by Johnson Research Group | October 24, 2012 8:31 am
Last week, we wrote about technology companies that should be jettisoned from investor portfolios. In the name of being fair and balanced, we thought it would be fitting to circle around and identify those tech stocks that appear ready to lead the sector higher through end-of-year trading, as everything in the world of technology certainly is not flawed.
We’ll start off by looking at a few companies that are not what people envision as tech stocks — electronic payments companies.
Visa (NYSE:V), MasterCard (NYSE:MA) and Fiserv (NASDAQ:FISV) have all been on a tear and aren’t likely to slow down right now. In this case, all three of the companies are an attractive alternative among the technology sector right now. We think a target of 5% to 10% higher within the next three months is reasonable.
Taking a look at two of these:
One of the largest payment technology companies, Visa continues to benefit from the fact that fewer of us are carrying cash. Year-to-date, Visa stock is more than 35% higher, outpacing the S&P 500 by a wide margin as electronic transaction activity grows. The company’s earnings picture has been solid, beating analyst expectations by an average of 5% for the last four quarters. While sentiment is positive, it’s not what we would refer to as “overloved,” meaning shares should have room to climb higher.
With shares breaking below their 50-day moving average on Tuesday, it appears the bulls could get an opportunity to buy Visa stock around the $134 level — a 5% sale price from its recent highs and the site of technical support. We expect to see prices north of $150 before year’s end.
Clearly benefiting from the same fundamental picture as Visa, MasterCard stock offers investors another play on the electronic payment universe. Performance for MA shares are less robust for the year, returning only 25%, though still outpacing the S&P 500. The upcoming retail season should help boost revenue for the payment technology companies as consumers swipe to buy their holiday gifts.
Watch for MasterCard stock to go “on sale” around the $450 level, as shares should grab support at their 50-day moving average at that price.
Another company most people don’t think of when you say technology is Corning (NYSE:GLW). The company uses its expertise to produce everything from fiber optic cables to glass for displays, making it a real Swiss army knife of tech.
Corning stock just recently broke above resistance at the $13.50 mark and will progress toward our target of $16.50 as soon as the market sees a little strength.
Finally, for the traders in the group, a tech giant is offering potential for a short-term trade.
Google (NASDAQ:GOOG) had a heck of a week last week as the Internet behemoth had all kinds of problems with its earnings announcement. The company unexpectedly missed analyst forecasts by 15%, which resulted in a 10%-plus haircut before the close. As a result, Google stock is now among the most technically oversold stocks in the Nasdaq-100 Index.
In addition to their “oversold” condition, GOOG shares are sitting just above a technically significant level of $660, which represents the level at which the shares consolidated during their mid-summer slowdown in August.
Finally, looking at the options market, there is a lot of put open interest at the November 660 strike, indicating that the options market is extremely pessimistic on the shares at that price point. Our experience is that large put open interest strikes like this tend to act as support for the shares.
For the above reasons, we like GOOG as a short-term (one to three weeks) play.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
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