Investment in Technology Stocks: What to look for in 2014?

technology stocks

When you talk about technological stocks, last year was a booming year indeed. And through an increase in both technology and telecom stocks, the market for technological stocks grew by over 18%, while internet stock also saw considerable growth. PowerShares NASDAQ alone increased by 65% last year and it holds some of the biggest technological stocks in the world, including Google and Facebook.

It is expected this year too will see a considerable increase in technological stock and in light of this, mentioned below are some interesting ideas for what to look for if you are considering investing in technology stocks in 2014. Take a look below:

Get Rovi Corp 

Rovi is a worldwide leader in state of the art technological solutions that power the digital entertainment industry. Rovi Corp provides cable, satellite, telecommunication, mobile and various other digitized components to various consumer electronics retailers and electronics manufacturers like Apple, Comcast, Google, Panasonic, Sony and many more.

Rovi Corp made the smart decision not to forgo profits just for the sake of increasing sales volume. The company took a rather conservative step and analyzed the level of contract closings in the final half of last year.  What this resulted in was the fact that the company got a full revision on whole year revenues and profits’ guidance over the span of the past three months this year which resulted in a profitable sell-off.

Rovi’s objective to get a precise value on possible licensing agreements is the correct step to take if you see it from a long-term perspective. Although it is true that it is taking the company quite a bit of time to close these deals, it is expected they will indeed have them and once this happens their stock will rebound, increasing in value considerably.

Get Cisco

One area in the US stock market which can be considered as being a bit too expensive but at the same time highly lucrative is ‘mega-cap’ information technology giants and organizations. These companies aim for low multiple earnings and present potentially high rewards for current investors and traders. Cisco is one of them and offers dividends together with buyback yields which have a 5% rate. Furthermore, the payouts and ratios are reduced so they have more room to increase.

These have admittedly made a number of investors unhappy over the last 2 or 3 years. In simple words, this sector of the industry has stopped growing. It used to but not anymore. However it is also important to understand that there has been no paradigm swing within the industry that could have caused a rift in their business models, especially the fact that they have a long product cycle. The lacklustre structural growth of the industry is more of a cyclical event than a business failure. According to various financial experts, it would be wise if you invest in this sector solely due to the valuations of the industry.

The two most interesting companies in this sector are Cisco and IBM. Cisco has been dominating the industry for global communications and has attained considerable growth over the years along with the financial might to press forward. The company has over $30 billion in net cash flow and sells its shares for %5.60 and has a dividend yield of 3.2%. Cisco also has a dividend + buyback yield of 5% with a 33% payout ratio.

However, it is important to realize the barrier to entry for probable rivals in the industry aiming for core business is high. IBM, on the other hand, has also established itself in the financial markets and has also managed to increase its per year revenue and profit compared to the last ten years and has grown by 12%. So, you can consider checking IBM out as well as a potential investment option in this niche.

Get Applied Materials 

Applied Material is the second biggest corporation when it comes to semiconductor manufacturing and fabrication and has merged with the industry’s third biggest semiconductor corporation, Tokyo Electron. The two companies combined have a net value of $30 billion. It is estimated that both synergies would save about $250 million in their first year of merger and then $500 million after a couple of years. The thing you need to focus on here is the fact that this merger will enable the corporation to capture a significant share of the market.

Last year, the semiconductor components and fabrication industry grew to $28 billion and it is estimated that by the start of 2017, it will further increase to $37 billion. It is also projected that the merged company would make $18.2 billion in revenues and $4.6 billion in operating income. If you break these massive numbers down in terms of share price, each share would cost $2.40 and if you consider their earnings in the previous four quarters, the total would be $0.59. According to statistics, the share price of the companies will be worth $48 after three years compared to what it is now, $16.

Get Apple 

Apple is a company you should not ignore and considering the fact how the market for tech stocks is increasing, Apple is a rather cheap stock. And with the launch of two of its iconic phones and a mini tablet, Apple will be dominating the market this year as well as the next. The newly re-stocked product line is doing great and Apple sold over 4 million units of its brand new iPhone 6 and 6 Plus in 24 hours after the launch. It is also expected that Apple will be earning more if the whole Apple China Mobile deal goes smoothly. A new Apple TV will indeed kick start the New Year in a positive light. Apple is a global brand, not to mention the most iconic.

All in all, these are some of the best technological shares you could consider checking out for the sake of investing. The technology market is expanding exponentially and the aforementioned companies will grow with it.