2 Strong Tech Stocks Amid a Weak Market That Should Continue to Outperform

Concerns over the Federal Reserve’s tighter monetary policy to fight inflationary pressure, lingering supply chain disruptions, and an anticipated economic slowdown have driven the recent tech rout. However, given their strong financials and promising growth prospects, we think betting on the stocks of technology companies Amdocs (DOX) and Sanmina (SANM) could be wise now. These stocks are outperforming the broader market. Read on.

The technology industry has experienced significant growth over the past two years, in-part because of the pandemic-driven digital transformation and accelerated tech dependence amid remote lifestyles. Furthermore, the tech industry is expected to achieve continuing business growth this year, driven by strong demand and adoption of advanced technologies, including 5G, cloud computing, and artificial intelligence (AI). Furthermore, increased corporate and government investments should boost the industry’s growth. Worldwide IT spending is expected to reach $4.4 trillion, up 4% year-over-year, according to a report by Gartner, Inc. (IT).

However, macroeconomic headwinds have dampened investor sentiment and triggered a massive sell-off in high-growth tech stocks of late. The tech-heavy NASDAQ Composite Index has plunged 8.8% over the past month. But, despite the risk-off environment, certain tech companies with positive cash flows, strong fundamentals, and solid growth attributes have managed to maintain their momentum and are well-positioned to deliver solid returns to the investors.

Given the industry’s bright prospects, we think it could be wise to invest in fundamentally sound stocks Amdocs Limited (DOX) and Sanmina Corporation (SANM), which are outperforming the market.

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in DOX for a 25% gain. Learn more about the RTR service here.

Amdocs Limited (DOX)

DOX in Saint Peter Port, the Channel Islands, provides software and services worldwide. The company designs, develops, operates, and markets open and modular cloud portfolios. It offers CES21, a 5G and cloud-native customer experience suite, the Commerce and Customer suite, the Monetization suite, Intelligent Networking suite, and more. It also offers home operating systems, data intelligence solutions, media services, mobile network services, and consulting services.

On May 24, DOX entered agreed to acquire MYCOM OSI, a U.K.-based company providing SaaS-based cloud network and service assurance solutions. This acquisition might expand DOX’s network service assurance and monetization offering with MYCOM OSI’s service assurance suite.

On May 11, DOX was selected by VodafoneZiggo to deliver a unified customer experience in a digital transformation project. “We are delighted to be strengthening our relationship with VodafoneZiggo and supporting its strategic objectives. This project will enable the company to quickly achieve transformational business outcomes, ensuring operational improvements and a unified customer experience across all lines of business,” said Anthony Goonetilleke, Group President of Technology and Head of Strategy at DOX.

In its fiscal year 2022 second quarter, ended March 31, 2022, DOX's revenue increased 9.2% year-over-year to $1.15 billion, and its non-GAAP operating income improved 9.1% from the prior-year period to $201.63 million. The company’s non-GAAP net income amounted to $190.94 million, up 28.9% year-over-year. In addition, its non-GAAP earnings per share rose 36.3% from the year-ago value to $1.54.

Analysts expect DOX’s revenue for its fiscal year 2022, ending Sept.30, 2022, to come in at $4.57 billion, indicating a 6.6% increase year-over-year. Also, the $5.28 consensus EPS estimate for the current year represents a 9.8% rise from last year. The company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

The stock has gained 13.2% in price year-to-date to close yesterday's trading session at $84.98. This compares to the S&P 500’s 14.9% decline over this period.

DOX's POWR Ratings reflect this promising outlook. It has an overall A grade, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

DOX has a B grade for Quality and Stability. Within the Software - Business industry, it is ranked #3 of 56 stocks. To see additional POWR Ratings (Momentum, Value, Growth, and Sentiment) for DOX, click here.

Click here to check out our Software Industry Report for 2022

Sanmina Corporation (SANM)

SANM in San Jose, Calif., offers integrated manufacturing solutions, components, products, logistics, and after-market services worldwide. The company operates through two business segments: Integrated Manufacturing Solutions; and Components, Products, and Services. It provides product design and engineering, direct order fulfillment and logistics services, and supply chain management services.

Last month, SANM’s product division, Viking Enterprise Solutions, launched Cloud Native Obsidian (CNO), an on-premises storage solution that enables enterprises to deploy a hybrid cloud strategy while reducing operational expenses. The solution simplifies storage implementation and provides enhanced flexibility, data durability, and scalability at predictable costs. With this comprehensive solution, the company is expected to expand its position in the storage market.

SANM's net sales have increased 12.5% year-over-year to $1.91 billion, and its gross profit has grown 6.5% year-over-year to $152.45 million in its fiscal 2022 second quarter, ended April 2, 2022. Its non-GAAP operating income rose 11.4% year-over-year to $95.25 million. And the company’s non-GAAP net income and non-GAAP net income per share came in at $73.17 million and $1.14, respectively, registering an increase of 8.5% and 12.9% year-over-year.

The $1.88 billion consensus revenue estimate for its fiscal 2022 third quarter, ending June 30, 2023, represents a 13.4% improvement from the same period in 2021. Also, the $1.11 consensus EPS estimate for the current quarter represents a 12.5% rise year-over-year. It is no surprise that it has topped the consensus EPS estimates in three of the trailing four quarters.

SANM’s shares have increased 3.6% in price year-to-date to close yesterday’s trading session at $42.95.

SANM has an overall B rating, which translates to Buy in our proprietary rating system. The stock has a B grade for Quality. It is ranked #9 of 81 stocks in the Technology - Services industry. Click here to see the additional POWR Ratings for Growth, Sentiment, Value, Momentum, and Stability for SANM.

DOX shares were trading at $86.85 per share on Friday afternoon, up $1.87 (+2.20%). Year-to-date, DOX has gained 16.60%, versus a -12.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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