The bank crisis and elevated recession risks have raised expectations that the Fed will start cutting rates later this year, helping lower bond yields and giving tech stocks a further lift. Also, given the industry's solid long-term potential, I think quality tech stocks Fuji Electric Co., Ltd. (FELTY) and Bel Fuse Inc. (BELFB) might be ideal investments.
According to Peter Voser, the chairman of ABB, a Swedish-Swiss tech and engineering giant, the global shortage of semiconductors, which has caused disruptions to supply chains and impacted the tech industry, is being resolved. He believes that the worst of the chip supply crunch has subsided.
Moreover, despite economic uncertainties, the tech industry experiences robust demand. Gartner estimates that global IT spending will increase 5.1% year-over-year to $4.60 trillion this year.
Additionally, in recent years, the global artificial intelligence market has experienced substantial growth, largely due to the widespread adoption of digital technologies. This trend is set to continue in the future, and the increasing demand for artificial intelligence in various industries, such as automotive, banking and finance, and manufacturing, is expected to be a significant driver of market growth.
The International Data Corporation's (IDC) Worldwide Artificial Intelligence Spending Guide predicts that the expenditure on artificial intelligence (AI) worldwide, covering AI-focused software, hardware, and services, will increase at a CAGR of 27% to reach $300 billion by 2026.
Take a look at the stocks mentioned above:
Fuji Electric Co., Ltd. (FELTY)
Headquartered in Tokyo, Japan, FELTY develops power semiconductors and electronics solutions in Japan and internationally.
FELTY’s forward EV/Sales of 0.82x is 49.1% lower than the industry average of 1.61x. Its forward Price/Sales multiple of 0.74 is 42.3% lower than the industry average of 1.28.
FELTY’s trailing-12-month asset turnover ratio of 0.89x is 11.7% higher than the 0.80x industry average. Its trailing-12-month return on capital of 8.08% is 15.2% higher than the 7.01% industry average.
FELTY pays $0.20 annually as dividends. This translates to a yield of 2.10% at the current market price, compared to the 4-year average dividend yield of 2.44%. Its dividend payments have grown at a CAGR of 25.1% over the past five years.
During the nine months that ended December 31, 2022, FELTY’s net sales increased 11.4% year-over-year to ¥690.78 billion ($5.21 billion). Its net income increased 16.1% year-over-year to ¥33.22 billion ($250 million), whereas its net income per share increased 14% year-over-year to ¥0.75.
FELTY’s revenue is expected to increase 69.7% year-over-year to $7.54 billion during the current fiscal year ending March 2023. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters.
The stock has gained 3.9% year-to-date to close the last trading session at $9.76.
FELTY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade in Value and Momentum. The stock is ranked #2 in the 42-stock Technology - Electronics industry.
Click here to see the POWR Ratings of FELTY (Growth, Quality, Stability, and Sentiment).
Bel Fuse Inc. (BELFB)
BELFB designs, manufactures, markets, and sells products used in the networking, telecommunications, computing, general industrial, high-speed data transmission, military, commercial aerospace, transportation, and e-Mobility industries.
On February 6, BELFB announced that the Company has entered into an agreement and closed on a minority stake investment with Germany-based innolectric AG. innolectric was founded in 2016 through a closely held ownership group to be a platform-based business in the field of power electronics for eMobility and in particular the on-board fast-charging for commercial vehicles.
This passive investment will create a strategic alliance focused on EV on-board power electronics broadly, but specifically on next generation fast charging technology.
BELFB’s trailing-12-month EV/EBITDA of 6.70x is 50.4% lower than the industry average of 13.49x. Its trailing-12-month Price/Sales multiple of 0.67 is 75% lower than the industry average of 2.69.
Moreover, BELFB’s trailing-12-month EBITDA margin of 12.96% is 32.5% higher than the 9.78% industry average. Its trailing-12-month net income margin of 8.05% is 198% higher than the 2.70% industry average.
On February 28, 2023, BELFB announced a quarterly dividend of $0.07, payable on May 1, 2023.
BELFB pays $0.28 annually as dividends. This translates to a yield of 0.79% at the current market price, compared to the 4-year average dividend yield of 1.84%. Also, it has paid dividends for 23 consecutive years.
BELFB’s net sales increased 15% year-over-year to $169.20 million in the fiscal fourth quarter, which ended December 31, 2022. Its gross profit increased 33.7% year-over-year to $52.51 million. Also, its net earnings increased 75.3% year-over-year to $14.04 million, while its net earnings per common share increased 76.7% year-over-year to $1.06.
BELFB’s EPS is estimated to grow 95.1% year-over-year to $0.80 in the current fiscal quarter ending March 2023. Its revenue is expected to rise 7.1% year-over-year to $146.49 million in the same quarter. Moreover, it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 133.1% over the past nine months to close the last trading session at $36.27.
BELFB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
BELFB also has an A grade for Value and Sentiment and a B in Growth and Quality. It is ranked first in the same industry.
To access additional ratings for BELFB’s Stability and Momentum, click here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
Yes, some special stocks may go up like the ones discussed in this article. But most will tumble as the bear market claws ever lower this year.
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- 5 Warnings Signs the Bear Returns Starting Now!
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You owe it to yourself to watch this timely presentation before placing your next trade.
REVISED: 2023 Stock Market Outlook >
FELTY shares were trading at $9.66 per share on Friday morning, down $0.11 (-1.08%). Year-to-date, FELTY has gained 2.88%, versus a 6.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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