Monday's pullback and the market's increasing volatility are not welcome events for anyone with a fully invested portfolio. However, for those who have built up substantial dry powder during the rally of the last six months, it could be a start of a more turbulent market that will offer lower entry points on some valuable names which will be trading down from recent highs. Two technology outfits that are on my own personal shopping list are below:
QUALCOMM (QCOM)
4 reasons QCOM is a long term bargain at around $61 a share:
- The stock is down some 10% since concerns about chip supply put a downbeat tone on its recent earning report. However, the supply concerns only came to the fore because of substantial demand for Qualcomm's products, not a bad problem to have. In addition, consensus earnings estimates for FY2012 and FY2013 have still risen over the past 3 months.
- Analysts expect rapid sales growth for the company for the next two years. Estimates are for over 25% sales growth in FY2012 and just under 15% growth in FY2013.
- QCOM has a pristine balance sheet with net cash of almost $14B and goes for a very reasonable five year projected PEG (1.07).
- The stock sells for less than 15 times forward earnings, a 20% discount to its historical average. The median price target for the 37 analysts that cover the stock is $75.
EMC Corporation (EMC)
4 reasons EMC is a solid buy at $27 a share:
- Investors sometimes overlook the strength of EMC's balance sheet. The company has around a $58B market capitalization. This includes $4B in net cash and their 80% stake in fast growing VMware (VMW) is worth another $37B.
- Earnings estimates for FY2012 and FY2013 have risen over the last month and it has a forward PE of under 14, an over 20% discount to its historical average.
- Analysts project sales growth in the low teens for FY2012 and FY2012. The company also increased operating cash flow approximately 70% from FY2009 to FY2011.
- The consensus price target by the 30 analysts that cover the stock is $33 a share. The company rates a "Strong Buy" with a $36 price target at S&P and was recently upgraded to a "Buy" at Mizuho as well.
Disclosure: I am long EMC.
