanced chip manufacturing facilities are located in the disputed island of Taiwan. Taiwan and China share a common history, and Beijing considers it an integral part of its territory even though Taiwan has its own passport and holds its own elections. Therefore, the island's status is a cause of significant friction between China and the Western rules based order led by the United States, and one of the biggest worries in the chip sector is that a potential conflict in China can disrupt the global semiconductor supply chain to lead to unimaginable consequences.
The potential repercussions of such a conflict are so significant that they even made the well known Warren Buffett of Berkshire Hathaway to change his mind. Mr. Buffett's investment firm made headlines at the end of last year as its filings with the Security and Exchange Commission (SEC) revealed that it had bought a whopping 60 million TSMC shares for a $4.1 billion investment for its third quarter of 2022 investments. Since Mr. Buffett takes his sweet time before investing, the decision suggested that TSMC could do nothing wrong. However, in the very next quarter, Berkshire Hathaway reduced its stake by an equally stunning $3.5 billion and disposed off of the shares entirely in the succeeding quarter. The $3.5 billion reduction made waves in the industry as speculation started to become rife about the reason behind the Oracle of Omaha's sudden shift of mood.
Mr. Buffett explained his decision soon, sharing that he believes that TSMC is a solid company but the firm's geopolitical risks simply proved too much to ignore. According to CNN which quotes several of his statements:
“I feel better about the capital that we’ve got deployed in Japan than in Taiwan,” the Berkshire Hathaway chairman added. “I wish it weren’t sold, but I think that’s a reality.”
Before we get to our latest pick of the cheapest technology stocks, it's also important to briefly consider the current investment climate for these stocks. The technology sector is a growth industry that depends on robust purchasing power for both businesses and consumers as well as easy access to capital due to expensive products and services. These days, technology stocks are under pressure as high rates and troubling economic data have dampened investors' risk appetites. Therefore, the major catalysts for the sector as a whole are announcements regarding interest rate cuts as well as economic growth since a slowing economy sees capital fly to safety in sectors such as consumer defensive.
So, time to look at some great cheap technology stocks, and some notable picks are QUALCOMM Incorporated (NASDAQ:QCOM), Applied Materials, Inc. (NASDAQ:AMAT), and Taiwan Semiconductor Manufacturing Company (NYSE:TSM).
13 Technology Stocks To Buy That Are Too Cheap To Ignore
A Wall Street trader on the phone, quickly executing a technology-driven trade. Editorial photo for a financial news article. 8k. --ar 16:9
Our Methodology
To compile our list of the best cheap technology stocks, we first made a list of the 30 most valuable technology companies whose price to trailing and forward earnings ratios are lower than 20, and that have analyst ratings of Buy or better. Then, the number of hedge funds that had bought their shares as of June 2023 was determined via Insider Monkey's database of 910 funds and the top cheap technology stocks are as follows.
13 Technology Stocks To Buy That Are Too Cheap To Ignore
Sensata Technologies Holding plc (NYSE:ST) is a technology company that sells sensors and other products for automobiles and aircraft. The firm expanded its product portfolio in October 2023 by announcing new sensors for aircraft electrical systems and performance.
During this year's second quarter, 32 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Sensata Technologies Holding plc (NYSE:ST). Robert Joseph Caruso's Select Equity Group is the biggest investor among these, owning 9.2 million shares that are worth $414 million.
Along with Applied Materials, Inc. (NASDAQ:AMAT), QUALCOMM Incorporated (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing Company (NYSE:TSM), Sensata Technologies Holding plc (NYSE:ST) is a cheap tech stock that cannot be ignored.
Leidos Holdings, Inc. (NYSE:LDOS) is a defense contractor that works with NASA, the Pentagon, and other organizations. It also sells cloud computing and other services to civilian users. The firm expanded its civil software portfolio in October 2023 by announcing a new security management system.
As of June 2023, 32 out of the 910 hedge funds polled by Insider Monkey had invested in the firm. Leidos Holdings, Inc. (NYSE:LDOS)'s largest shareholder is Anand Parekh's Alyeska Investment Group due to its $122 million investment.
Vontier Corporation (NYSE:VNT) is an automotive technology company that sells sensors and other products for large scale vehicle fleets. It has beaten analyst EPS estimates in all four of its latest quarters and the stock is rated Buy on average.
During Q2 2023, 33 among the 910 hedge fund investors tracked by Insider Monkey had bought Vontier Corporation (NYSE:VNT)'s shares. Robert Joseph Caruso's Select Equity Group is the biggest hedge fund stakeholder since it owns $74 million worth of shares.
Gen Digital Inc. (NASDAQ:GEN) is an American cybersecurity company that is known for its well known anti virus brands such as Norton. It expanded its presence in the home security market in September 2023 by teaming up with a home security products provider.
By the end of this year's second quarter, 36 hedge funds out of the 910 surveyed by Insider Monkey had held a stake in the company. Gen Digital Inc. (NASDAQ:GEN)'s largest shareholder among these is Jeffrey Smith's Starboard Value LP due to a $350 million stake.
TE Connectivity Ltd. (NYSE:TEL) sells sensors, connectors, and terminals for telecommunications, industrial, and other use cases. The firm has been performing well on the financial front lately as it has beaten analyst EPS estimates in all of its four latest quarters. This strong performance is also reflected in an increased 59 cent dividend per share payable in December.
37 out of the 910 hedge funds part of Insider Monkey's June quarter of 2023 research were TE Connectivity Ltd. (NYSE:TEL)'s investors. Natixis Global Asset Management's Harris Associates owns the biggest stake among these, which is worth $864 million and comes via 6.1 million shares.
Microchip Technology Incorporated (NASDAQ:MCHP), as the name suggests, is a semiconductor company. It made a big announcement earlier this year by announcing new chip products for use in outer space applications.
Insider Monkey took a look at 910 hedge fund holdings for their second quarter of 2023 shareholdings to find that 41 had bought the company's shares. Microchip Technology Incorporated (NASDAQ:MCHP)'s largest hedge fund stakeholder is Kerr Neilson's Platinum Asset Management courtesy of its $295 million investment.
NXP Semiconductors N.V. (NASDAQ:NXPI) is one of the more important chip companies in the world due to its close partnership with the car industry. The firm has partnered up with TSMC in Europe to build a massive $11 billion advanced chip making facility.
Insider Monkey's 910 hedge fund survey for their investments during this year's June quarter outlined that 48 had held a stake in NXP Semiconductors N.V. (NASDAQ:NXPI). Robert Rodriguez and Steven Romick's First Pacific Advisors LLC is the biggest investor among these since it owns a $162 million stake.
Flex Ltd. (NASDAQ:FLEX) is a specialty technology firm that caters to the needs of the supply chain industry. Its shares are rated Strong Buy on average and analysts have penned in a $7 share price upside based on the average share price target of $32.83.
54 out of the 910 hedge funds part of Insider Monkey's Q2 2023 research had bought and owned the firm's shares. Flex Ltd. (NASDAQ:FLEX)'s largest hedge fund shareholder is Andrew Wellington and Jeff Keswin's Lyrical Asset Management as it owns 9.8 million shares that are worth $273 million.
QUALCOMM Incorporated (NASDAQ:QCOM), Flex Ltd. (NASDAQ:FLEX), Applied Materials, Inc. (NASDAQ:AMAT), and Taiwan Semiconductor Manufacturing Company (NYSE:TSM) are some great cheap tech stocks.
