12 Best Technology Stocks That Outperformed in 2022
In this article, we take a look at 12 best technology stocks that outperformed in 2022. If you want to see more best technology stocks that outperformed in 2022, go directly to 5 Best Technology Stocks That Outperformed in 2022.
Given the Federal Reserve has raised interest rates seven times this year to fight inflation, the broader market has declined.
As of December 14, the S&P 500 has declined 16.7% year to date, the Dow Jones Industrial Average has fallen 7.16%, and the Nasdaq Composite or simply Nasdaq, has retreated 29.44% in 2022.
Of the three major indexes, the Nasdaq has decreased the most because it includes many growth stocks whose valuations have been negatively affected by the rising interest rates. Furthermore, the Nasdaq gives more weight to some big tech companies whose valuations have declined substantially this year as capital has moved from the tech sector into Treasuries given the higher yields.
Federal Reserve's Interest Rate Policy
While October and November core inflation were lower than expected, the Federal Reserve has signaled it will raise interest rates next year.
Federal Reserve Chairman Jerome Powell said on Wednesday, "The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path."
As for whether the increasing rates will cause a recession, Powell added, "I don’t think anyone knows whether we’re going to have a recession or not. And if we do, whether it’s going to be a deep one or not — it’s just not knowable."
If there is a moderate to severe recession next year, tech companies listed on the Nasdaq could face more headwinds.
Tech Stocks
While many tech stocks have declined given the Federal Reserve's interest rate increases, some tech stocks have managed to do better than the Nasdaq for various reasons. Some tech stocks have done well this year because they have increased their earnings significantly more than expected. Other tech stocks have done well because their stocks have simply declined less than the Nasdaq given the strength of their businesses.
Nevertheless, given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Adriano Castelli / Shutterstock.com
Methodology
For our list of 12 Best Technology Stocks That Outperformed in 2022, we picked 12 tech stocks with competitive advantages that outperformed the Nasdaq's 29.44% decline as of December 14. For this list, we included defense stocks given the level of difficulty in replicating cutting edge fighter jets or other military technology.
We then ranked the stocks based on the number of hedge funds in our database that owned shares of the same stock at the end of Q3.
12 Best Technology Stocks That Outperformed in 2022
12. Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD)
Year to Date Return as of December 14: 17.87%
Number of Hedge Fund Holders: 26
Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD) is an innovative technology manufacturer of aerospace and defense products that also has a real estate segment that leases the company's excess real estate assets.
For Q3, Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD)'s net sales rose 1% year over year to $549.8 million driven by higher volume on NGI and standard missile. Adjusted EPS was $0.45 for the period, slightly higher than the consensus of $0.44. As a result of the company's steady results and its potential growth for the future, Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD) shares have surged by 17.87% year to date as of December 14.
Alongside Texas Instruments Incorporated (NASDAQ:TXN), Oracle Corporation (NYSE:ORCL), and Apple Inc. (NASDAQ:AAPL), Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD) is a technology stock that has outperformed the NASDAQ this year.
11. General Dynamics Corporation (NYSE:GD)
Year to Date Return as of December 14: 20.03%
Number of Hedge Fund Holders: 35
General Dynamics Corporation (NYSE:GD) is a global aerospace and defense company that makes high tech products such as nuclear powered submarines. Like many other leading defense stocks, General Dynamics Corporation (NYSE:GD) stock has done well this year with a 20.03% rally as the market expects more demand in the future.
In terms of estimates, analysts expect General Dynamics Corporation (NYSE:GD) to earn $12.17 per share in 2022, $13.93 per share in 2023, and $15.66 per share in 2024.
Of the 920 hedge funds in our database, 35 owned shares of General Dynamics Corporation (NYSE:GD) at the end of September, ranking the stock #11 on our list of 12 Best Technology Stocks That Outperformed in 2022.
10. L3Harris Technologies, Inc. (NYSE:LHX)
Year to Date Return as of December 14: 3.06%
Number of Hedge Fund Holders: 39
L3Harris Technologies, Inc. (NYSE:LHX) is another defense stock that has outperformed the market this year with a rally of 3.06% in 2022 versus the Nasdaq's 29.44% decline over the same period. The company, which makes defense technologies such as space and airborne systems, has substantial scale given its annual revenue of over $17 billion.
Although analysts don't expect L3Harris Technologies, Inc. (NYSE:LHX)'s earnings per share to increase in 2023, they do see EPS growth in 2024. In terms of estimates, Wall Street expects L3Harris Technologies, Inc. (NYSE:LHX) to earn $12.89 per share in 2022, $12.70 per share in 2023, and $13.98 per share in 2024.
9. International Business Machines Corporation (NYSE:IBM)
Year to Date Return as of December 14: 10.16%
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a leader in helping deploy powerful hybrid cloud and AI technologies to help businesses seize new opportunities. Given the demand, International Business Machines Corporation (NYSE:IBM)'s third quarter revenue rose 6% year over year to $14.1 billion with its consulting sales up 5% year over year. For full year 2022, International Business Machines Corporation (NYSE:IBM) expects consolidated free cash flow of about $10 billion.
As a result of its growth potential and business quality, International Business Machines Corporation (NYSE:IBM) shares have rallied 10.16% in 2022 as of December 14.
8. The Boeing Company (NYSE:BA)
Year to Date Return as of December 14: -9.43%
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA) is a leading maker of civilian aircraft and military aerospace products which rank among the most technologically advanced in the world. Although the civilian aerospace business of The Boeing Company (NYSE:BA) has been negatively affected by the pandemic, the company's military business has strong growth potential in the future if it can maintain its market share.
For 2022, The Boeing Company (NYSE:BA) has declined less than the Nasdaq with a year to date decrease of 9.43% versus the Nasdaq's retreat of 29.44%.
7. Northrop Grumman Corporation (NYSE:NOC)
Year to Date Return as of December 14: 37.93%
Number of Hedge Fund Holders: 46
Northrop Grumman Corporation (NYSE:NOC) makes advanced military technology such as the B-21 and advanced space technology such as solid rocket boosters. Given the growth potential in space in the long term and Northrop Grumman Corporation (NYSE:NOC)'s strong existing business, the market has bid shares of the company up by 37.93% year to date.
Analysts expect Northrop Grumman Corporation (NYSE:NOC) to earn $24.75 per share in 2022, $22.73 per share in 2023, and $25.13 per share in 2024.
6. ASML Holding N.V. (NASDAQ:ASML)
Year to Date Return as of December 14: -22.78%
Number of Hedge Fund Holders: 51
Although its shares have retreated 22.78% year to date, ASML Holding N.V. (NASDAQ:ASML) still ranks among the best technology stocks that outperformed the market given the Nasdaq's decline of 29.44% over the same time frame. While its shares might be lower this year, ASML Holding N.V. (NASDAQ:ASML) has substantial long term earnings power given how difficult it is to compete with the company in terms of making essential semiconductor production equipment.
Baron Opportunity Fund commented on ASML Holding N.V. (NASDAQ:ASML) in a Q2 2022 investor letter,
ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology. Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward. Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.
Like ASML Holding N.V. (NASDAQ:ASML), Texas Instruments Incorporated (NASDAQ:TXN), Oracle Corporation (NYSE:ORCL), and Apple Inc. (NASDAQ:AAPL) are technology stocks that have outperformed the NASDAQ this year.
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Disclosure: None. 12 Best Technology Stocks That Outperformed in 2022 is originally published on Insider Monkey.
