Twelve top tech picks for 2010.
Despite some sprinkles of good news, the stock market seems stuck in an eddy of worries. This may be an improvement over the panic that gripped investors a couple of years ago or the euphoria that previously enthralled them but it does not help successful investment. An old English proverb says, “Worry is like sitting in a rocking chair. It gives you something to do but doesn’t get you anywhere.”
Investors have reasons for realistic concerns. The national unemployment rate seems stuck at 10%; here in California, it’s 12.4%. Political news tends to dominate the headlines but signs of economic recovery are breaking through. The U.S, economy grew at a 5.7% rate in the recent December quarter, faster than predicted but the market reaction was muted as economists warned that this growth cannot be sustained.
That’s undoubtedly true as long as the jobless rate stays so high. The new economic report showed, as expected, that consumer spending remains understandably restrained after the end of the years of easy credit. What was surprising was the increase in overall business expenditures at the fastest rate in 25 years. This included a 13% rise in spending for software and equipment.
The uncertainties stemming from recent fears of slumping into another Depression encouraged business to cut back on spending. They are now sitting on huge cash balances that they are beginning to invest in capital equipment and software. That ‘s good news for the tech sector and for my twelve top tech stocks for 2010.
Although much of their revenue comes from the consumer sector, I’m leading with my big three, all of which reported record earnings. Apple (AAPL-$195) led the pack with very strong earnings and the much-ballyhooed rollout of its new iPad. Typical of new product announcements from Apple, its stock price climbed before the news and then sold off.
This happened when it introduced the iPhone, which stock analysts dismissed then from their tiny little cubicles as just another advanced mobile phone. Today, Apple has licensed 140,000 “apps” for this device from which it grosses over a billion dollars from these licensing fees alone. Apple also recently raised its earnings guidance.
Similarly, Amazon (AMZN-$119) slid back amid confusion about the iPad and a fuss with the publisher Macmillan. This was quickly resolved with an agreement through which Amazon will raise its prices for some e-books for its Kindle. A price increase normally helps earnings and its soaring growth will continue.
Google (GOOG-$530) made headlines with its principled fight with China. It also remains on track for continued double-digit earnings growth. Like the other two companies, current weakness in its stock price reflects nothing more than weak investor nerves.
Intel (INTC-$20), among the tech companies with strong sales to business, also reported excellent earnings. Unique to this group, it pays a 3% dividend and fits well in retirement accounts. Cisco (CSCO-$23) will report soon and I expect it also to show resumed growth.
Oracle (ORCL-$24) completed its acquisition of Sun. Mergers often cause frictional earnings charges but Oracle is also headed for another successful year. So is Cognizant Technologies (CTSH-$45), the leading outsourcing firm based in the U.S.
NetApp (NTAP-$31) is my favored data management and storage firm. The tech sector is so promising that I’m adding four smaller companies: Akami (AKAM-$26), ArcSight (ARST-$26), Atheros (ATHR-$24) and BMC Software (BMC-$38).
Despite uncertainties affecting stock prices, these companies are all growing nicely and priced reasonably. Investors should recall Prince Hamlet’s advice, “ . . . if it be not now, yet it will come: the readiness is all.”