Why Trump May Actually Be Great for Technology Stocks


CDW Corp. (NASDAQ: CDW) came back from private equity land with a highly anticipated IPO in 2013 and has been a very strong stock over the past three years. The company provides IT products and services to business, government, education and health care customers in the United States and Canada. It offers discrete hardware and software products to integrated IT solutions, such as mobility, security, data center optimization, cloud computing, virtualization and collaboration.

This company is one of the stocks that RBC has highlighted in the past as having virtually no exposure to China, and it is a very attractive and somewhat defensive small/midcap play for investors. They also think that the company has benefited from the integration of UK IT services and solutions provider Kelway, although CDW has implied numbers for the quarter from Kelway will be down.

The analysts have cited in the past the unique culture and the compensation structure, and the Dell Partnership as among the top reasons to own the stock. They also see Trump’s plan for reduced corporate taxes and an infrastructure spending stimulus both helping.

CDW investors a paid a 1.26% dividend. The $55 RBC target price compares with the consensus target posted at $48.38. Shares closed yesterday at $50.65.

Texas Instruments

This old-school chip tech company was out of favor but has come back solid. Texas Instruments Inc. (NASDAQ: TXN) is a global semiconductor design and manufacturing company that develops analog integrated circuits and embedded processors.

The company generates 80% to 90% of its revenues from its analog and embedded processing businesses, which have well-diversified end-markets (autos, industrial, personal/consumer electronics), long product life cycles and limited capital intensity. The company has 6% market share of the auto chip market.

Numerous Wall Street pros see the stock as core large cap holding, and they cite a solid high-single-digit and very diverse revenue flow, solid capital allocation to lever the balance sheet if needed, and substantial room for margin expansion as the ramp up new facilities. The company boasts sustained impressive cash flow over the past several years and has impressively returned 100% plus of that back to shareholders via stock buybacks and dividends.

Texas Instruments posted strong third-quarter numbers and also increased its quarterly dividend by 32% to $0.50 per share, or $2.00 annualized. The increase reflects the company’s continued strength in free cash flow generation and its commitment to return excess cash to shareholders.

RBC again cites the potential for reduced corporate taxes, the infrastructure spending and also increased defense spending all as positive for the chip giant.

Investors are paid a solid 2.82% dividend with the new increase. The RBC price target for the stock is set at $85. The consensus price objective is lower at $74.34, and shares closed Wednesday just below that at $71.20.

Needless to say, all the final details of what the president will do after he is inaugurated in January are yet to be spelled out. But with both houses of Congress solidly in Republican control, most of what Trump has stated as his goals should come to pass in one form or another.