Breakout

2012 Sector Preview: How to Play Tech Stocks

Breakout

Despite a rough last couple of months, the darlings of the tech sector eked out a respectable year. Google (GOOG) is up more than 6% and Apple (AAPL), despite coming well off their highs, saw market gains of over 20% year-to-date. So how can the world's favorite tech stocks rebound from 2011's year-end weakness?

"All they (Apple) need to do is get a better iPhone out, a radically improved iPhone 5," says Sean Udall, author of the TechStrat Report newsletter. "They need a 4G, quad core iPad."

If they do that and succeed in creating a new "must-have" item (the much rumored television set perhaps?), he thinks the stock is headed for the moon again…or at least to $500 a share.

In the meantime Udall is moving some of his money from Apple to Google. "Market share numbers tell a lot of the story," he says. "The beauty of Google is they help a lot of other people make money…so many people use Google to enable what they do in business, either to save money or make money."

So in a tech world that is more and more becoming "Apple, Google and everyone else" what other tech companies is Udall looking at?

"I like Juniper (JNPR) a lot," he says. "Juniper was killing Cisco (CSCO) earlier in the year, Cisco's been killing them since — both companies basically are driven by the same thing."

Still for Udall, Juniper's new networking product "QFabric" should mean a revenue boost of 10-15%.

But will companies begin spending money on things like new servers next year? According to Udall the motivating force for businesses to spend cash on technology next year, therefore further buoying the sector, is (you guessed it) Europe.

"If we solve Europe and do so, let' say in the first quarter, then I think you're gonna see a powder keg of buying," Udall predicts. That would of course solve many global ills and a rising tide lifts all boats, tech included.

Another possible tech theme in 2012 could be the "revenge of the small caps." Udall likes Finisar (FNSR), saying, "they're set to do well in about three or four product categories."

What moves are you making in the tech sector come the 2012? Let us know in the comment section below or on our Facebook page.

View Comments (18)