If there is a good time to look at contrarian ideas, it is when the market gets a little lofty and multiples get extended. It seems pretty obvious that the markets are very nervous, and the potential for the United Kingdom to leave the European Union, along with heightened political rhetoric as a result of recent events, are not making things any easier.
A new Baird research report includes a list of most interesting stock ideas that were derived from the firm’s Estimate Revision Model. We screened the information technology (IT) contrarian companies in the report and found three that look very attractive at current levels.
This stock is still trading way below levels printed last summer. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
The company has faced some selling pressure as its exposure to Apple remains intact, as it supplies the processors that enable 3D Touch in Apple products. Analog Devices is reported to be the sole supplier for the 3D touch processor to Apple. Top analysts cite the company’s strong core business-to-business trends as a positive.
Analog Devices investors are paid a solid 2.95% dividend. The Thomson/First Call consensus price target for the stock is $60.10. The stock closed most recently at $56.90.
Cognizant Technology Solutions
This tech stock is well-liked across Wall Street. Cognizant Technology Solutions Corp. (NASDAQ: CTSH) provides IT consulting and business process outsourcing services worldwide. The company operates through four segments: Financial Services; Healthcare; Manufacturing, Retail and Logistics; and Other. It offers consulting and technology services, such as IT strategy, program management, operations improvement, strategy and business consulting services.
Though Cognizant is based in the United States, 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 it is a solid conservative technology holding to add to a portfolio.
The consensus price target is posted at $69.63. The stock closed trading on Thursday at $59.71 a share.
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) is an industry-leading developer and manufacturer of storage solutions that help to create, manage, experience and preserve digital content.
Western Digital 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 company recently completed the acquisition of SanDisk, which makes Western Digital a comprehensive storage solutions provider with global reach, as well as an extensive product and technology platform that includes deep expertise in both rotating magnetic storage and non-volatile memory. Most analysts see the SanDisk purchase as an accretive one, and operating savings from the integration of the two HDD businesses are not reflected in the current stock price. SanDisk’s technology and portfolio leadership in the NAND flash semiconductor and enterprise flash systems market should make the company much stronger overall.
Western Digital shareholders are paid a 4.3% dividend. The consensus price objective is $58.79. The stock closed Thursday at $46.42.
While only suitable for aggressive styled accounts, all three of these top stocks make good choices for long-term holders. It also is smart to nibble at these stocks, as volatility is heightened and investors need to stay nimble.