3 Big Tech Stocks for 2022

The last few weeks have felt like a bit of a rough time for tech stocks, but when you look at it from a longer-term perspective, tech has been an outperformer for years and will be for years to come. We live in an increasingly tech-dominated world and the market, by its nature, will reflect that. With that in mind, I set out to find some large cap tech stocks stocks that can beat the market in 2022, but will be relatively low risk in a world where Covid is still a factor and where the Fed will be tightening policy

My training and background are in trading, but the analysis and process needed for picking long-term winners is not the same as that used for identifying trades with expected time horizons measured in minutes, hours, or days. When looking for stocks to buy and hold, rather than study the chart, it is best to ignore it. Past price action means next to nothing for the long-term prospects of any stock, especially so in the tech sector. Performance over a year or more will be determined by how well a company’s business model and products fit with current trends, not by support and resistance levels or lines on a chart.

IBM (IBM): My first pick will, I’m sure, surprise a few people. For nearly a decade IBM has been known as a kind of poster child for the dangers of aging tech companies. The once-dominant company in the world of business computing got left behind as the world moved on to remote servers, tablets, the cloud and, as a result, the stock has followed a steady downward trajectory since it traded above $200 back in 2013.

However, Microsoft (MSFT) showed a few years ago that sleeping giants can be reawakened. Under new CEO Arvind Krishna, IBM has become a much more focused entity, concentrating their efforts in two areas that are expected to dominate the conversation next year: the hybrid cloud and artificial intelligence (AI). The change has been disruptive, as change tends to be, but that just makes the stock look like value right now. IBM is trading with a forward P/E of just over 10, which looks cheap for stock in a company focused on the two trendiest areas of B2B tech.

Apple (AAPL): Another boring big tech pick, but if the last few years have taught us anything, it is that Apple, despite its size, a dynamic company that can quickly respond to changes within its market. Their product updates are still major events, which tells you something in itself, and there are key ones expected in 2022. The most significant, of course will be the release of the iPhone 14, but Apple has increasingly derived revenue and profit from other markets, so keep an eye on the new AirPods Pro 2 and revamped subscription services, such as Apple Fitness, that could give a boost to anticipated revenue.

Those are all good reasons to own AAPL, but another reason to hold it through next year is that there is a chance of a major announcement coming from some other front. There are some potentially impactful products in the latter stages of development, such as glasses and other devices utilizing augmented reality (AR) technology, or the much-speculated Apple Car. An announcement on any of those could give the stock a serious boost next year.

Micron Technologies (MU): An old favorite stock of mine that I have made money on in the past, primarily as a swing trade type of play on the cyclicality of the chip and memory markets. However, the world’s increasing reliance on automated systems and technology have turned MU and other chip stocks into longer-term plays.

It was no surprise to see Micron beat expectations for EPS when they released results yesterday, as they have done that consistently all year. However, the bullishness that management showed about next year was a little more noteworthy from a company that is usually quite conservative in their outlook. They seem to believe that the chip shortage will ease next year, but that they can retain some pricing power as it does. If that is the case, forward and trailing P/Es of around 9 and 16 and a PEG ratio of right around 1 for MU scream value.

Final thoughts

There are a lot of risks going into 2022. Delta and omicron have shown that we are still a long way from defeating covid, and may even never truly do so. Meanwhile, it remains to be seen if the economy is strong enough to handle the Fed reversing course after a decade or so of ultra-low rates and supplying easy money. This is why tech stocks, which are generally seen as risky, have led the way down recently. Companies like IBM, Apple, and Micron, however, don’t fit in the triple digit multiple, possibly overbought mold. They are big, solid companies whose strategies and products make a good 2022 likely, whatever is happening around them. That is just the kind of thing I look for in buy-and-hold stocks.

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

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