What a year for technology in 2014. Such a fantastic year in fact, technology ended as the top sector in the S&P 500 with an astonishing 27.4% gain through last Friday. The question for investors in 2015 is a pretty simple one: Will the returns continue to outperform, or is a major correction due this year? While duplicating 2014 returns could be unlikely, there is every reason to believe that technology can still shine in 2015.
A new report from Stifel highlights the firm’s top picks for 2015, and a fair number of the analysts’ selections are devoted to technology. We screened the top picks for the liquid, big-cap names that could hold serve in what may be a far more volatile year on Wall Street.
Applied Materials Inc. (NASDAQ: AMAT) has long been the powerhouse name in chip capital equipment, and it is a top pick for 2015 at Stifel. The company is ramping up its efforts to be a bigger player in the NAND sector. For Applied Materials, where its share has been low in this arena, the new architecture throws open doors for a new and very profitable business opportunity. We had noted a rising short interest position in the stock earlier this year, but with the current short position of just 6%, many of the bears seemed to have left.
Applied Materials investors are paid a 1.7% dividend. The Stifel price target for the stock is raised to $29. The Thomson/First Call consensus price target is $26.73. Applied Materials shares closed Friday at $24.96.
EMC Corp. (NYSE: EMC) rallied in 2014 on news that Paul Singer’s activist hedge fund Elliott Management has accumulated a stake worth over $1 billion in the storage giant. Many think the activist play is an attempt to spin off and monetize the huge position in cloud software giant VMWare in an attempt to provide additional value for shareholders. While the stake is significant, they certainly at this point cannot dictate terms to EMC. The Stifel analysts make the case that the valuation for the company remains very compelling. They also think the overall product mix from the company, especially in the all-flash and software defined storage arena going forward, is a reason to own the stock.
EMC shareholders are paid 1.6% dividend. The Stifel price target is $33 and the consensus price objective is at $32.12. EMC closed Friday at $29.83 a share.
Ingram Micro Inc. (NYSE: IM) is the world’s largest wholesale technology distributor and a global leader in IT supply-chain, mobile device lifecycle services and logistics solutions. The company announced last fall a multiyear agreement with SquareTrade, the number-one-rated mobile device protection plan, trusted by millions of customers. Ingram Micro Mobility will provide all mobile device lifecycle services and back-end supply chain operations for SquareTrade, creating unrivaled reliability and consistency across its operations. The Stifel team thinks investors can look forward to solid margin expansion driven by cost cutting and a shift to higher-margin businesses like cloud, logistics and data-center-related opportunities.
The Stifel price target for this top stock to buy is $35, and the consensus target is $34.50. Shares closed trading on Friday at $27.34.
JDS Uniphase Corp. (NASDAQ: JDSU) was a pioneer of the optical revolution that began in the 1990s, and it announced last year a plan to split into two separate companies. One will be an optical and laser company, while the second will be a network and service enablement company. The Stifel analysts feel that this is a very positive catalyst for shareholders. In addition, company management remains very confident about the prospects of the business as the need for bandwidth across the world increases. As a result, the company is seeing strong demand in the Americas for its 100G products and LTE solutions.
The Stifel price target is $16, and the consensus target is posted at $14.65. Shares closed Friday at $13.70.
Splunk Inc. (NASDAQ: SPLK is a company that some on Wall Street think could be a solid fit with IBM. Surveys by resellers indicate that Splunk is one of the companies having an outstanding amount of current momentum, adding 500 new customers per quarter, and the Stifel team sees numerous drivers for solid double-digit earnings growth in 2015. The company provides the leading software platform for real-time Operational Intelligence. Splunk software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices.
The Stifel price target is $75, and the consensus target is right in line at $75.84. Shares closed trading on Friday at $58.79.
Western Digital Corp.‘s (NASDAQ: WDC) market share in the total addressable hard disk drive (HDD) market remains at a very impressive 45%. The company posted solid quarterly numbers, with revenue and earnings exceeding Wall Street expectations. Western Digital attributed much of the gain to the consumer electronics/gaming unit, which saw the biggest upside in their fiscal fourth quarter, shipping 10.9 million units, up 67% year-over-year.
Investors are paid a 1.5% dividend. The Stifel price target is $120, and the consensus figure is $116.32. Western Digital closed Friday at $110.42 a share.
The name of the game at Stifel is to stick with some of the large cap tech leaders for 2015. This makes good sense for investors with more aggressive growth portfolios that have some money carved out to dedicate to technology.