Stock Talk- U.S. tech stocks

Which ones performed well based on a set of quantitative criteria?

Ashley Redmond 20 April, 2012 | 1:00PM
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Asley Redmond: Welcome back to this month's edition of Stock Talk. If you've been reading the paper in the past few weeks or even following any business news, you will know that Facebook has bought Instagram for a billion dollars. Of course Instagram is a photography app that was originally made for the iPhone.

Sabeen Saeed: And since this happened, there has been a lot of buzz online about start-ups and tech companies.

Redmond: Yeah, it seems like everyone wants to know what's the next Facebook, or who is the next Instagram?

Saeed: Yeah, so I thought this month it would be interesting to run a screen looking at U.S. IT stocks, and hopefully highlight some stocks that our viewers are less familiar with.

Redmond: That's a great idea. Of course Sabeen used CPMS, which is Morningstar's quantitative equity research service, utilized by fund managers across the country. So, Sabeen what was the criteria?

Saeed: Well, this month we ran a fairly simple screen limiting the universe to U.S. IT stocks. I rank stocks on their return on equity, normalized earnings growth over five years and their earning surprise, which is whether companies are beating analyst expectations or not.

Redmond: So, what were the top 10 stocks?

Saeed: The top 10 stocks were; Apple, Baidu, Accenture, MasterCard, Alliance Data Systems, Seagate Technology, IBM, Gartner, Take-Two Interactive, and Linear Technology.

Redmond: And there is no surprise that Apple tops the list?

Saeed: Definitely. Another stock that stands out is Baidu, which is referred to as the Google of China. It's got great return on equity and reinvestment rate, relative to the media and IT stock, and strong sales momentum and earnings growth.

Redmond: Great. Also when you were taking a look at the list, was there anything else that really stood out to you?

Saeed: Yeah, well, at an aggregate level, the average stock on this list displays stronger growth and momentum relative to the S&P 500, and it's cheaper than the index on a price to earnings basis. If you had held the list of stocks that we just mentioned, you would have seen an average return of 22.9% versus the S&P 500 at 9.6%.

Redmond: Great. Thanks so much Sabeen.

Saeed: Thanks. Hopefully that information is useful for our viewers.

Redmond: Just a reminder, Sabeen is not providing financial advice. We do encourage you to speak with a financial advisor or a planner before selecting stocks. CPMS software is only available to institutional clients and investment advisors. However, you can go on Morningstar.ca and use the free stock quotes at the top of the page.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Accenture PLC Class A303.59 USD-1.43Rating
Apple Inc189.87 USD0.02Rating
Baidu Inc ADR110.58 USD-1.79Rating
Bread Financial Holdings Inc41.56 USD2.47Rating
Gartner Inc450.26 USD0.55
International Business Machines Corp169.03 USD0.04Rating
Mastercard Inc Class A460.27 USD0.31Rating
Seagate Technology Holdings PLC95.27 USD-3.02Rating
Take-Two Interactive Software Inc147.84 USD1.20Rating

About Author

Ashley Redmond

Ashley Redmond  Ashley Redmond is a Vancouver-based freelance writer.

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