The market has had a spectacular run since the March 2009 lows, and many of the perma-bears and short-sellers who have been pounded are breathlessly trying to break the market by saying how rich technology stocks are pricewise. A new research report from Oppenheimer points out that the current common investor perception is that the information technology sector is jammed with sky-high multiples. The fact is, the majority of the sector trades below the market’s overall current median.
In the report the Oppenheimer team also points out that historically, when tech trades at a big discount to consumer staples, the market has further room to run. They highlight 15 stocks that trade below the overall market multiple, which is about 18 times 2015 earnings for the S&P 500. We picked four that also pay solid dividends and are rated Outperform at Oppenheimer.
Originally a part of Hewlett-Packard, Avago Technologies Ltd. (NASDAQ: AVGO) and gets a huge chunk of its business from Apple and Samsung. Avago Technologies is a big provider in the cloud/hyperscale data center and networking segment. In fact, the company recently announced it will demonstrate its latest optical transceiver technologies for next generation data center and enterprise storage applications. As data center networks transition to 100G speeds to support higher bandwidth demands, technical challenges emerge across various levels of the network from storage endpoints to servers to top-of-rack and core switches.
Avago Technologies is also expected to be a huge winner in the fast growing 4G LTE market in China. Some analysts on Wall Street feel that the market could more than triple over the next few years and drive between 300 million to 400 million devices by 2017. Some on Wall Street are predicting that 2015 earnings will rise an astonishing 600%.
Investors are paid a 1.3% dividend. The Oppenheimer price target for this top stock is $140. The Thomson/First Call consensus price target is $141.35. Shares closed Friday at $123.33.
This chip giant is another top supplier to both Samsung and Apple, and the second half of this year could bring it even more earnings growth. Broadcom Corp. (NASDAQ: BRCM) supplies touch-screen controller chips for the iPhone 6. Many Wall Street analysts feel that the company will implement the shareholder-friendly strategic changes that the company unveiled last December at an analyst day meeting, and that will be the most significant price moving point for the stock. With a wide range of dynamic and innovative products that serve a wide swath of business, the stock is a solid bet.
The company recently announced a new family of 5G Wi-Fi Wave 2 solutions for enterprise wireless access points. The expanded portfolio delivers the quality, reliability and capacity required for all segments of the enterprise and cloud WLAN markets, including campus, education, hospitality, health care and public venues.
Broadcom shareholders are paid a 1.2% dividend. The Oppenheimer price objective is $55, and the consensus estimate is $51.82. The stock closed on Friday at $46.30 per share.
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