Tech takes top billing in elite investors’ 10 top US stock picks

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There’s a reason the US became the centre of last year’s spec-tech boom. Its market is home to many truly amazing tech companies that have made investors’ wildest dreams come true. Sadly, as we are now witnessing, these incredible success stories are few and far between, and not simply the result of having a cracking story to tell.

Substantive tech plays that have established records of eye-watering growth and profitability stand out among the elite fund managers’ 10 favourite US stocks.

Our list of 10 US stocks is based on the collective level of conviction of the world’s top-performing fund managers.

We’ll be looking in a bit more detail at these companies throughout the week, but here’s a taster of what’s on the list.

Big tech

Name Market cap Price-to-earnings ratio Return on capital employed Forecast EPS growth 12-month share price return
Alphabet $1.4tn 20 29% 6.1% -14%
Amazon $1.4tn 94 11% -1.3% -25%
Microsoft $2.1tn 27 34% 12% -2.0%

Source: FactSet • Price-to-earnings ratio and forecast earnings growth based on 12-month earnings forecasts. Data as 1 Aug 2022

Three names on the list that will be familiar are tech titans Alphabet (US:GOOGL), Amazon (US:AMZN) and Microsoft (US:MSFT). Recent second-quarter results from these companies helped buoy both the US and global stock markets in July. A reliance on weakening advertising revenues has been a bit of a worry for investors in Google and YouTube owner Alphabet, however.

These tech giants are playing pivotal roles in shaping technological change and have strong influences on the development of virtual society and digital infrastructure – two themes that are a focus for Fix the Future.

Cutting-edge players

Name Market cap Price-to-earnings ratio Return on capital employed Forecast EPS growth 12-month share price return
Nvidia $454bn 31 33% 19% -7.6%
Tesla $9.bn 58 17% 56% 32%
Globant $8.3bn 35 15% 29% -17%
Endava $5.6bn 35 19% 22% -21%

Source: FactSet • Price-to-earnings ratio and forecast earnings growth based on 12-month earnings forecasts. Data as 1 Aug 2022

Several cutting-edge digital tech companies make the list. Two of these, Nvidia (US:NVDA) and Tesla (US:TSLA), are developing technologies of the future. The other two, Globant (US:GLOB) and Endava (US:DAVA), are consultants which help other companies harness cutting-edge technologies.

These consultants, along with Nvidia, are making a major contribution to the development of the world’s digital infrastructure, while Tesla is a big player in the decarbonisation of transport, another Fix the Future theme linked to the technological change megatrend.

It’s not all tech…

Name Market size Price-to-earnings ratio Return on capital employed Forecast EPS growth 12-month share price return
Linde $152bn 24 8.4% 11% 0.9%
Thermo Fisher Scientific $234bn 25 15% 0.0% 12%
Performance Food Group $7.7bn 15 3.8% 27% 8.2%

Source: FactSet • Price-to-earnings ratio and forecast earnings growth based on 12-month earnings forecasts. Data as 1 Aug 2022

Linde’s (US:LIN) technical expertise is in making industrial gases. It now looks set to benefit from the growing consensus that hydrogen will play a vital role in storing and distributing renewable energy as well as powering heavy industry. This means the company could have a major role in the world’s energy transition, a key theme in Fix the Future’s environmental and climate change megatrend.

Thermo Fisher Scientific (US:TMO) provides a way to play growth in the biotech and pharma industries without the risks associated with hit-or-miss drug development. Its high-tech equipment is widely used by the industry. This makes the company a picks-and-shovels play on the health and longevity theme, part of Fix the Future’s social and demographic change megatrend.

The final stock to make the list is Performance Foods Group (US:PFGC), a food distribution company serving markets from convenience stores to independent restaurants. Covering more than 159 million miles of road a year to get food products to customers when they’re needed, resource efficiency, another environmental and climate change theme, is a key issue.

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