The information technology (IT) analysts at Oppenheimer continue to view the sector very favorably and believe that recent relative outperformance can continue in the months ahead. What keeps them so constructive on the sector is the potential for a set of dual tailwinds: improving fundamentals (as evidenced through rising analyst estimates) and a potentially revitalizing global macro backdrop.
They also believe that despite recent outperformance, further gains for tech are likely in the cards. Valuations remain very attractive, providing a considerable degree of downside protection in the event of a deterioration in sector fundamentals. With a market at record highs, this makes good sense for investors now.
Here are the top electronic equipment and component stocks to buy at Oppenheimer.
Arrow Electronics Inc. (ARW) smashed earnings and revenue estimates last week. The company also announced a $200 million share repurchase program, showing confidence in returning capital to shareholders. The Thomson/First Call price target for the stock is $50.
Corning Inc. (GLW) offers investors a solid mix of value, diversity and growth at a sharply discounted price point. The company is literally dirt cheap, trading at 1.03 times book value and holding $3.75 per share in cash and cash equivalents. This allows for some security and the potential for increasing dividends. The consensus price target for the fiber-optic pioneer is $16.65 and investors are paid a 2.7% dividend.
FEI Co. (FEIC) supplies scientific instruments for nanoscale applications and solutions for industry and science. Its products include transmission electron microscopes and scanning electron microscopes (SEMs); DualBeam systems, which include a SEM and focused ion beam system (FIB) on a single platform; stand-alone FIBs; and optical microscopes. The consensus price target for the stock is $83. Investors are paid a small 0.4% dividend.
Ingram Micro Inc. (IM) is the world's largest wholesale technology distributor and a global leader in IT supply-chain, mobile device lifecycle services and logistics solutions. Monday it announced a multiyear agreement with SquareTrade, the number-one-rated mobile device protection plan, trusted by millions of customers. Ingram Micro Mobility will provide all mobile device lifecycle services and back-end supply chain operations for SquareTrade, creating unrivaled reliability and consistency across its operations. The consensus price target for this top stock to buy is $21.50, which is below current trading levels.
Jabil Circuit Inc. (JBL) is the ultimate outsourcing stock. The company offers electronics and mechanical design, production, product management and aftermarket services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, solar, storage and telecommunications industries. The consensus price target for this top name is $24.70. Investors receive a 1.4% dividend.
Measurement Specialties Inc. (MEAS) is a small cap name that has been on fire. Last week the company announced record results for the second quarter and reported an increase in consolidated net sales of $11.9 million, or 13.4%, to a record $100.5 million for the three months ended June 30, 2013, as compared to the corresponding period of last year. The consensus price target for the stock stands at $52.
TE Connectivity Ltd. (TEL) designs and manufactures products that connect and protect the flow of power and data inside the products used by consumers and industries. It operates through three segments: Transportation Solutions, Communications and Industrial Solutions, and Network Solutions. In July the company smashed estimates and raised its outlook for the rest of the year. The consensus price target for the stock is $56.50. Investors are paid a 2% dividend.
Adding tech stocks to a portfolio that are cheap in valuation makes sense at this juncture in the market. High-priced momentum stocks will be the first ones to be shot in the event of a big market sell-off, a possibility we wrote about recently. With corporate technology budgets expected to grow with the economy, the rest of this year and 2014 could be outstanding for the tech sector.