If six years ago your broker had told you that tech stocks were a safe place to hide out from the gyrations of a shaky financial sector, you probably would have fired the broker. Not these days. Consider all that tech has going for it now.
First, tech companies aren't financial companies. Any company even associated with debt, mortgages and leverage buyouts carries a stench that just won't wash off. But tech outfits, overall, hold plenty of cash, and many are using that money to buy back shares and even raise dividends or start paying them.
Second, there's the magic elixir of globalization. Foreign companies need technology from U.S. companies, which generate more patents than the companies of any other country. Globalization also means the opportunity to sell to the mushrooming consumer classes in countries such as China and India. U.S. companies also produce much of the gear that makes globalization possible to begin with -- the hardware and software that allows communication through wired and wireless networks.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Third, the weakening dollar is fueling tech exports.
Finally, values aren't hard to uncover. This is despite an impressive showing by tech stocks recently. The major indexes that track the tech sector have risen about 20% in the past year through August 31 (for example, the Nasdaq 100 rose 23%), compared with 14% for Standard & Poor's 500-stock index.
Here are five tech blue chips worth considering:
1. Apple Inc. (symbol AAPL). Yes, it's already up 70% for the year and has been on a tear for several years. But Apple remains high on Christopher McHugh's list of tech stocks to buy and hold. McHugh, a co-manager of Turner New Enterprise, has held shares in Jobs & Co. since 2004. Although the stock is pricey -- trading at 33 times estimated earnings of $4.38 per share for the fiscal year that ends in September 2008 -- McHugh sees too many growth opportunities to sell now. Apple shares closed at $144.16 on September 4, but took a hit to close at $136.80 the next day when the company cut the price of its marquee product, the iPhone, by $200, down to $400. No worries. A similar discount in the price of the iPod once caused Apple stock to drop -- until investors realized that cheaper iPods meant more sales and more profits for Apple.
Among the opportunities, McHugh says, are Apple's plans to expand its retail stores overseas; production of cheaper, better versions of the red hot iPhone; and the growing popularity of Apple's personal computers. "The halo effect" for Apple's products and its ability to innovate will continue to generate strong growth, he says.
2. Intel (INTC). The semiconductor business is notoriously cyclical, but the strongest chip makers should prosper thanks to strong global demand. McHugh likes Intel despite problems it's had recently. Now that its management team is refocused and the industry appears to have worked through a chip glut, Intel is in a much better position to grow than rival Advanced Micro Devices (AMD), says McHugh. Intel closed at $26.18 September 4, up 1.7%. It's up 28% year-to-date.
3. Broadcom (BRCM). This smaller, communications chip maker is also a favorite of McHugh's. The reason: He says it should be able to expand its sales in the profitable wireless-phone market, including pushing into profitable areas dominated by rival Qualcomm. Shares of Broadcom rose 2.7% September 4 to $35.44 and are up 10% this year.
4. Cyprus Semiconductor (CY). Kevin Landis, chief investment officer of the Firsthand funds, calls Cyprus the "best bargain" story in tech. The firm owns 53% (a stake worth roughly $3 billion) of SunPower (SPWR), a maker of highly efficient solar panels. In addition, Cyprus has $800 million in cash. Given that Cyprus's shares, which closed at $25.91 September 4 and are up more than 50% year-to-date, are still valued at only $4 billion, you essentially can buy into the promising semiconductor business for nothing, Landis figures.
5. Applied Materials (AMAT). If Landis and McHugh are correct about rising demand for chips, Applied Materials should also reap the benefits. The company makes machines that produce semiconductors. Moreover, Applied, like Cypress, has a solar angle. Using technology that isn't much different from that used in chip-manufacturing equipment, Applied builds machines that make thin-film solar panels. The stock rose 2% on September 4, to $21.78, and is up 18% so far this year.
One note of caution: With the financial sector's problems raising questions about the sustainability of the economic expansion, this is no time to buy the smaller, riskier tech names, many tech fund managers say. But there are some prime tech stocks worth considering in these times of volatility.
-
My First $1 Million: Self-Employed Trader, 50, San FranciscoEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Think You Know How to Be Happy in Retirement? These 9 Stats May Surprise YouWhen it comes to your retirement happiness, don't believe everything you hear. We've turned to solid research for the facts on finding your bliss in retirement.
-
If You're Retired or Soon to Be, Don't Miss These Tax BreaksThe OBBB offers some tax advantages that are particularly beneficial for retirees and near-retirees. But they're available for only a limited time.
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Dow Slides 427 Points to Open December: Stock Market TodayThe final month of 2025 begins on a negative note after stocks ended November with a startling rally.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
Stocks Extend Win Streak on Black Friday: Stock Market TodayThe main indexes notched wins in Friday's shortened session, with the blue-chip Dow Jones Industrial Average closing higher on the month.
-
Dow Adds 314 Points to Thanksgiving Rally: Stock Market TodayInvestors, traders and speculators enjoy the best Thanksgiving Week gains for the major stock market indexes in more than a decade.
-
Dow Falls 557 Points to Start NVDA Week: Stock Market TodayThe Oracle of Omaha saw growth and value in certain corners of the stock market during the third quarter.
-
Dow Dives 797 Points as Government Opens: Stock Market TodayThe process of pricing and re-pricing realities old and new never stops, and next week promises to be at least as exciting as this week.
