Five Favorites in Tech

07/04/2014 10:00 am EST


Stephen Quickel

Editor, US Investment Report

US stocks have put on pretty big moves since bottoming in mid-April-maybe too big-and notes of caution have crept into the market, suggests Stephen Quickel, editor US Investment Report.

The S&P 500 has risen 7.9% and Nasdaq Composite has gained 9.0% in eleven weeks. Our average PEG ratio has risen from 0.76 to 0.94 in six weeks. This is still comfortably below the 1.00 ideal, but more stocks than usual above the 1.10 level.

In researching new stocks, we've rejected a lot of promising names because they appear to be over-extended. Nevertheless, here are some we like from the tech sector:

Avago Technologies (AVGO)

Once Hewlett-Packard's chip division, this Singapore and San Jose-based outfit is the world's ninth largest semiconductor company, after acquiring LSI Corp in May.

Specializing in radio frequency (RF) chips for Apple, Samsung, and other smartphones, earnings estimates have risen dramatically.

Oracle (ORCL)

At 11 times earnings, with potent technology and driving leadership, and a price dip from $43 to $40 after a climb from $36 last winter, today is a buying opportunity for this mega-cap tech.

Some found the first-ever release of its cloud computing numbers disappointing. CEO Larry Ellison sees ORCL reaching Number Two in cloud sales. In my view, he is not a man to bet against. (CRM)

The acknowledged world leader in cloud computing with sales rising 30% a quarter, CRM (for "customer relationship management") trades at meaningless P/E and PEG ratios.

After three brief high-volume dips in 2014, the stock's jump from $54 to $58 and breakout above its 10-week moving average was on heavy trade. It was at $36 last June; we're targeting $70.

Synaptics (SYNA)

News that it will buy Japan's Renesas SP Drivers could add $1.50 a share to Synaptics' 2016 earnings, according to Wells Fargo, pushing them above $6. SYNA makes touchscreen chips. Already up 70% in 2014, it could rise from 89 to 110 at an 18 P/E.

Ubiquity Networks (UBNT)

This $3 billion revenue provider of wireless broadband hardware outsources all manufacturing and marketing and has just 200 employees.

Small wonder its return on equity is an astounding 80%, with earnings expected to grow 28% a year. Now at $44, up from $32 in May, UBNT should return to its March peak of $56.

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