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JPMorgan Chief U.S. Equity Strategist Tom Lee just articulated that underperformers in the technology sector could outperform in the second quarter, as the sector significantly underperformed the overall market in the first quarter. He highlighted nine names in the space that could go from laggard to leader in the months ahead. Given the high historical valuations of traditional defensive sectors like utilities and consumer staples, it seems like good advice to deploy on any pullbacks in the market. Here are three picks from the list that look the most likely to make Lee's prediction come true in the second quarter.

Check Point Software (NASDAQ:CHKP): This Israel-based company is a leading provider of network security products, including virtual private networks and firewalls.

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Here are four reasons why CHKP is undervalued at $46 a share:

  1. The 23 analysts who cover the stock have a $55 median price target, implying 20% upside. Credit Suisse has an "Outperform" rating on the stock and believes the company can make $4.15 a share by FY 2015.
  2. It has a cash-rich balance sheet with over $1 billion in net cash on the books (around 15% of market capitalization).
  3. Check Point is expected to have 6% revenue growth annually over the next two years, and the stock sports a modest five-year projected PEG (1.27).
  4. The stock is selling near the bottom of its five-year valuation range based on P/E, P/S, P/B, and P/CF. The company has grown earnings at better than a 20% CAGR over the past five years despite the recession, and CHKP is selling for just over 12 times 2014's expected earnings.

AVG Technologies (NYSE:AVG): Another Internet security firm based in the Netherlands. The company engages in the development and sale of Internet security software and online service solutions under the AVG brand name.

Here are four reasons why AVG is a bargain at $13.50 a share:

  1. The stock is very cheap at just over six times 2014's expected earnings.
  2. A beneficial owner has made several purchases in March and there has been no insider selling in over a year.
  3. The three analysts who follow the stock have price targets ranging from $18 to $30, all substantially above the current stock price. BWS Financial initiated the shares as a "Buy" in mid-March.
  4. The company has crushed earnings each of the last four quarters, and consensus earnings estimates for both FY 2013 and FY 2014 are up nicely over the last two months.

Apple (NASDAQ:AAPL): The company is everyone's favorite tech laggard.

Here are four reasons why AAPL will go higher than $423 a share in the second quarter:

  1. Taking out the almost $140 billion in cash and marketable securities (35% of market capitalization) on hand, AAPL sells at just over six times trailing earnings.
  2. The stock yields 2.4%, and that is likely to go significantly higher as it is widely expected that a 50% or better dividend hike will be announced before or in the next earnings release (April 23).
  3. Despite all the analyst downgrades recently, the median price target by 46 analysts who cover the stock is $600 a share, some 45% above its current price. The stock also looks like it is bottoming at $420 a share.
  4. Even though the days of annual sales increases of 50% are over, revenues are still expected to rise at a 14% CAGR over the next two years. The stock sports a miniscule five-year projected PEG (0.54).
Source: Buying Into JPMorgan's Tech Laggards