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Valuation Dashboard: Technology And Telecom - Update


  • Valuation metrics in Information Technology and Telecom.
  • Evolution since last month.
  • A list of stocks looking cheap in their industries.

This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages in each industry.

Executive summary

I wrote last week in my S&P 500 monthly dashboard that Technology (including Telecom) is fairly priced regarding historical averages of valuation ratios and above the baseline in profitability (measured by ROE). In a closer look at industry level and extending the stock universe to mid caps, Hardware, Semiconductors, Communication Equipment and Wireless Telecom Services have mixed valuation factors and are undervalued for at least one of them. They are also above their historical averages in profitability. Other industries are less attractive. Software and Diversified Telecom Services are the most overpriced. This is not justified by an exceptional profitability: both are close to their historical baselines.

Since last month:

  • P/E has improved in Wireless Telecom Services and deteriorated in Internet, Communication Equipment, Computers/Peripherals.

  • P/S has improved in Computers/Peripherals, Wireless Telecom Services and deteriorated in Internet, Software, Semiconductors.

  • P/FCF has deteriorated in Internet, Software, Diversified Telecom Services and is stable elsewhere.

  • ROE has improved in Computers/Peripherals and deteriorated in Diversified Telecom Services.

  • The Technology Select Sector SPDR ETF (XLK) is almost tied with the SPDR S&P 500 Trust ETF (SPY) in monthly return.

  • In this period, the 5 best-performing S&P 500 Tech or Telecom stocks are Alliance Data Systems Corp. (ADS), Advanced Micro Devices Inc. (AMD), CA Inc. (CA), Oracle Corp. (ORCL) and Red Hat Inc. (RHT).

Some cheap stocks in their industries

The stocks listed below are in the S&P 1500 index, cheaper than their respective industry factors for Price/Earnings, Price/Sales and Price/Free Cash Flow. The 10 companies with the highest Return on Equity are kept in the final selection. This strategy rebalanced monthly has an annualized return about 12.76% in a

This article was written by

Fred Piard profile picture
Data-driven portfolios and risk indicators.
Author of Quantitative Risk & Value and three books, I have been investing in systematic strategies since 2010. I have a PhD in computer science, an MSc in software engineering, an MSc in civil engineering and 30 years of professional experience in various sectors. My aim is making simple and efficient quantitative investing techniques available to my followers. Quantitative models can make investment decisions faster, reproducible and emotionless by focusing on relevant information in the middle of market noise. Moreover, models can be refined to meet specific risk tolerance and objectives. 

Step up your investing experience: try Quantitative Risk & Value for free now (limited offer).

I am an individual investor and an IT professional, not a finance professional. My writings are data analysis and opinions, not investment advice. They may contain inaccurate information, despite all the effort I put in them. Readers are responsible for all consequences of using information included in my work, and are encouraged to do their own research from various sources.

Analyst’s Disclosure: I am/we are long CTXS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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