by Johnson Research Group | November 16, 2012 9:19 am
Around the beginning of the year, a new list identified Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and International Business Machines (NYSE:IBM) as the new “Four Horsemen of Technology” — the implication is that these four companies will headline growth for the future of tech.
The replacement of Dell (NASDAQ:DELL), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC) and Cisco (NASDAQ:CSCO) by the new Four Horsemen makes some sense … but from a trading perspective, we’re more concerned with finding the “Four Workhorses of Technology.”
The Four Workhorses are a different breed. These are the companies that are doing the work among the typical tech exchange-traded funds like the Powershares QQQ Trust (NASDAQ:QQQ) or the Technology Select Sector SPDR (NYSE:XLK).
Without further adieu, here they are:
Looking at the performance of the new Four Horsemen, the average return for 2012 of this group is about 17%. The average is skewed by AAPL and GOOG, which have returned around 30% each, while IBM and AMZN have returned around 3% year-to-date.
Our group of Four Workhorses might not post as stellar returns, but they offer consistency and reliability — which are important to us as investors. Our Workhorses have returned an average of 36% year-to-date with an average volatility that is lower by about 15%.
For our money, these stocks are a great representation of technology and more likely to be at the head of the pack as we roll into 2013 and beyond. However, we think a list like this should be updated more often than every 10 years, given the speed at which technology changes, so we’ll revise this list for you every quarter.
Here’s a closer look at each of our Four Workhorses of Technology:
Click to Enlarge That’s right, a credit card company is among the workhorses of technology.
Think about the number of transactions that you make a week for your household’s expenses. If you’re like us, more than 75% of them are done via electronic payments using something like a Visa (NYSE:V) card. The technology of payment processing is huge, as convenience and security finally appear to be working together with our credit cards.
Visa’s fundamentals have been improving, despite the economy, helping to push shares toward new highs in a strong technical trend.
Click to Enlarge We consider Amazon and eBay (NASDAQ:EBAY) to be working in similar markets as both represent an online retail shopping experience.
Honestly, we like AMZN as one of the Four Workhorses; however, we thought it would be better to offer an alternative. Ebay has done an amazing job of remaining something better than a flash in the pan in the technology sector by continuing to tweak its business over the years.
Given that we like Visa, it’s no surprise that the inclusion of PayPal into eBay’s business model adds a facet in the attractive electronic payment universe that gives it a nod over Amazon. Ebay stock has run 57% higher year-to-date, and it’s among the most volatile of the Workhorses.
EBAY is trading closer to the $45 mark now, which we would view as a great opening price for traders looking to bid on this online market leader.
Click to Enlarge Handsets are the hottest of the electronic items out there as consumers continue to demand new, upgraded handsets.
But whether it’s an Apple, Nokia (NYSE:NOK), Samsung (PINK:SSNLF), Motorola or many other models, there’s an excellent chance that Qualcomm (NASDAQ:QCOM) is producing semiconductors or other critical pieces of the handset.
Qualcomm stock is trading only 14% higher for the year, making it the worst-performing workhorse. QCOM shares have been trading with a slightly lower measure of volatility lately and are now breaking above a confluence of technical support/resistance levels. A break back above the $62 level will get technical buyers moving back into the shares and likely push prices back toward the $70 mark.
Click to Enlarge Our final Workhorse likely isn’t on the radar of the average investor.
Fidelity National Information Services (NYSE:FIS) is in the business of providing banking and payments technology solutions worldwide. Note that this company operates some of its business in the same wheelhouse as Visa and other credit card companies with electronic payment solutions.
FIS shares are more than 30% higher for the year with a volatility measure that is 20% lower than the Four Horsemen, meaning FIS shareholders are realizing greater gains with less volatility — a notion that most investors love.
The stock is holding tight at the $34 level during the recent pullback in the market, which likely will serve as a launching pad for the stock to shoot toward $40 in the intermediate-term.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
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