Within the high-tech sector, options abound. The most successful companies are those with a highly diversified product offering than can adapt to constantly changing market situations, and usually have a bid in the mobile technologies sector. In this article we will look into three of these cases:
Google Inc (NASDAQ:GOOG), Broadcom Corporation (NASDAQ:BRCM) and QUALCOMM, Inc. (NASDAQ:QCOM).
A Stock in Constant Innovation
Google is one of the most common examples used when people talk about a successful company. One can understand why its stock is so pricy, trading at $829.61 (May 2). However, valuation-wise, it exchanges at discount to its peers, at 23.7 times its earnings, versus the 48.1 times industry mean, and very close to its 10-year low of 16.29 (the maximum was 161.5). Most analysts recommend buying this stock at the moment; below you will find the main reasons to back this advocacy:
In the second place, few other companies hold such an impressive execution track record like this firm. Over the past five years, revenue has grown at a compound annual growth rate of 18.1%, gross-profit growth rate of 16.7% and operating-profit growth rate of 6.3% (Zacks Research). In addition, over the years, the management has accomplished a series of very successful acquisitions like Picassa, Android, YouTube, Motorola Mobility, Ad Mob an another 120.
Google Inc (NASDAQ:GOOG) is a dominant search engine in all of North and Latin America, Eastern Europe and most of Asia/Pacific countries. Constantly enlarging its market share, Google seems to offer compelling growth prospects as the market enlarges.
The list of Google Inc (NASDAQ:GOOG)’s attributes also includes a leading position in the mobile market, a growth segment at the moment, the launch of its digital wallet, its strong financial position (especially the absence of long-term debt), profitability and growth.
Continued Growth
QUALCOMM, Inc. (NASDAQ:QCOM) is another of those consensus-generating companies. Most analysts, from Goldman Sachs to Barrons and Morningstar, rate this company’s stock as a strong buy, especially as its current valuation at 17.8 times earnings is close to a 10-year minimum and forward P/E looks even more alluring at 12.99.
Besides its outstanding ratios, including among the highest operating and net margins in the industry, at 30.4% and 28.9% respectively (and these values were about 15% higher last December), and absence of long term debt, this company offers some other interesting features that portray a promising outlook for investors: Its forward annual dividend rate is 2.3%.
The strong and continued wireless chip demand should drive earnings in the near-term. The company will benefit from the growing demand of 3G technologies and smartphones in emerging markets, particularly in China.
Last quarter’s results came in just a few days ago. QUALCOMM, Inc. (NASDAQ:QCOM) reported a 24% rise in revenue year over year, to $6.1 billion, and an increase in its dividend by 40%.
Qualcomm is an established high-end provider for mobile phone manufacturers like Samsung, Nokia, Sony, HTC and Google Inc (NASDAQ:GOOG). Its processor chips serve numerous Android and Windows-powered phones and tablets. Furthermore, it now supplies Apple with the wireless baseband chips used in iPhone 4S and iPhone 5 devices, replacing Intel.
Its broad product offering positions QUALCOMM, Inc. (NASDAQ:QCOM) to benefit from the market expansion. The Atheros Communications acquisition further integrates the company, allowing it to enter the sector of consumer electronics.
The company holds thousands of patents and royalty-paying licenses worldwide, which help to contain the advance of its competitors. As 3G networks are updated to provide better service to customers, QUALCOMM, Inc. (NASDAQ:QCOM)’s royalty incomes should be positively impacted.
A Market-Share Leader
The thing about the tech business is that there is room for growth everywhere and for everyone; it’s just a matter of being creative enough. Broadcom Corporation (NASDAQ:BRCM) stock may not have caught your attention over the past year as its price barely changed. However, the company has outperformed expectations, delivering a 10% growth in revenue year over year and 3.4% EPS growth, which beat the consensus estimate by 16%. I’d say, “buy.” But first, take a look at some reasons to back this recommendation, listed below.
Already a market-share leader in providing chips for enterprise-networking set-top boxes and many other areas, the company’s wide product offering provides extra advantages to compete for an increasing market share in the growing connectivity sector while still producing semiconductors, which provide a more steady revenue source. In addition, Broadcom supplies big clients like Apple with high-tech chips that integrate various functions and has recently attained several other major customers like Samsung and Nokia.
The firm’s strong focus on research and development provides further compelling arguments to trust in its future, especially as most of its employees work in this area. Thanks to its valuable human capital, Broadcom Corporation (NASDAQ:BRCM) has remained innovative since its beginnings, delivering consistent and strong growth. The uptrend in demand of pay TV and internet access in developing countries, especially in India and China, provide even more opportunities for expansion. Finally, its scale is worth mentioning, as it leads the sector, having shipped products in excess of two billion in 2012. This strengthens the company’s position for long-term growth in the semiconductor market (Zacks Research).
Bottom Line
Diversifying your investments is usually a good idea, especially if you choose good companies. All of those described above provide very promising outlooks for both the short and long term. I would recommend buying any or all of these stocks.
The article 3 Big Technology Stocks to Give a Closer Look originally appeared on Fool.com and is written by Victor Selva.
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