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20 Nasdaq-100 Stocks That Will Heat Up 2H18


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Unless you've been living under a rock, you know that the narrative surrounding broad markets - it's been one of strife since late January until the recent rally. Volatility spiked and the S&P 500 Index  still sits almost 3% below late-January highs.

But for the Nasdaq-100 index - the 100 largest stocks, by market capitalization, listed on the Nasdaq Composite stock exchange - the news has been a little better.

Helped in large part by big gains in Amazon.com, Inc. (NASDAQ: AMZN ) and Netflix, Inc. (NASDAQ: NFLX ), along with strength in its largest component, Apple Inc. (NASDAQ: AAPL ), the Nasdaq has gained 13% so far this year. And the index actually now sits at an all-time high.

Investors looking for exposure to the index can buy the well-known PowerShares QQQ Trust (NASDAQ: QQQ ) ETF. But many components of the index look attractive at current levels as well - even with the index at the highs.

Here are 20 of the best Nasdaq stocks investors should consider for the second half of 2018 and beyond.

20 Best Nasdaq-100 Stocks to Buy: Take-Two Interactive (TTWO)

Source: Via Rockstar

Three different video game developers are included in the Nasdaq-100, and from here Take-Two Interactive Software, Inc (NASDAQ: TTWO ) looks like the best play. I've recommendedElectronic Arts Inc. (NASDAQ: EA ) in the past, but a recent rally has moved that stock closer to fair value .

The reliance of Activision Blizzard, Inc. (NASDAQ: ATVI ) on declining World of Warcraft and relatively stagnant Call of Dutylooks like a concern .

Meanwhile, it's been smaller Take-Two that has been the best performer in the group over 1-, 3- and 5-year periods. Just as I argued earlier this year, Take-Two remains the best play in the space going forward . Concerns about Red Dead Redemption 2 have dogged the stock of late  but those short-term issues leave a long-term buying opportunity.

TTWO stock isn't cheap, but there's plenty of room to grow into that valuation from revenue increases and margin expansion. The stock only has gained about 4% so far in 2018, but I expect much better performance in the second half.

20 Best Nasdaq-100 Stocks to Buy: JD.com (JD)

Source: Daniel Cukier via Flickr

After a round-trip from $36 to $50 and back again, JD.com Inc(ADR) (NASDAQ: JD ) has seen a nice bounce over the past couple of weeks, gaining over 15%. And it looks like the Chinese e-commerce provider could be set up for a nice rally in the second half of the year.

This remains a cutting-edge stock with a chance to take market share from Chinese leader Alibaba Group Holding Ltd (NYSE: BABA ). Growth has been impressive from a revenue standpoint, with margins taking a hit from aggressive investments.

Unlike Alibaba, JD.com holds inventory, which affects its financials, but also gives it more room for upside as its supply chain is built out.

JD stock isn't inexpensive, at 34x forward estimates. But with revenue growing at 30%-plus, that valuation will look downright cheap if and when current investments pay off.

With a market capitalization roughly one-ninth that of its larger rival, even second place in the massive Chinese online shopping market should be good enough to drive JD higher.

20 Best Nasdaq-100 Stocks to Buy: Nvidia (NVDA)

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It took me a while to come around to the Nvidia Corporation (NASDAQ: NVDA ) story, admittedly, but I'm now a firm believer in the company. And even with NVDA near an all-time high, after 75% gains over the past year - and stunningly, a 1,160% rise over the past three years - I'm not ready to back off just yet.

Q1 earnings last month looked spectacular , continuing a multi-year trend. Gaming growth continues to impress. Datacenter represents a real opportunity in the near-term. The automotive market could contribute down the line as self-driving cars become more of a reality.

Competition from Advanced Micro Devices, Inc. (NASDAQ: AMD ) represents a minor threat. Valuation is high, at over 30x next year's EPS, even backing out the company's cash. I can see the case for maybe waiting (or hoping) for a better entry point.

But NVDA hasn't looked cheap in a while - and yet it continues to rack up the gains. This still looks like one of the best companies in the index, if not the entire market, and still a stock worth paying up for.

20 Best Nasdaq-100 Stocks to Buy: Dollar Tree (DLTR)

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Dollar Tree, Inc. (NASDAQ: DLTR ) stock has been all over the place over the past year. After big gains, DLTR declined over 30% just between late January and late May. A big decline following disappointing Q1 earnings capped off the fall to a nine-month low.

But DLTR has started to recover, gaining 10% over the past two weeks and filling much of the post-earnings gap. And there should be more good news ahead. Analysts still see DLTR as a triple-digit stock, and project nearly 20% upside. The Dollar Tree banner is performing well, including a 4% same-store sales print in Q1. And a turnaround at Family Dollar continues to progress, if slower than shareholders would like.

With the stock trading at under 14x FY19 EPS estimates, there's room for both earnings growth and multiple expansion. Forced to choose, I'd still pick rival Dollar General Corp. (NYSE: DG ), but at these levels DLTR looks too cheap as well.

20 Best Nasdaq-100 Stocks to Buy: Expedia (EXPE)

Source: Shutterstock

Online travel remains hot, and Expedia Group Inc (NASDAQ: EXPE ) should be a continued beneficiary. A strong Q1 report showed continued growth on the top line, setting up further improvements in earnings and cash flow going forward.

Meanwhile, EXPE looks like one of the cheaper stocks in the space.

Larger rival Booking Holdings Inc (NASDAQ: BKNG ) boasts similar growth but at a higher valuation, and with less room for upside. As such, EXPE, at just 20x forward EPS, looks like the best play on a booming sector.

20 Best Nasdaq-100 Stocks to Buy: Cognizant Technology Solutions (CTSH)

Source: Cognizant Technology Solutions via Flickr

IT consultant Cognizant Technology Solutions Corp (NASDAQ: CTSH ) has had a choppy 2018. Strong fourth-quarter earnings in early February set up a nice bull run. But the stock has pulled back in part due to the disappointing guidance it gave with its Q1 report in May.

But the pullback has created an attractive entry point. So-called "digitization" - moving data online - is driving revenue and profit growth, notably in the healthcare space. Cost-cutting should help margins.

Financial services demand has been weak but there's hope for a turnaround in that vertical.

With CTSH trading at less than 16x forward EPS, it doesn't take much of an acceleration in growth to move the stock nicely higher. CTSH isn't the sexiest stock in the high-tech Nasdaq, but it does look like one of the more intriguing value plays.

20 Best Nasdaq-100 Stocks to Buy: Paychex (PAYX)

Source: Cognizant Technology Solutions via Flickr

A recent rally has taken some of the potential upside away from Paychex, Inc. (NASDAQ: PAYX ), but there still should be more room to run.

The payroll and HR firm looks like a forever business, dominating the market along with rival and fellow Nasdaq component Automatic Data Processing (NASDAQ: ADP ).

But from here, PAYX is the better pick of the two. It still trades ~3 turns lower than ADP on an EPS basis. ADP has gotten more press of late thanks to a large stake held by well-known investor Bill Ackman - but that alone doesn't justify a premium to PAYX.

Meanwhile, Paychex has tons of cash and an attractive 2.9% dividend . Even at an admittedly full valuation, there's enough to see PAYX racing past $70.

20 Best Nasdaq-100 Stocks to Buy: Facebook (FB)

Source: Shutterstock

Count me among the panicky investors who abandonedFacebook Inc (NASDAQ: FB ) after its Cambridge Analytica scandal . But I've seen the error of my ways. Even with FB stock threatening new all-time highs - and the $200 level - I still see more upside for the stock.

Competition is pretty much dead, with Snap Inc (NYSE: SNAP ) still struggling with user growth. The GDPR (General Data Protection Regulation) in Europe raised concerns. But as Facebook management has pointed out, tighter regulation benefits existing entrants. It's much harder, and more expensive, for a startup to comply with GDPR than it is for Facebook or Alphabet Inc (NASDAQ: GOOGL , GOOG ) unit Google.

Meanwhile, Facebook continues to expand its revenue potential. It's entering the dating and home services spaces. More such efforts likely are on the way. Instagram and WhatsApp still haven't really been monetized yet.

There's still a lot of growth left here, and at less than 20x forward earnings (backing out the company's cash), not much growth is priced in. With competition dead, regulators toothless and users back on board, FB's rally should resume.

20 Best Nasdaq-100 Stocks to Buy: Check Point (CHKP)

Source: Check Point Software

Cybersecurity stocks have done rather well this year - but Check Point Software Technologies Ltd. (NASDAQ: CHKP ) has been left out of the rally. While FireEye Inc (NASDAQ: FEYE ) has gained 22% and Palo Alto Networks Inc (NYSE: PANW ) 43%, CHKP actually has declined modestly so far in 2018.

To be sure, Check Point hasn't done itself any favors. Lowered full-year guidance after Q1 sent the stock tumbling. But this remains a growing company in a growing sector trading at just 15x 2019 EPS estimates, backing out nearly $10 per share in cash.

Performance does need to improve, but if and when it does, CHKP should be a big winner.

20 Best Nasdaq-100 Stocks to Buy: eBay (EBAY)

Source: Lin Cheong via Flickr

I recommended buying shares of eBay Inc (NASDAQ: EBAY ) on the dip in early April. With the stock at similar levels today, I still think there's a buying opportunity here.

The legacy eBay business itself isn't much to get excited about, admittedly. Growth has been rather tepid of late. But the StubHub unit drives 10% of revenue - and is growing faster, with better margins. Cash flow generation is impressive, and the balance sheet is clean, leaving the company with plenty of options.

Meanwhile, the company is ditching PayPal Holdings Inc (NASDAQ: PYPL ), which it spun off in 2015, as its primary payment provider, moving instead to Dutch firm Adyen. That move should save eBay more money - and boost profits.

eBay is far from the most exciting stock in the QQQ. Indeed, it's probably one of the least exciting in the tech-heavy index. But boring stocks can provide good returns. And I expect eBay to grind out enough growth to make a ~16x normalized P/FCF multiple look cheap.

20 Best Nasdaq-100 Stocks to Buy: Alexion Pharmaceuticals (ALXN)

Source: Alexion Pharmaceuticals

Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN ) hasn't been immune to the weakness in the biotech space. ALXN has pulled back about 20% from last year's highs.

But the selloff seems like too much. Wall Street remains firmly behind the stock , with the average target price of $159 suggesting over 30% upside. Recent Phase 3 results and strong earnings sent the stock up double-digits  but investors mostly have shrugged since then.

ALXN, like any biotech play, has risks. Flagship product Soliris could face competition next decade. But the company is solidly profitable and growing, could be an acquisition target, and is having success building out its pipeline. This looks like a stock headed for a turnaround - and a solid buy at current levels.

20 Best Nasdaq-100 Stocks to Buy: Micron (MU)

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Micron Technology, Inc. (NASDAQ: MU ) isn't as cheap as a seemingly ridiculous 5.5x forward P/E multiple would suggest. Memory pricing is notoriously volatile, and may be near a peak. Cyclical concerns here are warranted; it's possible that Micron earnings, like those memory prices, are near a peak themselves.

As such, some investors might consider trying to buy on a dip, or selling puts to establish a better entry price. But from here, a straight bet on MU stock looks like a solid play. Pricing is holding up. Demand should continue to grow, thanks to increasing cloud demand and growing smartphone adoption worldwide.

Meanwhile, an aggressive stock repurchase plan, highlighted at last month's Investor Day, strengthens the bull case here. As I've written several times over the past two years, Micron stock should be cheap but not this cheap.

20 Best Nasdaq-100 Stocks to Buy: KLA-Tencor (KLAC)

Source: via KLA-Tencor

Semiconductor equipment manufacturer KLA-Tencor Corp (NASDAQ: KLAC ) has held up well, all things considered. While chipmakers generally have performed well this year - with strength from MU, AMD and NVDA, among others - chip equipment makers have faced choppier trading.

Applied Materials, Inc. (NASDAQ: AMAT ) and Lam Research Corporation (NASDAQ: LRCX ) both have pulled back sharply from their highs, with both stocks now roughly flat so far this year.

KLAC actually has ground out some upside, however, rising over 8% in 2018. And there's reason to see more upside. The acquisition of Orbotech Ltd (NASDAQ: ORBK ) removes a competitor and moves KLA-Tencor into new markets. Revenue and profits have grown nicely so far in FY18 (ending June). And yet KLAC trades at just 13x forward EPS estimates.

There is a risk of a slowdown in the chip sector - which would hit equipment makers like KLAC hard. But with the sector still seemingly set for years of growth, KLAC should benefit.

20 Best Nasdaq-100 Stocks to Buy: Monster Beverage (MNST)

Source: Mike Mozart via Flickr (modified)

Monster Beverage Corp (NASDAQ: MNST ) has grown up. The short sellers that dogged the stock for years have moved on. Its dominance in the energy drink space - and the permanence of that industry - now is unquestioned.

Now comes the hard part. As a more mature company, Monster needs to find a way to grind out profit growth. And, of late, it's struggled to do so. MNST shares have fallen after the last two earnings reports. Last month, Luke Lango highlighted potential margin pressure going forward. MNST has pulled back some 20% from its highs, and trades not far above levels seen back in 2015.

But it's too soon to throw in the towel on MNST just yet. Price increases are likely, which should assuage at least some of the margin issues. Rumors of an acquisition by The Coca-Cola Co (NYSE: KO ), who already owns a large stake in MNST, are swirling again . And this remains a dominant beverage franchise with growing revenue and profits.

It's not the same bull case for MNST that existed five years ago. But it's still a good one.

20 Best Nasdaq-100 Stocks to Buy: Cadence Design Systems (CDNS)

Source: Shutterstock

Given its inclusion in both the Nasdaq and the S&P 500, software maker Cadence Design Systems Inc (NASDAQ: CDNS ) gets surprisingly little coverage. But undercovered doesn't mean underloved.

CDNS has been a star performer in the space, more than doubling from early 2016 levels. And with an early-year dip now erased, the run higher is resuming. Strong Q1 earnings in April sent the stock higher. Demand for the company's automation and emulation software continues to increase - and should do so for years to come.

Cadence is a key, if somewhat unknown, part of the tech sector. That positioning means CDNS stock isn't cheap, at 25x forward earnings. But it also means that the company's growth runway should continue for years - giving it plenty of time to grow into the valuation, and continue its multi-year bull run.

20 Best Nasdaq-100 Stocks to Buy: Ulta Beauty (ULTA)

Source: Mike Mozart via Flickr

Retailer Ulta Beauty Inc (NASDAQ: ULTA ) had a strong run of its own of late, climbing over 30% from early March lows. But the run was interrupted by a downgrade from Goldman Sachs Group Inc (NYSE: GS ) last week.

But as I argued at the time, there's no need to panic . Valuation does look full - but analyst Matthew Fassler's target still suggests 9% upside from a current price of $249. And Ulta's growth is pretty much unmatched in the retail space. While other retailers strive for simply keeping same-store sales positive, Ulta is guiding for a 6-8% increase. It has plenty of room to continue to expand its store count, creating a runway for double-digit earnings growth annually for years to come.

19x forward EPS seems like a big multiple for a U.S. retailer - and it is. But Ulta has proven, and continues to prove, that it's worth paying up for.

20 Best Nasdaq-100 Stocks to Buy: Xilinx (XLNX)

Source: Shutterstock

Chipmaker Xilinx, Inc. (NASDAQ: XLNX ) hasn't posted the same type of growth seen elsewhere in the industry. But that doesn't mean XLNX stock isn't attractive.

The company still has an opportunity to capture data center spending - a key driver of the gains for NVDA and, more recently, AMD. Aerospace & defense provides another growing end market. Xilinx grew revenue 8% last year to an all-time record, with adjusted EPS growing nicely as well.

Meanwhile, Xilinx could be an acquisition target. It's a natural fit for Broadcom Inc (NASDAQ: AVGO ) after its bid for Qualcomm, Inc. (NASDAQ: QCOM ) fell through . In the meantime, investors get a 2% dividend and solid growth at a reasonable price.

20 Best Nasdaq-100 Stocks to Buy: CA (CA)

Source: Marclo Fontana via Flickr (Modified)

For software maker CA Technologies (NASDAQ: CA ), the days of heady growth, too, are in the past. There are some potential benefits from IoT (Internet of Things), but CA's exposure to the mainframe business of IBM (NYSE: IBM ) provides a headwind.

Still, there's some value here. CA has reversed the negative trend on the top line, growing revenue 4% in fiscal 2018 (ending March). An effort to move to a subscription-based model should help margins, and follows a strategy that's been successful for a number of software companies over the past few years.

Meanwhile, CA is ramping up shareholder returns , devoting two-thirds of free cash flow to a 3% dividend yield along with share buybacks. At 13x forward earnings, and with cash coming back, there's a path for CA stock to grind out upside over time even if revenue growth stays muted.

20 Best Nasdaq-100 Stocks to Buy: Mylan (MYL)

Source: Shutterstock

As cheap as Mylan NV (NASDAQ: MYL ) looks, recent history has shown that the most dangerous thing an investor can do is argue that a drug stock is simply "too cheap".

Valeant Pharmaceuticals Intl Inc (NYSE: VRX ) looked cheap for most of its 90%+ plunge. More recently, Teva Pharmaceutical Industries Ltd (ADR) ADR (NYSE: TEVA ), Mallinckrodt PLC (NYSE: MNK ), and Celgene Corporation (NASDAQ: CELG ) have shown the risk of focusing solely on price when evaluating pharma and biotech plays. (In the case of TEVA, I myself made the bull case far too early .)

That said, MYL is awfully cheap, trading at just 7x forward earnings. Pricing concerns surrounding the EpiPen persist - but of late, it seems like the Trump Administration has other priorities. Deleveraging should help earnings - and limit risk.

As a result, Street analysts still see nearly 20% upside for MYL. And while those analysts were late in seeing declines elsewhere, in this case I think they're right. Investors need to be cautious with MYL and the drug space as a whole. But for now, the rewards seem worth the risks.

20 Best Nasdaq-100 Stocks to Buy: Marriott (MAR)

Source: Shutterstock

The one question when it comes to Marriott International Inc (NASDAQ: MAR ) is valuation. Will Healy argued back in February that MAR stock simply wasn't cheap enough , and even with MAR a few points lower I see his point. 22x forward EPS for a cyclical business isn't exactly a value price.

But this isn't a business that should have a value price. It's one of the leaders in the hospitality space. Demand continues to grow both in the US and worldwide. Supply in major cities is getting close to capped out. There are a number of drivers, including higher occupancy and higher pricing, that can boost revenue and substantially boost margins.

In theory, a lower price would be nice - and investors could consider selling puts or other option strategies to lower the entry point. But Marriott stock is worth the premium.

As of this writing, Vince Martin has a long position in IBM options, and no positions in any other securities mentioned.

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The post 20 Nasdaq-100 Stocks That Will Heat Up 2H18 appeared first on InvestorPlace .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Stocks
Referenced Symbols: TTWO , JD , NVDA , DLTR , EXPE


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