Tech Shines as Markets Defy "Sell in May and Go Away" Adage: 5 Picks

Despite the historical underperformance of April and the "Sell and Go Away" adage for May, U.S. stock markets, particularly the Nasdaq Composite and S&P 500, experienced strong gains in May, driven by the technology sector's robust performance. Zacks Investment Research recommends Intuit Inc. (INTU), Amphenol Corp. (APH), Broadcom Inc. (AVGO), Twilio Inc. (TWLO) and Ubiquiti Inc. (UI), all with favorable Zacks Ranks and recent double-digit returns, citing their strong growth prospects and strategic positioning in areas like AI and cloud computing.

Analysis

U.S. stock markets defied historical adages in May, delivering strong returns, with the Dow, S&P 500, and Nasdaq Composite advancing 3.9%, 6.2%, and 9.6% respectively. This performance, the best for the S&P 500 and Nasdaq since November 2023, was largely propelled by the technology sector, evidenced by the Technology Select Sector SPDR (XLK) surging over 10%. Five technology companies with favorable Zacks Ranks and recent double-digit returns are highlighted: Intuit (INTU), Amphenol (APH), Broadcom (AVGO), Twilio (TWLO), and Ubiquiti (UI). Intuit (Zacks Rank #1) is benefiting from its cloud-based subscription model and AI-powered 'Intuit Assist', with expected revenue and earnings growth of 14.8% and 18% respectively for FY2025, and a 3.7% improvement in consensus earnings estimates in the last 30 days. Amphenol (Zacks Rank #1) leverages AI/ML for its connectivity solutions and boasts a diversified model, projecting 32.3% revenue and 40.7% earnings growth for the current year, supported by a 3.1% rise in consensus earnings. Broadcom (Zacks Rank #2) sees strong demand for networking products and custom AI accelerators, anticipating AI revenues to jump 44% YoY to $4.4 billion in Q2 FY2025 and overall current-year revenue and earnings growth of 21.2% and 36.1% respectively. Twilio (Zacks Rank #2) is focusing on generative AI with its CustomerAI technology and partnerships, forecasting 7.8% revenue and 22.6% earnings growth this year, with consensus earnings up 7.1%. Ubiquiti (Zacks Rank #2) relies on its adaptable business model and community-driven support, expecting 1.7% revenue and 10.8% earnings growth for FY2026.

Key Decisions for Investors

• Given the robust performance of the technology sector and positive outlooks for AI and cloud computing, investors may consider maintaining or increasing exposure to tech-focused equities.
• The five highlighted stocks – Intuit (INTU), Amphenol (APH), Broadcom (AVGO), Twilio (TWLO), and Ubiquiti (UI) – warrant further due diligence for potential inclusion in portfolios, considering their strong Zacks Ranks, significant projected earnings growth, and strategic alignment with key tech trends like AI.
• Monitor ongoing developments in AI adoption, cloud migration, and custom accelerator demand, as these are critical catalysts for the forecasted growth of the recommended companies and the broader technology sector.