Reasons to Expect a Rebound Among Big Tech Stocks -- And Three You Need to Know
“Uncertainty” has made big tech shares the biggest losers in the market lately, as their investors took profits, their U.S. customers delayed purchases and their overseas sales dwindled. But things are about to get a lot more certain, and that makes the big tech sector quite fertile ground for cheap, long-term investments in dividend-paying shares.
Tax rates, including those elusive rates on capital gains that sparked selling, will be set in the course of months, if not exactly by the end of the year. U.S. companies, which have been piling up trillions of dollars in cash while waiting out this uncertainty, will find themselves even further in need of tech upgrades. Uncertainty surrounding Europe may drag on for years, but domestic clarity should give a kick to shares of big tech companies unfairly caught in the slide.
The trick to investing well for a rebound is sorting out which big tech is truly down on general uncertainty and not some more ingrained problem. Google (GOOG), for example, saw its biggest share price loss of late after earnings revealed trouble squeezing money from web surfers on mobile devices. Google's profit margin narrowed.
Nevertheless, the entire tech sector has been battered to some extent by an excuse that’s likely to diminish substantially in the next few months. Here’s the quick reference to a few interesting big tech investments now. YCharts will offer more in-depth looks at each of them in days to come.
Yes, yes, we all know Apple blew it with those ridiculous maps, and that iPad Mini isn’t as special as we expected. But this is a company that had more right than most to blame tax-scared profit takers for the recent selling. By September, anyone selling Apple shares that were purchased about a year earlier wracked up about 70% gains.
Apple selling since September has shot down the share price about 20% and put its share price valuations into old school company territory, as in a PE ratio of about 12.
Alternatively, shares of chip maker Qualcomm are only slightly cheaper now than last quarter, and for good reason. The company keeps churning out unexpectedly big sales and profit gains by supplying chips for smartphones.
Earnings have been so strong lately that the share price valuations remain near 10-year lows, with a PE ratio of less than 18.
Intel seems in an awful mess of late, caught as a big supplier for the fading PC industry and a struggling contender in the fast-growing mobile devices market. The 20% dive in the share price over the last six months reflects a growing sense of worry about its future.
But Intel remains a profitable company with a $104 billion market cap and a 4.3% dividend yield. That deserves a look from any value investor.
Dee Gill is a contributing editor at YCharts, which includes the just-released YCharts Pro Platinum for professional investors.
Filed under: Company Analysis