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Quarter-End Insights

3 Undervalued Tech Stocks

Look beyond the tech giants for hidden opportunities.

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Technology continued to significantly outperform the broader market as we exit 2020. We still wouldn’t characterize this rise as a bubble across the higher-quality, larger-cap tech names we cover, as we see robust fundamental tailwinds supporting future growth for most of our coverage, such as cloud computing, remote working, 5G network rollouts, and the "Internet of Things." However, valuations for certain names still appear unreasonable to us, and a pullback in tech stocks would likely be healthy, in our view. We struggle to identify many tech stocks trading at attractive valuations today.

As of Dec. 21, the Morningstar US Technology Index was up a whopping 46.8% year to date, vastly outperforming the U.S. equity market, which is up 19.4% year to date. Over the past three months, tech performed relatively in line with the broader market, up 13.6% compared with the U.S. equity market up 12.8%.

Brian Colello does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.