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Stock Strategist

Five Tech Stocks to Watch

We'd snap these up--at a lower price.

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At Morningstar, we make no bones about being picky about valuation. We believe the price investors pay for a stock is one of the most critical factors in making a sound long-term investment. This is especially relevant in techland, where investors often bid up stock valuations on the basis of a given company's strong growth outlook. As a result, it's rare that the quality tech names we cover also pass our stringent valuation sniff tests. Indeed, of Morningstar's 43 total 5-star stocks as of December 7, only one of them was in the telecom, software, or technology hardware industries. And probably for good reason too, as the average stock in each of these industries is up 17%, 21%, and 22% respectively over the trailing three months.

Yet while 5-star tech stocks at Morningstar may be few and far between, there are plenty of technology companies we cover that we think would make great investments at the right price. The following is a list of five small to midsized tech stocks that fall into this camp; that is, they are smaller companies we think have a strong outlook but are not quite cheap enough to recommend.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.