Friday January 25, 2013
by John Buckingham, editor The Prudent Speculator
For those with a multi-year, three-to-five-year or longer investment plan, we would look to add to equity exposure on any market weakness.
Indeed, we believe that dividend-paying value stocks will be the place to be in 2013. Here's a look at the four technology stocks that made our list of favorite stocks for 2013.
Corning (GLW) is the leading designer and manufacturer of glass and ceramic substrates found in liquid crystal displays, fiber-optic cables, automobiles and laboratory products.
We believe that while there may be short-term headwinds to overcome, the company is well-positioned to take advantage of its market-leading product lines over the long-term.
Gorilla Glass, Corning’s ultra-popular mobile device component, has been gaining positive momentum lately and has a lot of potential to grow in the LCD glass space.
We feel that the company will continue to progress as the economy improves, particularly in the Telecom and Specialty Materials businesses. Corning’s inexpensive valuation (P/E ratio of 10) and 2.9% dividend yield currently offer an attractive entry point.
Intel (INTC), the leading global semiconductor manufacturer, supplies advanced technology solutions for the comput- ing industry. We expect to see continued growth in demand for chips from Intel, particularly in data center enterprise applications.
While sales of its latest processors, code named ‘Ivy Bridge’, might still suffer from some excess capacity early in the year, we believe that Intel will be operating optimally by the time the next generation of ‘Haswell’ processors come to market mid- year.
Additionally, the company continues to develop its foundry business and maintains a sizeable technological lead over its competitors with ‘Triple-Gate Transistors’ that process commands more efficiently, while using less physical chip space.
We also like that Intel has a diversified revenue stream, low levels of debt, a competitive assortment of products and 4.4% dividend yield.
KLA-Tencor (KLAC) is a leading maker of process monitoring solutions for the semiconductor industry; its equipment is used to detect defects in the semiconductor manufacturing process.
We believe that KLAC can benefit from increases in semiconductor manufacturer capacity and from the evolution of chip technology, particularly as manufacturers begin to produce devices that require technology smaller than 28 nanometers.
While the company faces some headwinds due to client reductions in capital expenditures next year, we think KLAC is positioned to quickly ramp production when the cycle swings upward.
We also like that management is continuing to repurchase stock, in addition to boosting its quarterly dividend payout. KLAC offers a 3.3% yield, over $10 per share in net cash on the balance sheet and a P/E ratio under 11.
Microsoft (MSFT) is the world-wide leader in software, services and solutions that “help people and businesses realize their full potential.”
Launched in 2012, sales of the company’s flagship Windows 8 operating system have been slower than initially expected, though we believe that over time Microsoft will benefit from the unique design.
The operating system was built from the ground up, comes complete with an app store and can be implemented across a broad array of form factors, opening up diversified revenue streams and helping to facilitate a seamless user experience from smartphone to tablet to PC and beyond.
In addition to those features, a refreshed Microsoft Office suite and fluid access to cloud data storage should prove tremendously beneficial to the bottom line.
Enterprise customers should also adopt Windows 8, though at a relatively slower clip, in order to allow IT departments to work out glitches before applying them across large user groups.
We look favorably upon the company’s improving growth prospects across its business segments, and we are drawn to the dividend yield of 3.4% and the modest P/E ratio of less than 11.
Learn more about this financial newsletter at John Buckingham's The Prudent Speculator.