The technology sector has been a favorite among investors, providing explosive gains over the last several years.
Still, 2022 was undoubtedly rough for the sector, with a hawkish Federal Reserve and soaring inflation spoiling the fun.
Following the poor performance, many have become aware of these stocks’ increased volatility.
However, if investors want to shield themselves from spooky price swings, targeting low-beta technology stocks could provide precisely that.
Beta is a measure of a stock's systematic risk, or volatility, compared to the market as a whole. Generally, the benchmark is the S&P 500, which has a beta of 1.0.
Historically, stocks with a beta higher than 1.0 are more sensitive to the market’s movements, while those with a beta less than 1.0 are less susceptible.
Three low-beta technology stocks – Motorola Solutions Inc. MSI, MongoDB MDB, and Zscaler ZS – could all be considered.
Let’s take a closer look at each one.
Motorola Solutions Inc.
Motorola Solutions is a leader in mission-critical communications products, solutions, and services for communities and businesses. MSI is currently a Zacks Rank #2 (Buy).
MSI shares provide exposure to technology paired with an income stream; Motorola Solutions’ annual dividend currently yields 1.4%, nicely above its Zacks sector average.
Certainly a positive, the company has been committed to increasingly rewarding its shareholders, growing its payout by more than 11% over the last five years.
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In addition, MSI’s growth trajectory shouldn’t be ignored; earnings are forecasted to climb nearly 12% in its current fiscal year (FY22) and a further 9% in FY23.
The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 9% in FY22 and 6.3% in FY23.
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MongoDB
MongoDB provides a developer data platform that offers services and tools necessary to build distributed applications at the performance and scale that users demand.
MDB’s earnings outlook has shifted notably higher over the last several months, helping land the stock into a Zacks Rank #2 (Buy).
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Further, MDB carries a strong growth profile; earnings are forecasted to soar more than 150% in its current fiscal year (FY23) and a further 80% in FY24.
MDB’s top line is also healthy, with estimates suggesting Y/Y growth of 44% in FY23 and 23% in FY24.
And for the cherry on top, MongoDB has a stellar earnings track record; MDB has exceeded earnings and revenue estimates in ten consecutive quarters.
Impressively, two of the company’s last three bottom line beats have been by triple-digit percentages.
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Zscaler
Zscaler is one of the world's leading providers of cloud-based security solutions, offering a full range of enterprise network security services.
Like the stocks above, the company’s earnings outlook has recently improved, helping land ZS into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
Increasing demand for cyber-security solutions has benefitted the company significantly, helping it exceed earnings and revenue estimates in each quarter dating back to 2018.
Just in its latest release, Zscaler registered an 11.5% EPS surprise and reported revenue 4.3% above expectations.
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Bottom Line
As we’re all aware, 2022 was packed with volatility, with violent price swings occurring regularly.
However, targeting low-beta stocks can help shield investors against volatility, as these stocks are less susceptible to the market’s movements.
For those who seek exposure to tech, all three low-beta stocks above – Motorola Solutions Inc. MSI, MongoDB MDB, and Zscaler ZS – fit the criteria.
In addition, all three have seen their earnings estimates drift higher as of late, indicating favorable business outlooks.
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MongoDB, Inc. (MDB) : Free Stock Analysis Report
Zscaler, Inc. (ZS) : Free Stock Analysis Report
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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.
