by Traders Reserve | October 19, 2013 8:00 am
The government sure knows what buttons to push to send the VIX, a measure of stock market volatility, into a tizzy and investors heading for the nearest exit signs.
It happened between April and June when the Fed toyed with pulling the plug on the bond-buying Band-Aid keeping the economy from bleeding. The DJIA suffered at least three 200-plus point plunges during that period, while the S&P 500 shed 2.2%.
The VIX rose even higher thanks to the government shutdown that had the nation on pins and needles, with worst-case scenarios making daily headlines. The result was a loss across all three indexes over a 5-day stretch, broken only after Congress got past it impasse.
I don’t blame investors. If I were sitting in a couple fat stocks that racked up fat gains three-quarters of the way through the year, I’d take profits off the table too. Seeking refuge on the sidelines as the fourth-quarter storm blows on through sounds very soothing.
No one knows what to expect on Capitol Hill or Wall Street from one day to the next. We can’t control either, but we can seek out stocks capable of shaking off potential nervous breakdowns and performing stealthily through the rest of 2013.
Here is a trio of tech stocks — non-hyped issues well-positioned to hold up under adversity, deliver growth and value, and pay dividends to boot.
Although government contracts don’t sound appealing right now, once Uncle Sam gets back on track the Department of Homeland Security is looking to secure Big Data vendors to provide billions of dollars in products and services over many years.
EMC (EMC) will be in the running. In late 2012, the $50 billion company formed a separate organization called Pivotal Initiative, headed up by VMware’s (VMW) former CEO Paul Maritz. It combines VMware’s data center software and EMC’s big data technology. It is expected to bring in revenue of about $300 million in 2013. Revenue is projected to grow to over $1 billion by 2017. EMC actually owns 33% of VMware.
General Electric (GE) also invested $105 million to buy a 10% stake in Pivotal Initiative. Best of all, EMC’s products are compatible with many different platforms including IBM (IBM) and Oracle (ORCL).
EMC brings value to the table—just what a portfolio needs to weather storms. It trades at 14.5 times this year’s earnings, with a clean balance sheet of $11.15 billion in cash. It recently started paying a small dividend of 1.6%, but that’s expected to increase steadily.
The company reported a 5.7% increase in revenue and 7.8% gain in net income to $701 million for the second fiscal quarter ended June 30. Up 3.6% in the third quarter and flat year-to-date, EMC has plenty of room to grow.
Most impressive about CA Technologies (CA) is that its net income for the first fiscal quarter ended June 30 rose 42% to $335 million. Perhaps Michael Gregoire taking over as CEO and cutting costs had something to do with the growth.
Prior to that announcement, shares of CA were up 30% year-to-date so it appears this may be the beginning of a second chapter of steady gains.
CA is involved in a rapidly growing and necessary part of IT. It’s called Data Center Infrastructure Management or DCIM. Rather than go into eye-glazing detail about what it does, let’s just focus on its staggering market potential. Fewer than 10% of mid- to large-sized data centers utilize it, and 451 Research says DCIM supplier revenue will reach $1.8 billion by 2016, representing a 44% compound annual growth rate.
While migrating away from mainframe services, ala IBM, the DCIM provider is also focusing on growing its cloud market share. Cloud is estimated to become a $148.8 billion global market in 2014, $160 billion in 2015, and $207 billion in 2016.
Known for having a strong pipeline and healthy financial books, it also delivers an impressive 4.5% dividend.
While J.P. Morgan (JPM) lowered their IT spending forecast for 2013, it sees a 3.6% growth on the horizon in 2014. That bodes well for NICE Systems (NICE) which provides solutions for capturing and analyzing customer interactions across communication channels such as phone, surveys, email and the Web—otherwise known as a Big Data platform.
Its second-quarter revenues rose 4% to $225 million year over year and the acquisition of Causata, a provider of real-time Big Data analytics technology, is expected to help drive growth in 2014.
An added bonus with NICE is its foray into the security industry with Actimize. It’s the largest and broadest provider of a single financial crime, risk and compliance software platform for the financial services industry.
Named No. 1 in anti-money laundering technology by Operation Risk & Regulation Magazine in 2012, the company just earned recognition from Chartis, a provider of research and analysis on risk management in the global market. It announced last month that NICE was positioned as a Category Leader in its The RiskTech Quadrant™ for Enterprise Fraud Management Solutions.
According to Chartis, a “Category Leader” is a risk technology vendor that “has the necessary depth and breadth of functionality, technology, and content, combined with the organizational characteristics to capture significant market share by volume and value.”
Sorry, no dividend here. However, during that volatile April-June period, the stock rose 27%; and while the rest of the market dipped nearly 3% in the last five trading days, it gently fell 0.18%.
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