The 10-year bull market that started in March of 2009, when the S&P 500 hit the ominous intraday low of 666, is the second longest bull market on record. While stocks basically have traded sideways over the past 18 months, there are signs that the market may be ready to crack. Technology stocks, especially the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google), have driven market performance for years. This year is no exception, with technology up 22% versus the S&P 500’s 15%.
Goldman Sachs recently came out very negative on some of the technology companies, especially the software sector, with software stocks now carrying their highest multiples since the tech bubble that finally exploded in 2001.
We decided to screen the Merrill Lynch technology research universe for technology stocks trading at reasonable valuations that pay solid dividends. We found four rated Buy that fit the bill nicely.
This top mega-cap technology company recently reported an outstanding quarter. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Note that Cisco is one of the most shorted Dow Jones industrial average components.
Shareholders receive a 2.5% dividend. The Merrill target price for the shares is $62, and the Wall Street consensus target is $58.63. The stock closed Tuesday at $56.08.
This blue chip giant still offers investors a very solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.
IBM’s five major segments are: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. Analysts cite the company’s potential in the public cloud as a reason for their positive outlook going forward.
IBM shareholders receive a large 4.68% dividend. Merrill has a $165 price target, while the consensus target is $147.21. The shares closed at $138.36 on Tuesday.
This stock has been very volatile over the past year, but the settlement of some litigation issues with Apple has smoothed out the landscape. Qualcomm Inc. (NASDAQ: QCOM) designs, develops and supplies semiconductors and collects royalties on wireless handheld devices and infrastructure based on its dominant position in CDMA and other related technology patents.
In addition, Qualcomm provides systems software and components to wireless handset vendors and promotes applications and services that run on high-speed wireless networks. The company operates primarily through two segments: CDMA Technologies and Technology Licensing.
Shareholders receive a 3.42% dividend. The $105 Merrill price target is well above the $88.77 consensus target. The stock closed at $72.55.
This is a leader in the total addressable hard disk drive (HDD) market. Western Digital Corp. (NASDAQ: WDC) designs, manufactures and markets hard disk drives for use in enterprise storage, servers, desktop and laptop computers and consumer electronic devices. It also has a growing solid state drive and storage systems portfolio and is currently the third-largest enterprise solid state drive manufacturer.
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 analysts feel the company’s business mix switch to NAND flash could continue to provide earnings momentum and growth as compared to the rather flat revenue streams from the HDD product line. In addition, personal computers account for 50% of hard disk drive sales and the improved performance at Dell and overall PC sales bodes well for the company in 2019 and beyond.
Shareholders receive a 4.87% dividend. Merrill analysts have set a $60 price target. The consensus target is $53.65, and the stock closed most recently at $41.63 a share.
These four stocks have solid upside to the current Merrill Lynch price targets and also offer investors perhaps more comfortable entry points. There is a good chance the market could trade sideways or even down for the balance of 2019, as investors take profits and a witch’s brew of geopolitical and other issues stir the volatility. These stocks could be good better tech vehicles for a sideways to downward move.