Qualcomm

This stock that has totally underperformed this year but is a member of the Merrill Lynch US 1 list. Qualcomm Inc. (NASDAQ: QCOM) remains a Wall Street favorite, and many are sticking to their guns, basically saying that trading at current levels — 12.6 times estimated 2016 earnings — it may be a tremendous long-term value. Qualcomm is a quality tech company with recurring royalty revenue and a strong footprint, so patient investors may fare very well.

The growth of 3G mobile technologies in emerging markets, like China and India, has had a positive impact on Qualcomm. The company has been for years a market leader in the development of 3G CDMA (Code Division Multiple Access) technologies. It recently developed an LTE chipset that supports SCDMA (Synchronous Code Division Multiple Access) technology. China’s mobile network runs on this, and it could provide the company with a huge leg up in years to come. The company has signed numerous big licensing deals in China that gave the stock a solid boost.

The recently announced joint venture with Japan’s TDK company will enable delivery of RFFE (radio frequency front-end) modules and radio frequency filters to fully integrate systems for mobile devices and other fast-growing business segments. According to Qualcomm, the RFFE space is projected to be an $18 billion market by 2020.

The company posted strong fourth-quarter results, but a licensing dispute with Japanese technology giant LG has surfaced, and the analysts feel the dispute could last through fiscal 2016. They do remain positive on the stock and reiterated the Buy rating.

Investors receive a 4.2% dividend. The $75 Merrill Lynch price target is well above the consensus estimate of $59.28. Shares closed Thursday at $45.66.

Western Digital

This long-time innovator in the storage industry is a leader in the total addressable hard disk drive (HDD) market. Western Digital Corp. (NASDAQ: WDC) storage solutions help to create, manage, experience and preserve digital content. The company is responding to changing market needs by providing a full portfolio of compelling, high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to original equipment manufacturers, distributors, resellers, cloud infrastructure providers and consumers.

The most compelling news is that the company made a stunning $19 billion purchase of SanDisk last year that could be a strong addition to its current offerings. Western Digital could significantly benefit from SanDisk’s technology and portfolio leadership in the NAND flash semiconductor and enterprise flash systems market.

The drop off in the PC business helps to spur initiative in the company’s cloud business, and analysts estimate that the company’s gross profit contribution from Business Critical (cloud) drives will exceed that of PCs by the second half of next year. Of all the stocks beaten down due to the poor PC environment, Western Digital may have the most upside potential, especially when Wall Street analyst notes that in 2016 Enterprise HDDs will have an average three-year cost of $100 per year, versus $500 for NAND.

Investors receive a plump 4.07% dividend. Merrill Lynch has a whopping $76 price target, and the consensus figure is $73.75. Shares closed Thursday at $49.14.

While these may be more suited for aggressive growth accounts, they make good sense for total return investors. With good yields and solid upside potential, the prospects for overall gains are very good, as are the entry points.