By Jeff Reeves, MarketWatch
All eyes have been on the technology sector in 2018, after some of the biggest companies have struggled to make headway.
The most obvious is Facebook Inc. /zigman2/quotes/205064656/composite FB -0.36% , which is down almost 7% this year, owing to concerns about users’ privacy on the platform and high-profile Congressional hearings about the social-media platform’s business practices.
There’s also Google parent Alphabet Inc. /zigman2/quotes/205453964/composite GOOG +2.46% /zigman2/quotes/202490156/composite GOOGL +2.44% , down 15% from its 52-week high in January, and Apple Inc. /zigman2/quotes/202934861/composite AAPL +2.77% , which has basically gone nowhere since December.
You would be forgiven if you have only paid attention to those big name stocks lately, since they seem to be dominating the headlines.
However, investors shouldn’t make the mistake of thinking that large-cap tech stocks are the only way to play the profit potential of this sector.
I have my eye on five smaller tech companies that seem to have a lot to offer, and could be worth a look given their durable growth in a challenging stock market environment.
Don’t know of ShotSpotter /zigman2/quotes/203800377/composite SSTI +4.50% ? You may be hearing a lot more about this fast-growing company, and perhaps not for pleasant reasons. After all, ShotSpotter is a high-tech “gunfire detection and location technology” tool that uses surveillance infrastructure to give gunfire alerts to local law enforcement. It’s deployed in over 70 communities, including major municipalities from Los Angeles County to Newark, N.J., as well as smaller Midwestern markets like Gary, Ind., and Omaha, Neb.
I won’t moralize over the causes of gun violence in America. But as an investor, it is important to not see the big picture trends lifting this company. Revenue growth is projected to run at 35% this year and another 35% or more in fiscal 2019. And while ShotSpotter is not yet profitable, it is rapidly approaching break-even and could be posting positive earnings within 12 months.
Admittedly, ShotSpotter is a new company to Wall Street. But shares opened at $12.20 after a June 2017 IPO, and have already raced up to above $30. That kind of momentum in a market that seems to be struggling is worthy of attention.
Another stock that you likely haven’t heard of is R1 RCM /zigman2/quotes/201747533/composite RCM +2.69% , a software and services firm that focuses on “revenue cycle management” for health-care companies.
While that buzzphrase may not get your blood pumping, it is an important concept surrounding medical-billing processes. Hospitals and doctors simply have to get it right in order to navigate the inefficiencies and complexities of the American health-care system, and R1 RCM helps them do that.