This year has been challenging for the NASDAQ tech stock index. It is doing far worse than the market as a whole, down 33% year to date. By now, you would only have $6,800 left if you had put $10,000 in the NASDAQ at the beginning of the year. Others believe the losses will keep coming.
To claim that all tech equities are performing poorly this year, however, would be incorrect. Some individual tech stocks are doing rather well; one Canadian tech stock has increased by 91% so far this year! Let’s look at two tech stocks that have performed comparably well this year. We’ll start with one that you’ve probably heard of before moving on to a lesser-known TSX stock that’s outperforming the market.
The stock of Apple Inc. (NASDAQ:AAPL) is performing better this year than the average big tech name. It is displaying relative strength despite being down only 23% for the year. Although there has been a significant reduction of 23%, this year has been successful for big tech. It should also be mentioned that Apple is one of the few large tech firms that pay dividends, thus a small amount of cash income distributed to owners helps to balance the price decrease.
Why is Apple doing comparatively well this year?
There are several factors, some of which are rather evident and others of which are more difficult to identify. Before continuing, I should clarify that Apple’s outperformance has NOT been a result of positive earnings reports. Apple’s most recent quarter saw only a 2% increase in revenue and a loss in earnings; overall, however, the performance was quite typical of large tech at the time. Thus, Apple’s quick expansion is not the reason why it outperforms.
The fact that Apple is a staple in the portfolios of many buy-and-hold investors may be a contributing factor to the outperformance. The amount of Apple shares available on the open market is constrained by Warren Buffett’s $150 billion stake in the company, which he has no intention of selling. There are countless additional stockholders who have long-term holdings in Apple, thus their inability to sell may also be supporting the price.
The immense value of Apple’s brand is another factor. For more than a decade, Apple has consistently ranked as the top brand worldwide. Apple items are incredibly popular and command high prices. Because consumers are willing to make compromises in order to purchase Apple products, investors may gamble that the company will continue to provide satisfactory results despite the economic slump.
A little Canadian tech stock called Sierra Wireless (TSX:SW)(NASDAQ:SWIR) is outperforming not just the NASDAQ but also Apple right now. It is one of the best-performing tech stocks of the year, up 91% for the year.
Why is Sierra Wireless doing so well?
In comparison to the large online corporations, you are used to hearing about, Sierra’s company is very different. Most of its clients are companies, and it sells routers, SIM cards, and other IT components. Its expanding product selection and 5G modules are currently in high demand. Sierra’s products will continue to be in demand as long as businesses require digital infrastructure, making SW’s business less cyclical than those of consumer-facing IT firms.
Moreover, there is the issue of Sierra’s most recent earnings report. Sierra reported a 41% rise in revenue during the second quarter. Also, it posted earnings of $10.9 million vs a loss of $10 million the year prior. For the tech industry this year, these outcomes are far above average. And given that Sierra already has a sizable order backlog secured for 2023, growth is expected to continue into the following year. Additionally, until 2026, the market for IoT connection solutions is expected to expand by 21% annually, which should further boost Sierra’s top-line growth.