The stock market has posted strong gains in 2012, but there are still a number of tech stocks that offer value and strong upside potential. Most investors should have some exposure to the tech sector because technology continues to become increasingly important for business productivity, and for the convenience and entertainment needs of consumers.
Also, many tech companies have cash-rich balance sheets as well as growth potential. The heavy levels of cash in this sector means takeovers are likely to continue. The growth potential of tech stocks-- in spite of a weak global economy-- is likely to keep investor interest high. This means any dips are likely to be short and shallow. Here are a few tech stocks that offer substantial upside potential, possibly a chance to double in the next couple of years:
Computer Sciences Corporation (NYSE:CSC) is a leading provider of information technology ((NYSE:IT)) services to major corporations, governments, and other entities. The company recently appointed a new CEO, Mike Lawrie. Computer Sciences is one of the least expensive tech stocks in the market. It offers an above average dividend yield, a low price to earnings ratio of just about 7, and it trades below book value of $30.17 per share. The stock is trading at close to half the 52 week high, so it's a great time to accumulate. With new management coming and a deeply undervalued share price, it's easy to see how this stock could double in the next couple of years.
Here are some key points for CSC:
- Current share price: $26.48
- The 52 week range is $22.80 to $56.61
- Earnings estimates for 2011: $3.70 per share
- Earnings estimates for 2012: $3.76 per share
- Annual dividend: 80 cents per share which yields 2.9%
Geoeye, Inc. (NASDAQ:GEOY) offers earth imaging services which are used to provide data, security, and monitor conditions at agricultural and other sites. Investors were paying over $40 per share for this stock in the past year, but it now trades at bargain-levels at just around book value, which is $22.01. Directors and officers have been taking advantage of this undervalued stock and buying a significant amount of shares. Stephen Feinberg, a beneficial owner of more than 10% of Geoeye, has purchased over 500,000 shares just in January alone. This stock only needs to trade back around the 52-week high in the next couple of years for investors to double their money.
Here are some key points for GEOY:
- Current share price: $22.08
- The 52 week range is $17.98 to $44.68
- Earnings estimates for 2011: $2.02 per share
- Earnings estimates for 2012: $2.25 per share
- Annual dividend: None
Xerox Corporation (NYSE:XRX) designs and manufactures printers, copiers, software, and other related products. It also provides business solutions such as IT services. Xerox operates a division called "PARC" which is also known as Palo Alto Research Center. PARC has made a number of technological breakthroughs and Xerox has about 9,400 active patents. This stock appears undervalued with the stock selling below book value, which is $8.88 per share. It also looks cheap based on the price to earnings ratio, which is only around 7 times earnings. When you consider that the average price to earnings ratio for the S&P 500 Index is around 12, this stock could have significant upside potential.
Here are some key points for XRX:
- Current share price: $7.96
- The 52 week range is $6.55 to $11.50
- Earnings estimates for 2011: $1.12 per share
- Earnings estimates for 2012: $1.23 per share
- Annual dividend: 17 cents per share which yields 2.1%
Hewlett Packard (NYSE:HPQ) designs and manufactures a range of technology products and services which include printers, computers, tablets, software, consulting and other business solutions. While this company has remained solidly profitable, you might not know that based on how weak the stock has been over the past several months. Much of the weakness was brought on by heavy management turnover which resulted in lost investor confidence. Former ebay, Inc. (NASDAQ:EBAY) CEO, Meg Whitman, joined Hewlett Packard as CEO a few months ago, and the company now appears to be on track and poised to regain investor confidence. Even though the stock has rebounded off the 52 week lows, it still appears undervalued with a price to earnings ratio of just about 7 and a book value of $19.41. Based on earnings power of over $4 per share, it looks like the dividend could be raised significantly in the future. Long-term investors should be buying this stock on dips.
Here are some key points for HPQ:
- Current share price: $28.95
- The 52 week range is $21.50 to $49.39
- Earnings estimates for 2011: $4.09 per share
- Earnings estimates for 2012: $4.49 per share
- Annual dividend: 48 cents per share which yields 1.7%
MEMC Electronic Materials, Inc. (WFR) is a leading maker of wafers for use in computers, solar, and other products. MEMC is one of the few U.S.-based solar makers. The solar division has been impacted by weak profit margins due to excess inventory, low-priced competition from China, and subsidy cutbacks from budget-strained governments. The stock is trading for about one-third of the 52 week high and for just about half the current book value, which is $9.75 per share. In spite of all the challenges facing this company, it has remained profitable. Significant improvements in the financial results are likely as the global economy heals from a multitude of economic shocks. In the next couple of years, the stock should be able to rebound to at least book value, which would be about double the current stock price.
Here are some key points for WFR:
- Current share price: $5.15
- The 52 week range is $3.65 to $15.04
- Earnings estimates for 2011: 32 cents per share
- Earnings estimates for 2012: 29 cents per share
- Annual dividend: None
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.