If you’re not a tech person — or you don’t keep up with the industry super closely — you’ve likely never heard of Cadence Design Systems (NASDAQ:CDNS) stock. Although the company has an $18 billion market cap, has existed since 1988 and spans 20 countries with almost 8,000 employees, it just doesn’t like to plaster its logo everywhere. It’s at the top of the development chain where chips are made, designed and tested.
The company started in this line of work before the digital revolution really gained traction. This means its dealt with mainframes, auto manufacturers and the like in the early days. It knows how to manage its business in good and bad times.
In fact, Cadence is one of my Top 5 Stocks for Growth Investor, where CDNS stock holds a place of honor in my High-Growth Investments Buy List. And right now is a good time. Mass digitization gives CDNS a bigger role to play in the software industry.
CDNS doesn’t make chips, it makes tools and software to help design the chips. That means it has gotten caught up in the U.S.-China trade war, since it supplied its products to China’s Huawei, the biggest telecom in China and a leader in 5G technology.
U.S.-China Trade War and CDNS Stock
So far, this hasn’t bothered CDNS much — and it beat earnings expectations in the past two quarters. Earnings beats are a key component of my Growth Investor strategy, and odds are Cadence will do it again. It does so in the face of dour economic news not only from abroad, but increasingly at home as well.
The reason for this is the fact that we are transitioning into a new mobile age that requires an entire new set of technological solutions. You can think of CDNS as an upstream partner to a company like Nvidia (NASDAQ:NVDA). And Nvidia has transformed from a niche graphics card company to a juggernaut in the next generation of tech applications.
The firms that use CDNS include all the big-name chipmakers you can think of. And they’re all looking to get into 5G, autonomous driving, big data, artificial intelligence, smart homes, etc.
What companies won’t do at this point is give up their next-generation technologies and stick with the status quo. That doesn’t work in this kind of market, even with a global slowdown and major trade wars.
CDNS stock is up over 50% year-to-date and 46% for the past 12 months, given the big tech selloff in last year’s fourth quarter. But that is still a healthy gain given the fact that it’s been hit by the U.S.-China trade war.
My Portfolio Grader has CDNS stock rated an “A” now, which means the markets still hold the stock in high regard, even in these uncertain times. Also, the fact that it has survived both the dotcom bubble and the 2008 financial crisis is very encouraging. I’m a long-term investor which is one reason I’ve got my eye on the “mother of all technologies” now.
The Huge Tech Trend That’s About to Take the Semiconductor Industry to the Stratosphere
Up until now, technologies have certainly made our lives easier and more efficient … but with a lot of room for human error. People trip over cords, spill their coffee and get tired.
Artificial intelligence does not.
If AI sounds futuristic, well then, the future is already here. If you use apps like Netflix (NASDAQ:NFLX), TurboTax, QuickBooks, Zillow (NASDAQ:Z) or even an email spam filter, then AI is already helping your day run more smoothly and efficiently.
And as scientists find even more applications for artificial intelligence — from healthcare to retail to self-driving cars — it’s incredible to imagine how much computing power will be involved. So any one company that can help with that is the one company that’s most worth investing in.
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Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.