Wednesday January 25, 2012
by Chuck Carlson, editor The DRIP Investor
In our latest special report, we feature three favorite investment ideas for 2012 -- all from the technology sector.
Here's a look at Cisco Systems (CSCO), Motorola Solutions (MSI) and Qualcomm (QCOM). These three stocks each offer dividend reinvestment plans and are attractive ideas for the coming year.
Cisco has not exactly been a stellar performer for investors over the last two years.
The stock was the second-worst performer in the Dow Jones Industrial Average in 2010 and followed that dismal performance with another top 10 worst showing among Dow components in 2011.
However, the stock’s poor performance over the last 24 months is one of the reasons these shares intrigue me for 2012. I’ve done a fair amount of research over the years on the “worst-to-ﬁrst” phenomenon in the Dow.
In a nutshell, Dow stocks that do horribly one year tend to do well the following year.
To be sure, it doesn’t always happen, but history does show that Dow stocks have an ability to rebound sharply after they have been depressed. I think Cisco is ready to rebound in 2012.
I like the stock’s valuation, I like that earnings estimates have been rising, I like that the stock has managed to beat earnings estimates in each of the last four quarters.
I especially like that the stock’s Quadrix Overall score is 94 (out of a possible 100). Yielding 1.3%, Cisco represents a solid rebound play for 2012.
The firm offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $500.
Motorola Solutions is one of the two pieces remaining after the breakup of Motorola (the other is Motorola Mobility, which is being acquired by Google).
Motorola Solutions produces advanced data-capture devices such as barcode scanners and RFID (radio-frequency identiﬁcation) products for business. The ﬁrm also makes professional and commercial two-way radios for a variety of markets.
The stock has been a solid performer in recent months, and I think these shares will really break out in 2012.
Earnings estimates are trending higher, and the stock should draw additional attention now that it pays a quarterly dividend of $0.22 per share. The current yield is nearly 2%, a decent payout in this low-interest-rate world.
Per-share proﬁts are expected to come in around $2.55 for 2011 and $2.89 in 2012. Motorola Solutions has beaten the consensus earnings estimate in each of the last three quarters, so those estimates may prove conservative.
Providing a kicker to these shares is takeover potential. Shareholder activist Carl Icahn reportedly owns roughly $1.8 billion worth of Motorola Solutions stock.
Even if no takeover offer develops, Icahn’s looming presence will assuredly hold management’s feet to the fire.
I have great expectations for this Editor’s Portfolio stock in 2012. Motorola Solutions offers a direct-purchase plan whereby any investor may buy the ﬁ rst share and every share of stock directly from the company. Minimum initial investment is $1,000.
Qualcomm is a stock for 2012 and beyond. The company’s chip technology is focused on mobile computing via smart phones, tablets, and other devices.
The company gets the majority of proﬁ ts from licensing its various technologies to vendors. Emerging markets represent a huge opportunity as those developing countries continue to roll out 3G networks. Per-share proﬁ ts should approach $3.60 in ﬁ scal 2012, up from $3.20 in ﬁ scal 2011.
The company’s balance sheet includes nearly $21 billion in cash and investments and no long-term debt, so the firm is in great position to continue to fund research and development and dividend increases.
The stock, yielding 1.6%, is an attractive play on some of the fastest-growing markets in the tech and communications sectors.
Qualcomm offers a direct-purchase plan whereby any investor may buy the ﬁrst share and every share of stock directly from the company. Minimum initial investment is $500.
Learn more about this financial newsletter at Chuck Carlson's The DRIP Investor.