Technology Stocks Dominate Baird's Best March Picks

Like many of the firms we cover on Wall Street, the equity strategists at Baird agree that technology, health care and financials are the sectors that will outperform for the balance of the year. With massive up and down moves in the market due to geopolitical tension around the world, it becomes difficult for investors to gauge if now is the best time to add funds or get into the market. Tuesday’s big upside move and price breakout have convinced many that the bull market is ready to run some more.

A new report from the team at Baird highlights their top stock ideas for the month of March. As we finish up the first quarter of the year, many companies that may have been impeded by the unseasonably cold weather around the country could start a big sales push to end the quarter. Technology companies are among the best in dodging weather-related issues, and stocks from the sector dominate the Baird list of best ideas for March.

Altera Corp. (NASDAQ: ALTR) is the leader in China, and recent data show that is not changing anytime soon. 4G network deployment-related orders from Huawei surged since December and January, and they will extend into at least June, per Baird’s recent field research. Huawei is a 10% customer of Altera. The multiyear growth trend in China’s wireless infrastructure deployments should act as a driver for Altera in years to come, with LTE-related capital expenditures expected to increase exponentially in the next two years. Investors receive a 1.7% dividend. The Baird price target for the stock is $40. The Thomson/First Call estimate is $38.26. Altera closed Tuesday at $36.60.

Apple Inc. (NASDAQ: AAPL) is a company trying desperately to make a splash this year. The new iPhone 6 is expected to be released this summer. The Baird team surveys showed solid early interest in the iPhone 6, particularly among owners of the iPhone 5, 5s and 5c. That same group appears to be enthusiastic about a larger screen, which has been widely rumored. Many are also expecting the iWatch to makes its debut as Apple starts to enter the wearables category. While the stock has made a nice move off the lows, it is still way below the $700 high from 2012. Investors are paid a 2.3% dividend. The Baird price target is $600. The consensus target is $586. Apple closed Tuesday at $531.24.

EMC Corp. (NYSE: EMC) is the top storage vendor globally with more than 30% of the total market. The Baird team thinks that for a legacy incumbent, EMC has done a very good job positioning for software-defined technologies related to storage and
networking (with VMware). They expect these technologies to take a number of years to roll out across different industry verticals and different workloads. EMC’s 80% ownership of VMware also provides investors an excellent multifaceted technology powerhouse stock. Investors are paid a 1.5% dividend. The Baird price target is $32, and the consensus target is $29.15. EMC closed Tuesday at $26.87.

Fortinet Inc. (NASDAQ: FTNT) is becoming one of the top hot names around Wall Street, with more and more firms picking up coverage. The Baird analysts expect the company’s NP6 network processor chip will directly benefit the service provider customer vertical (25% of revenues) in 2014. This is the first NP refresh in three years. As we have written previously, and their surveys concur, network security remains a priority of enterprise customers, amid a growing number of high-profile security breaches and an increasingly mobile workforce. The Baird price target is $27, and the consensus target is $25.57. Fortinet closed Tuesday at $23.50.

Qlik Technologies Inc. (NASDAQ: QLIK) is another fast-rising tech name catching a buzz on Wall Street. The company’s QlikView Business Discovery platform lets people quickly bring data sources together to create dynamic visual applications that can be navigated and searched intuitively. QlikView uses Natural Analytics to reflect the way human curiosity searches and processes information, while delivering the enterprise manageability, governance and service offerings organizations require. The Baird price target is $35, and the consensus is at $32.40. The stock closed Tuesday at $30.70.

Top technology names offer investors solid growth with much less debt than many other sectors in the S&P 500. Underperformance versus other sectors last year is making it a go-to area for Wall Street this year. New products and a surge in demand for big data and security should drive growth far beyond 2014.

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