In this piece, we will take a look at the 12 best affordable technology stocks to buy now. If you want to skip our primer on how to select affordable stocks and the technology sector, then check out 5 Best Affordable Tech Stocks To Buy Now.
Technology stocks are some of the favorites when it comes to investor and media attention. Most of this interest is due to the fact that technology as a whole has transformed human civilization in unimaginable ways in just a handful of decades. This transformation covers corporate and personal use cases, with the technological ‘revolution’ for these take place in phases.
On the corporate front, big data analysis and computerized databases picked up the flow in the 1990s when firms such as SAP SE (NYSE:SAP) and Oracle Corporation (NASDAQ:ORCL) introduced enterprise computing software platforms that transformed the manner in which firms could do business. The companies’ enterprise resource planning (ERP) software products were something that Henry Ford would have envied, as they allowed managers to plan material flow and production systems to utilize the inventory at hand for maximum profitability.
Revolution through technology on the consumer front took a bit longer. The dawn of the smartphone era, ascribed by many to Apple Inc. (NASDAQ:AAPL)’s iPhone allowed people to do a lot more with their cellphones than just make phone calls. However, at the time of the iPhone’s launch, semiconductor fabrication hadn’t matured significantly to churn out processors and graphics processing units (GPUs) that could balance heavy duty workloads with power efficiency. This took a bit longer, and it followed the growth of the Internet. Both of these combined have transferred most of our daily tasks such as working and entertainment to the computer and ensured that technology plays a nearly indispensable role in our daily lives.
So, it’s safe to say that investors find it quite appetizing when new technology firms surface or existing ones create new industries that were previously untapped. When it comes to 2023, the big buzz word for the technology sector is artificial intelligence (AI). AI has injected fresh life into the shares and the income statement of the GPU designer NVIDIA Corporation (NASDAQ:NVDA). NVIDIA, like other chip companies, had a torrid 2022 as its revenue tanked due to a slowdown in the semiconductor industry due to demand and supply mismatch. However, the dawn of the AI era propelled the company’s valuations to record high levels and it also ensured that NVIDIA’s latest earnings results saw massive revenue growth that the firm promises will also be present as the current quarter ends.
However, NVIDIA’s price to trailing earnings ratio which measures the ratio between its share price and the earnings per share of the four latest quarters currently sits at 110.10. This means that the market has ascribed a hefty premium to the share price when compared to the profit that the firm earns. In other words, it means that investors pay a lot more for NVIDIA than it can actually make through its income statement, as their expectations are built on a future where the firm is able to expand its market share and earn even more money than the billions of dollars that it currently brings in.
This makes the stock ‘expensive’ when we consider it in terms of valuation measures, creating room for a hunt for other companies that might also see explosive growth in their share price like NVIDIA. Affordability on the stock market is typically defined in terms of the P/E ratio, with the title of ‘value stocks’ being given to firms that trade at low multiples but have strong business models that can drive growth in the future. So, even though a firm’s shares might trade for at, let’s say, $1,000 per share, if its earnings per share is $800, then a P/E ratio of 1.25 might mean that the firm is affordable if its industry or market ratios are significantly higher.
Technology stocks as a whole have been see sawing over the past year and a half. 2022 was an absolute bloodbath for the sector, but 2023 saw tech heavy indexes such as the NASDAQ 100 soar to record highs as they were fueled by the sentiment surrounding AI. However, a key question to ask when analyzing the broader share price appreciation trend to decide if investing in technology stocks is worth it is that if the price momentum is spread across the sector. That is to say, whether the performance exhibited by mega cap stocks also traces its way to their mid cap and small cap peers. Well, to conclude on a positive note, the S&P SmallCap 600 Capped Information Technology is up by 12.52% year to date while the S&P MidCap 400 Information Technology index is up by a stronger 18.12%. This indicates that there is some juice in the sector after all, and a key reason that might be holding back the smaller stocks is an uncertain economic environment.
With these details in mind, let’s take a look at some top affordable technology stocks out of which the top three picks are Tower Semiconductor Ltd. (NASDAQ:TSEM), Gen Digital Inc. (NASDAQ:GEN), and Silicon Motion Technology Corporation (NASDAQ:SIMO).
Photo by Jonas Leupe on Unsplash
Our Methodology
To compile our list of the best affordable technology stocks, we first used a trailing P/E of 20 for the stock market as a benchmark of affordability. Then, a list of 30 technology companies with a market cap greater than $200 million that were trading below this P/E ratio was compiled. For the final list of the top affordable technology stocks, they were ranked through the number of hedge funds that had held their shares as of Q2 2023 courtesy of Insider Monkey’s database of 910 hedge funds and the top stocks are as follows.
12 Best Affordable Tech Stocks To Buy Now
12. PagSeguro Digital Ltd. (NYSE:PAGS)
Number of Hedge Fund Investors In Q2 2023: 22
Latest P/E Ratio: 9.42
PagSeguro Digital Ltd. (NYSE:PAGS) is a Brazilian software company headquartered in Sao Paulo, Brazil. The firm enables its customers to manage their daily financial and payment needs. The firm beat analyst EPS estimates for its second quarter and the stock is rated Buy on average.
By the end of this year’s second quarter, 22 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in PagSeguro Digital Ltd. (NYSE:PAGS). Out of these, the firm’s largest shareholder is Daniel Patrick Gibson’s Sylebra Capital Management since it owns 11.5 million shares that are worth $109 million.
Just like Gen Digital Inc. (NASDAQ:GEN), Tower Semiconductor Ltd. (NASDAQ:TSEM), and Silicon Motion Technology Corporation (NASDAQ:SIMO), PagSeguro Digital Ltd. (NYSE:PAGS) is a top affordable tech stock.
11. STMicroelectronics N.V. (NYSE:STM)
Number of Hedge Fund Investors In Q2 2023: 22
Latest P/E Ratio: 9.61
STMicroelectronics N.V. (NYSE:STM) is a semiconductor fabrication company that sells chips to car makers and other companies. Despite a slowdown in the chip sector, the firm has beaten analyst EPS estimates in three of its four latest quarters and analysts have penned in a $14 upside to the share price.
As of June 2023, 22 hedge funds among the 910 polled by Insider Monkey were the firm’s investors. STMicroelectronics N.V. (NYSE:STM)’s largest hedge fund shareholder is Steve Cohen’s Point72 Asset Management courtesy of a stake worth $111 million.
10. Vishay Intertechnology, Inc. (NYSE:VSH)
Number of Hedge Fund Investors In Q2 2023: 22
Latest P/E Ratio: 8.48
Vishay Intertechnology, Inc. (NYSE:VSH) is another semiconductor manufacturer. The firm expanded its manufacturing footprint in September after it opened a new plant in Mexico.
22 out of the 910 hedge funds part of Insider Monkey’s research had bought Vishay Intertechnology, Inc. (NYSE:VSH)’s stock as of Q2 2023 end. Ken Fisher’s Fisher Asset Management is the firm’s biggest investor among these since it owns $90.6 million worth of shares.
9. Daqo New Energy Corp. (NYSE:DQ)
Number of Hedge Fund Investors In Q2 2023: 22
Latest P/E Ratio: 2.47
Daqo New Energy Corp. (NYSE:DQ) is a Chinese semiconductor company that sells chips to solar power equipment manufacturers. A slowdown in the Chinese economy has hit the firm’s income statement, as it has missed analyst EPS estimates in all four of its latest quarters. However, to keep investors satiated, the firm has a $700 million share repurchase program in the works.
As of June 2023, 22 out of the 910 hedge funds surveyed by Insider Monkey had owned the firm’s shares. Daqo New Energy Corp. (NYSE:DQ)’s largest hedge fund stakeholder is Lei Zhang’s Hillhouse Capital Management through a stake worth $80.8 million.
8. Sanmina Corporation (NASDAQ:SANM)
Number of Hedge Fund Investors In Q2 2023: 23
Latest P/E Ratio: 9.96
Sanmina Corporation (NASDAQ:SANM) is an American technology company that provides consulting services and products such as printed circuit boards. It is one of the few stocks on our list that has been rated Strong Buy on average by analysts, perhaps because the firm has beaten analyst EPS estimates in all four of its latest quarters.
Insider Monkey dug through 910 hedge funds for their second quarter of 2023 investments and discovered 23 Sanmina Corporation (NASDAQ:SANM) investors. Ric Dillon’s Diamond Hill Capital is the biggest hedge fund shareholder since it owns 684,681 shares that are worth $41.2 million.
7. Amkor Technology, Inc. (NASDAQ:AMKR)
Number of Hedge Fund Investors In Q2 2023: 26
Latest P/E Ratio: 9.96
Amkor Technology, Inc. (NASDAQ:AMKR) is another semiconductor company. It provides backend products and services to chip firms, that allow them to test and develop their products. Analysts have penned in a sizeable $10 upside to the share price, and the stock is rated Buy on average.
By the end of this year’s June quarter, 26 hedge funds among the 910 that were part of Insider Monkey’s research had held a stake in the company. Amkor Technology, Inc. (NASDAQ:AMKR)’s largest stakeholder among these is Stephen White’s SW Investment Management since it owns $63.9 million worth of shares.
6. Arrow Electronics, Inc. (NYSE:ARW)
Number of Hedge Fund Investors In Q2 2023: 27
Latest P/E Ratio: 6.37
Arrow Electronics, Inc. (NYSE:ARW) is an American firm that sells chip products and other services. Despite being up 20.56% year to date, the firm’s shares slipped in early August after it announced its latest earnings results.
27 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database had bought Arrow Electronics, Inc. (NYSE:ARW)’s shares. Out of these, the firm’s biggest investor is Cliff Asness’ AQR Capital Management through a stake worth $272 million.
Tower Semiconductor Ltd. (NASDAQ:TSEM), Arrow Electronics, Inc. (NYSE:ARW), Gen Digital Inc. (NASDAQ:GEN), and Silicon Motion Technology Corporation (NASDAQ:SIMO) are some best affordable technology stocks that hedge funds are buying.
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Disclosure: None. 12 Best Affordable Tech Stocks To Buy Now is originally published on Insider Monkey.
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