Seeking Alpha
What is your profession? ×
Long/short equity, growth, medium-term horizon, registered investment advisor
Profile| Send Message|
( followers)

Every quarter we break down the best and worst seasonal plays. We don't do it for fun. It's pretty tedious. But, when it comes to seeking alpha, it can mean the difference between tailwinds and headwinds.

Today, we broke out data from the Seasonal Investor across technology (NYSEARCA:XLK).

What we found wasn't surprising, giving summer's typical seasonal swoon. High beta baskets, such as technology typically struggle in Q3. The Technology ETF isn't meaningfully strong or weak, finishing higher in 6 of the past 10 and 3 of the past 5 years. It's average return over the past 10 years, is a yawn worthy 0.07%.

However, digging deeper we do find a few large cap technology stocks with interesting seasonality.

I already spent time discussing Apple Computer (NASDAQ:AAPL) and its supply chain, so we'll skip that one for now. Across the large cap universe, there are still 10 others posting solid seasonality for the quarter.

Scroll down below the table and for a look at each of these ideas.

SymbolSECTORINDUSTRY# Up# Up10 Year Q35 Year Q3
(Past 5)(Past 10)AverageAverage

First up is Altera, a specialized semi chip maker supplying telecom, autos and industrials. Back in early June, the company guided 14-18% sequential revenue growth, citing sales strength of next-generation 28 nanometer designs. Back in Q1's EPS report, the company admitted sluggish back-half quarter sales versus its mid-quarter update. Hopefully, this quarter is tracking better. Telecom and wireless were sources of Q1 weakness as they depleted inventory and cut capex. But, with Altera supplying a larger amount into 4G base stations than 3G, any rebound would help support the quarter.

American Tower is another strong play in Q3, finishing up in four of the past five years for an average 4.45% return. I wrote previously about American Tower's opportunity to leverage its existing towers by installing additional equipment. It's certainly possible investors will get more excited about mobile device sales upside and corresponding telecom capex. If so, American Tower will continue its winning ways.

You'd think Amazon would be a star during the holiday shopping season, not hum drum vacation months. But, Amazon has posted gains in four of the past five for an average 19% return - pretty impressive for a high-priced stock with a gravitation defying valuation. A lot of the excitement will likely coincide with the launch of its next-generation Kindle Fire, which is slated for July 31st according to CNET. Of course, with millions of new Kindle owners this year toting them to the beach, investors may get promising ebook sales metrics when the company reports.

China Unicom has struggled in the wake of lowered subscriber growth forecasts this month. The Chinese wireless provider claimed 2.73 million net 3G subscribers were added in May, which came in -6.6% below April and marked the lowest net additions growth since last fall. Likely to offset slowing growth, the company announced a 30% cut in prices for its cheapest smartphones in a bid to boost mass market adoption. With 215 million subscribers, investors betting China will avoid a hard landing might find this a good time to step in.

A lack of 3-D content may have forced Directv to cut its 3-D channel to part time, but Q3 seasonality suggests investors are typically enamored with the company ahead of the start of its exclusive NFL Sunday Ticket programming. Expect to see more ads hyping the service in July, when NFL training camps open.

Across these five, investors have a workable list of stocks to start due diligence.

But, five more also screen strongly and we'll cover the catalysts for those in Part Two.

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