Technology

With IT Spending Still Soaring, 4 Stocks to Buy for 2016

Despite the market’s ups and downs, and some high-profile pundits saying that disaster is imminent, the fact of the matter is the economy is improving, as is job growth and spending. While we are poised to finish September with the worst quarter for stocks in five years, it may be offering savvy investors, especially in technology, an outstanding entry point.

In a new research report, Deutsche Bank has interviewed 28 chief information officers, many at top firms in the Fortune 500, who control massive corporate spending. These interviews indicate that information technology (IT) spending has remained solid throughout 2015, with no sign of a slowdown, outside sectors exposed to energy.

We flagged four top stocks that the Deutsche Bank team is positive on, and all four are rated Buy.

Cognizant Technology Solutions

This tech stock is very well liked across Wall Street. Cognizant Technology Solutions Corp. (NASDAQ: CTSH) provides IT consulting and business process outsourcing services worldwide. It offers consulting and technology services, such as IT strategy, program management, operations improvement, strategy and business consulting services.

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Cognizant is based in the United States, but it primarily uses an offshore workforce in India. The company is well positioned for a variety of trends in IT services, and many expect it to increase earnings well in excess of the industry average. The company’s solid second-quarter results were broad based. In addition the company raised second-half guidance and is a solid conservative technology holding to add.

The Deutsche Bank price target for the stock is $69. The Thomson/First Call consensus price target is $75.04. The stock closed trading on Monday at $60.04.

Microsoft

This is another top technology stock that should not only do fine in a rising rate environment, but it gives investors some degree of mega-cap tech safety. Microsoft Inc. (NASDAQ: MSFT) stock has gapped up and down this year on earnings, and while the release of the new Windows 10 has put some focus back on the software giant, some bugs in the software have cause update issues, and those reportedly are being dealt with.

The Deutsche Bank team points to the fact that among the large-cap IT players, the feedback on Microsoft was the most positive, and they were surprised at how frequently Azure, which is the company’s cloud computing platform offering, was flagged as a rival to Amazon’s AWS service.

Microsoft investors are paid a very solid 3.3% dividend. The Deutsche Bank price objective is $55, and the consensus price target is $50.17. The stock closed Monday at $43.29.

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