These stocks covered in this article are large cap or better technology stocks. These stocks are considered "old tech" stocks. An "old tech" stock is a stock in a technology corporation that has been around for quite a while and has a certain level of maturity. Most pay dividends. The only stock on the list that doesn't pay a dividend is Yahoo Inc. (NASDAQ:YHOO).
There may be an uptick in volatility in front of us as we head into the summer months with the markets at all-time highs. This may be an ideal time to rotate out of more speculative names and into these solid "old tech" opportunities.
In the following sections, we will perform a review of the fundamental and technical state of each company to determine if this is the right time to start a position. Furthermore we will attempt to discern the significant catalysts for the stocks going forward. The following table depicts summary statistics and Wednesday's performance for the stocks.
Cisco Systems, Inc. (CSCO)
The company is trading 6% below its 52-week high and has 15% potential upside based on the consensus mean target price of $23.53 for the company. Cisco was trading Wednesday at $20.45, down over 2% for the day.
Fundamentally, CSCO looks solid. Cisco has a forward P/E of 9.96. Cisco's quarter-over-quarter EPS and sales growth rates are 46% and 5%, respectively. Cisco's net profit margin has increased to 19.72%. Cisco has a dividend with a yield of 3.25%. The company is trading at 13 times free cash flow.
Technically, Cisco has been performing well. The golden cross was achieved. The stock is currently consolidating just above the bottom of the current uptrend channel which has been an ideal time to pick up shares.
Cisco was recently named the "Top Dividend Stock of the Nasdaq 100," according to Dividend Channel. CSCO has a price to book ratio of 2.01 and pays a dividend yielding 3.25% while most dividend paying stocks in the Nasdaq 100 yield 2.2% and for over four times book value. Cisco recently bumped its quarterly dividend 21% to $0.17/share. Moreover, Cisco is well positioned to take advantage of the proliferation of mobile computing devices as it is still the market leader in network hardware. I like the stock here.
Corning Inc. (GLW)
The company is trading 2% below its 52-week high and has 5% upside based on the consensus mean target price of $15.05 for the company. Corning was trading Wednesday for $14.35, up 1% for the day.
The company has many fundamental positives. The company has a forward P/E of 10.51. Corning has a net profit margin of 22.26%. Corning currently trades for book value. The company pays a dividend with a 2.48% yield. Corning is trading for 22 times free cash flow.
Technically, the stock is overbought after a solid earnings beat. You can read the transcript here. The stock was in a solid uptrend until the company missed earnings expectations in late October and went into a nose dive. It seems to have found a short term bottom at the $11 level.
Several positive developments have recently occurred for Corning. The company recently announced a $2 billion stock buyback program to replace a $1.5B program that expired in December and has hiked its quarterly dividend by a penny to $0.10/share. The buyback is good for repurchasing 10% of shares at current levels.
Furthermore, Corning recently announced a capital expenditure plan of approximately $250 million to increase manufacturing capacity of the company's diesel emissions control products. Mark Beck, executive vice president, stated,
"Important heavy-duty regulations in China and Europe, as well as for non-road vehicles, take effect over the next two years which could double demand for our products by 2017."
In my earlier missive I suggested buying the stock at the $11 mark. Now that the stock has spiked, I suggest waiting a while to buy in. the stock currently has an RSI of 73 which is signaling it is oversold. The stock is a long-term buy.
Intel Corporation (INTC)
The company is trading 15% below its 52-week high and 5% above the consensus mean target price of $22.93 for the company. Intel was trading Wednesday for $24.06, up slightly for the day.
Fundamentally, Intel has some positives. The company has a forward P/E of 11.80. Intel pays a dividend with a yield of 3.76%. The company has a net profit margin of 19.45%. The company is trading for 2.3 times book value and has a PEG ratio of 1.11.
Technically, the stock looks solid. The stock recently broke out to the upside of the recent trading range. The pop was due to better than expected earnings results. With an RSI of 73, the stock is currently oversold.
I posit one of the drivers for the stock going forward is the fact Intel just confirmed it will to sell Atom CPUs for $200 Android touchscreen PCs. Furthermore, adding systems based on its Core CPUs could sell for $400-$500.
Moreover, INTC recently reported better than expected first quarter results. You can read the transcript here. I like the fact INTC is diversifying from Microsoft's Windows 8 products. The risk/reward ratio favors longs and the 3.93% dividend yield provides some cover. I would wait for a pullback to start a position though. The stock is currently overbought here.
Microsoft Corporation (MSFT)
Microsoft is trading 1% below its 52 week high and is trading slightly above its consensus mean target price of $32.48 for the company. Microsoft was trading Wednesday for $32.83, down nearly 1% for the day.
Microsoft is fundamentally solid. The company has a forward PE of 10.78. Microsoft is trading only 14 times free cash flow. Microsoft's ROE is 22.57%. The company pays a dividend with a 2.78% yield. The company's net profit margin is 21.58%.
Technically, Microsoft gapped up significantly and is currently trading for 14% above its 50-day sma. The stock has fulfilled the coveted golden cross. Once again, this stock like many of the old tech stocks on this list has spiked up recently and is currently overbought with a RSI of 73.
Microsoft sent out an invite Wednesday to a May 21st event pretty much stating the next Xbox will be unveiled. Xbox's director of programming Larry Hyrb wrote a brief post on his blog about the announcement saying,
"The event will mark the beginning of a new generation of games, TV and entertainment."
Microsoft recently beat earnings estimates. You can read the transcript here. Microsoft seems to have reinvented itself and has broken out of a long-term trading range. I like the stock here, but would wait for a pullback to get in. I posit you will get an opportunity to buy this stock at a lower level due to a summer selloff based on macro-economic events.
The company is trading 4% below its 52-week high and 5% above the consensus mean target price of $25.52 for the company. YHOO was trading Wednesday for $24.31, down almost 2% for the day.
Fundamentally, YHOO has some positives. The company has a forward P/E of 16.38. The company has a net profit margin of 68%. The company has a PEG ratio of .49 and trades for slightly less than two times book.
Technically, the stock is in a solid uptrend. Currently, the stock is trading at the midpoint of the uptrend channel. This is an ideal time to start a position in the stock.
"Content at scale on the web, delivered in a personalized way."
Another positive is Yahoo's new iPhone Weather app has topped iOS weather app charts. Dan Frommer recently stated,
"I've seen more normal people talking about it in a good way than any app in a long time."
Finally, an Android version of Yahoo's revamped flagship app is now out. These are all very positive developments for Yahoo going forward. I like the stock here.
The Bottom Line
I believe these stocks are buys that have major upside potential. MSFT, INTC, and GLW have had recent parabolic moves based on the positive catalysts. I would wait for a pullback prior to starting a position in these names. The market is trading at all-time highs in the face of several negative market developments. I posit a correction may be in the works. With these stocks being sold off regardless of their future prospects, you may get a chance to pick them up at a discount over the next few months. Hopefully you have some powder dry and can take advantage.
Furthermore, always remember to maintain a well-balanced diversified portfolio containing several asset classes. Use this information as a starting point for your own due diligence and research methods before determining whether or not to buy or sell a security. If you choose to start a position in any stock, I suggest layering in reduce risk.
Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article is for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.