Technology

4 Cheap Large-Cap Tech Stocks to Buy for Solid Gains in 2015 and 2016

With interest rates possibly going higher a tiny 25 basis points, or one-quarter of 1%, as early as Thursday, many investors are wondering how the markets will trade over the next year or so in a period of slowly rising rates. The sector that does the best in a rising rate environment, after energy, is technology, and there is a trove of quality big cap tech stocks at bargain prices right now.

We screened the Merrill Lynch stock coverage universe for quality large cap technology stocks that have been marked down in price during the recent sell-off and increased market volatility. We found four that are rated Buy at Merrill Lynch that fit the bill perfectly.

Cisco

This is the top mega-cap technology stock pick on Wall Street and perhaps a surprising defensive pick. Cisco Systems Inc. (NASDAQ: CSCO) posted outstanding earnings in August, and many on Wall Street have raised their price targets for the networking giant significantly higher. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.

Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching, and next generation security are also adding to the total sales profile and product mix.

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Cisco investors are paid a very solid 3.22% dividend. The Merrill Lynch price target for the stock is $32, and the Thomson/First Call consensus target is lower at $31.09. Shares closed Wednesday at $26.07, down over 10% since the earnings report.

EMC

This company may be in for big changes. EMC Corp. (NYSE: EMC) is technology’s large-scale storage leader, but new avenues of flash and other storage opportunities are grinding away at the tech giant’s business. The good news for the company is that storage demands are accelerating, and the company’s majority ownership of VMware gives it a virtualization infrastructure solutions product that includes a suite of products designed to deliver a software-defined data center (SDDC) run on industry-standard desktop computers and servers.

While the VMware stock is on the balance sheet, the earnings are not, so some Wall Street analysts feel that the company may buy the rest of VMware it does not currently own or even consider a merger with HP Enterprise, a spin-off from Silicon Valley icon Hewlett-Packard. This could add growth and revenues for both companies. Others think NetApp could also be a target for EMC.

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EMC shareholders are paid a 1.85% dividend. Merrill Lynch has a $32 price target, and the consensus target for the stock, which has had a lousy 2015 to date, is $29.39. Shares closed Wednesday at $24.86.

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