Now that the “sell in May and go away” theme has given way to a stock market recovery in the first half of June, many investors are seeking safety net areas within the market. Some investors may be looking for utilities or consumer staples for safety and defense, but other investors are keeping their toes in the water in technology. It turns out that even if with a U.S.-China trade war brewing there are some technology stocks that already may have priced in much of the bad news that might be coming.
24/7 Wall St. has been screening many sectors for value and upside alike. Sometimes value and upside might offer conflicting views, and investors should understand that a broadening trade war and a continuing slower economy may pull all ships lower with the sinking tide.
Technology has changed over the years for investors. Many companies would now be considered “old school” by modern standards. These companies now pay solid dividends, have fairly predictable businesses, have long operating histories and are trading at a discount to the broader market.
Running a technology screen on Finviz reveals that 36 tech stocks in the S&P 500 are valued above $10 billion in market cap, pay dividends and still offer implied upside to the consensus analyst target price from Refinitiv. Within technology, we screened out companies that are really telecom companies, that are being targeted by the government or that are in potential game-changing lawsuits or antitrust cases.
24/7 Wall St. has identified 10 technology stocks from the S&P 500 that would be considered cheap on forward earnings multiples, come with upside to the consensus price targets and offer solid dividend yields. We have provided some trading data as well, and additional color, if there are issues to consider that may act as a drag on the shares. We have ranked these in order of their expected price-to-earnings ratios.
HP Inc. (NYSE: HPQ) was last seen trading near $20. It has a market cap of $30.1 billion and a 52-week trading range of $18.06 to $27.08. The consensus target price is $23.48, and HP is valued at 8.72 times expected earnings. The stock has a price to free cash flow ratio of 11.44.
HP, formerly Hewlett-Packard, may be hard to get excited about, selling personal computers in a world that many assume is now just all smartphones or Macs. Now that the company has broken out its enterprise and consumer businesses, the PC and printer giant offers a 3.2% dividend yield, and its shares have offered no real upside in 2019, with a loss of about 2% after is 2019 recovery was dashed with a big drop of about 15% at the end of February. The stock has been range-bound since and effectively is looking for its next big direction.
Seagate Technology PLC (NASDAQ: STX) was trading near $44, in a 52-week range of $35.38 to $59.93. It has a market cap of $12.2 billion and a consensus analyst target of $49.95. The stock is valued at 8.98 times expected earnings and 23.96 times free cash flow.
Seagate is a top storage and hard drive company that dates back to the late 1970s, and it has big swings up and down with earnings. Investors rarely want to pay up for a company that makes hard drives and storage devices. Some investors worry that a 5.7% dividend yield may be too high and is a red flag, but the company has plenty of cash and is less leveraged than others with huge debt burdens.
International Business Machines Corp. (NYSE: IBM) traded near $135, with a consensus target price of $147.06. It has changed hands in a 52-week range of $105.94 to $154.36. The market cap is $119.9 billion. The stock is valued at 9.52 times expected earnings and 18.01 times free cash flow.