2 Banks And 2 Tech Stocks To Buy For The Summer

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 |  Includes: BAC, MSFT, NOK, SAN
by: Chris Lau

The major U.S. indices rose 3% last week, marking their best performance for 2012 to date. The rise came despite rising uncertainty in Europe led by Spanish bank risks. This was balanced by optimism fueled by China lowering interest rates by 25 basis points. China last cut rates in December 2008.

On June 9, China reported an inflation rate of 3%, production growth of 9.6%, and retail sales growth of 13.8%. The lower figures suggest that China will continue easing monetary policy. On the same day, Spain's banks were said to be receiving 100 billion euros in assistance without any condition.

Global leaders are trying to stabilize the market that would also encourage taking on risk. Investors have two choices: to minimize exposure to the equity markets or to buy companies likely to bring leadership to markets. Facebook's (NASDAQ:FB) IPO was supposed to renew and to lead the technology sector. Instead, its drop brought skepticism.

With markets once again validating "Selling in May and going away," what companies should investors buy for the summer? Which companies are likely to lead markets in a positive way?

Banco Santander (STD) is thought to be just like any other Spanish bank, but this is untrue. The company has an international presence. Banco Santander generated 27% of its profits from Brazil in Q1 2012, 13% from Mexico, 13% from the U.K., and 12% from Spain. Net provision for loan losses declined to 15 million euro, compared with 69 million in Q1 2011. Negatives in the quarter included negative interest income of 513 million euro from the higher cost of credit of issues in wholesale markets.

The volatility of Bank of America (NYSE:BAC) deserves special attention. Shares peaked at $10 this year and closed at $7.56. During the recent rally, Bank of America gave up some of its two-day 10% gain by the end of last week. Selling was especially strong at prices above $7.60. Fundamentals will get less attention than trading patterns. Although confidence in the eurozone will help boost bank businesses, investors will need to see how Bank of America shares move. Two negatives events Bank of America is facing are a lowering in debt ratings from Moody's and further job cuts in the financial sector. If shares cede to the downgrade and fail to hold gains during the market's next rally, the rest of the market will also trend lower.

Microsoft (NASDAQ:MSFT) shares underperformed the Nasdaq index since April, when the company reported solid 3rd-quarter earnings. In that quarter, the company reported that 40% of the enterprise desktops were on Windows 7. The desktop refresh from Windows XP is expected to continue over the next 2 years. Worldwide, Microsoft sold over 600 million copies of Windows 7.

Two drivers that support leadership from Microsoft for the market are Windows 8 and Nokia's (NYSE:NOK) Windows Phone. A release preview of Windows 8 is currently available, and a retail release is due for later this year. Microsoft's Hotmail was also reported by WinFuture to encompass a Metro-style interface.

Nokia shipped 2.2 million devices between January and March, according to IDC estimates. The figures exclude sales in the United States. Nokia recently launched its Lumia phone in North America in April. Analysts at IDC are so positive for Lumia that the research firm forecasted the Windows phone platform will reach 46.2% growth between 2012 and 2016:

(click to enlarge)Click to enlarge

(Chart source: AppleInsider.com)

A word of caution: Microsoft has been losing mobile market share since 2007. Despite what IDC thinks, sales of Windows Phone 7 in the United States need to be established this spring and summer. Microsoft investors will be rewarded if there are market share gains that lead to a launch of Windows Phone 8.

Nokia should also be considered a speculative buy, even though the company will not lead the direction of the market. There are several reasons for buying Nokia: Lumia's release was well-received in Asia and India; Verizon (NYSE:VZ) may sign-up Lumia; strong patent portfolio holds value.

Finally, the Windows Phone 7 Metro user-interface is different from that of Apple's (NASDAQ:AAPL) iPhone: the tiles are all active and update automatically. Users do not need to open the "app" to get updates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.