Semiconductor stocks were hit hard by the recent market sell-off, but the underlying business of this industry is growing—and should continue that trend in 2018 and beyond. Throughout the chip-making space, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.
For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
For example, consumer-level IoT products include things like Amazon’s (AMZN) Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.
As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. And 2018 promises to be another marquee year for these suppliers, with the number of connected devices worldwide set to continue its rapid growth.
With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth in 2018:
Hot Stocks To Buy Right Now: Twitter, Inc.(TWTR)
I’m not the biggest fan of Twitter Inc (NYSE:TWTR) based on current valuation, but there is no doubt that this stock has broken its two-year slump and skyrocketed to levels not seen in several years.
For most of 2016 and 2017, TWTR stock was range bound in the mid-teens level. Advertising revenue growth was coming off the rails, and actually dipped into negative territory for several consecutive quarters in 2017. Profitability concerns grew, and the question turned from “How profitable can Twitter be?” to “Will Twitter ever be profitable?”
But then everything changed in the fourth quarter of 2017. Advertising revenue growth, which had fallen into negative territory for the prior three quarters, jumped back into positive territory. The company started to figure out how to monetize its data through a data licensing businesses, which sells user data to third-party buyers. That added more firepower to revenue growth.
Plus, it’s a particularly high-margin business, so data licensing ramp led to margin expansion. Profit margins started to creep into positive territory.
All this continued in the company’s first quarter earnings report. Ad revenue growth accelerated. Data licensing revenue growth accelerated. Margins expanded. Profitability improved.
TWTR stock dropped on the news because management sounded a cautious tone on growth going forward given a competitive landscape. Plus, regulation hangs over the stock, particularly the company’s data licensing business.
For those reasons, TWTR stock looks risky here.
But there is no doubt that TWTR stock is one of the hottest turnaround stories on Wall Street right now.
Hot Stocks To Buy Right Now: Waddell & Reed Financial, Inc.(WDR)
It’s no secret that the actively managed investment fund industry is under pressure. High fees, generally poor performance and an ever-growing number of low-cost passively managed funds are all factors putting pressure on companies like Waddell & Reed.
The company’s earnings have steadily declined since 2014, pushing its dividend payout ratio up to close to 90% last year. As a result, management ultimately decided to slash the firm’s quarterly dividend by 46%.
Simply Safe Dividends had assigned the company a Dividend Safety Score of 12 prior to its reduction announcement, signaling high risk of a payout cut.
Unfortunately the outlook remains somewhat grim for the business, largely driven by continued performance struggles and relatively high fees that averaged 66.5 basis points last quarter.
Less than 30% of Waddell & Reed’s fund assets were ranked in the top half of their group by Morningstar over the past three-year performance period. Not surprisingly, Waddell & Reed continues to see a couple billion dollars of asset outflows each quarter.
Should the market take a tumble, the business would come under further strain.
Hot Stocks To Buy Right Now: Knight Transportation, Inc.(KNX)
Knight-Swift Transportation Holdings Inc (NYSE:KNX) had its humble beginnings in 1966, taking steel from the Port of Los Angeles to Arizona and bringing cotton from Arizona to LA.
Today, KNX is a $4 billion business with 20,000 trucks on the road throughout the U.S. and Mexico. If you see a Swift logo on a truck while driving, it’s a KNX truck.
Charles Dow, the inspiration for the Dow Jones Industrial Average, also inspired a fundamental theory about the economy and the markets. It’s simply called Dow Theory.
One of the core tenants is that if you look at the transportation and the industrial sectors, you can predict how well the economy will be doing in the near future. If transport business is rising, that’s a bullish sign.
KNX stock is up 10% year to date and up 20% in the past five months. That’s a good sign that the economy is on an upswing, and KNX stock with it.
Hot Stocks To Buy Right Now: Network-1 Technologies, Inc.(NTIP)
(NYSEAMERICAN:NTIP) has a market cap of $65 million, so it isn’t a game changer at this point. And from the looks of things, it may not get the opportunity to even try its hand becoming a force.
Its specialty is protecting intellectual property assets. Granted this is huge deal in the tech sector where knowledge is almost as important as products. If you don’t have the ability to keep your new tech ideas out of the hands of competitors, you don’t have a chance.
Most of NTIP’s IP portfolio deals with networks and Quality of Service (QoS) patents for delivering content over the internet.
It’s off 42% in the past year, but there’s no reason to go bargain hunting now.
Hot Stocks To Buy Right Now: Celanese Corporation(CE)
Celanese Corporation (NYSE:CE) announced a 17% increase to its quarterly dividend, raising it from 46 cents per share to 54 cents. Dividends will be paid from the specialty chemicals manufacturer on May 10 to shareholders of record as of April 30. As a result, CE shares trade ex-dividend on April 27.
CE Dividend Yield: 1.95%