While 2014 is still pretty young, one trend that has been noteworthy is the choppiness in some big name tech stocks.
Amazon.com (AMZN), a stock that has long been thought of as bulletproof, has crumbled 17% since the start of the year. And despite a wildly successful IPO in the fall followed by a big run-up, social media darling Twitter (TWTR) is down 35% since Christmas.
It’s enough to make you think that the tech sector has finally run out of gas, right?
As it turns out, a lot of large-cap tech stocks are doing just fine. Despite some underperformers, the major sector funds including the Vanguard Information Technology Index Fund (VGT) and the iShares Dow Jones US Technology Sector Index Fund (IYW) have both still handily outperformed the S&P in the past 12 months.
That means it’s not a question of avoiding all tech stocks, but rather, avoiding the bad picks and focusing on the good ones.
To help you do just that, here’s a list of seven big-name tech stocks that are looking up right now.
Tech Stocks: Seagate Technology (STX)
In a post-PC age, a hard drive manufacturer is a hard sell for many investors. But while the storage business is competitive and the mobile revolution has turned up the pressure, consolidation in the industry has allowed Seagate Technology (STX) to become much more competitive in the past few years.
Consider that since the March 2009 lows, STX stock is up a phenomenal 1,700%! And not only did the company reinstate its dividend, but it brought the payments back at an even higher rate.
But don’t think the growth is all in the rear-view mirror. In the past 12 months, STX stock is up more than 60% vs. about 20% for the broader S&P 500. And looking ahead, the company tallied more than $1.1 billion in R&D expenditures last year to prime the pump for future growth.
Despite all this, Seagate still sports a forward price-to-earnings ratio of just less than 10 and boasts a 3.1% dividend yield.
Watch for Seagate earnings on April 29.
Tech Stocks: Facebook (FB)
Facebook (FB) has been on a tear in the last 12 months, up 120% since last spring. Furthermore, FB stock has managed to put up 8% gains YTD despite big volatility for the rest of the market and the meltdown of other tech giants like Amazon.
While there’s bound to be criticism of FB as a fad and a social media site that is rapidly becoming “uncool,” the bottom line is still the bottom line — and Facebook continues to impress.
What’s even more impressive, as I noted after Google (GOOG) and Yahoo (YHOO) reported earnings, is that FB stock continues to motor higher thanks to strong ad metrics. GOOG and YHOO both are seeing the opposite, with their cost-per-click numbers sinking as advertisers demand lower rates … but somehow Facebook has managed to prove the value of its platform above other Internet advertising methods. This will bode well for the company even as competitors see ad revenue pressured.
And even if rates flat-line? Well, FB continues to grow aggressively overseas and reach new users. Furthermore, its mature U.S. audience remains highly engaged and profitable.
You could do worse than hide out in Facebook stock right now, considering the volatility elsewhere in the stock market this year.
Facebook reports earnings after the bell Wednesday, April 23.
Tech Stocks: Cisco (CSCO)
Cisco (CSCO) is edging out the broader market, up 4% to the S&P 500’s 1% in 2014. And that’s not even counting any distributions as part of its plump 3.3% dividend yield.
Sure, CSCO stock gets a bad rap for its anemic long-term returns. Over the last 10 years, the megacap tech stock is actually slightly in the red vs. 60% gains or so for the S&P. But for long-term dividend investors, CSCO could hold serious potential as a value play — especially at current pricing and with current stability for shares.
The most recent Cisco earnings from February did forecast a sales decline, but the sharp selloff that followed was quickly replaced by a rally in late March that pushed CSCO stock to its highest levels since before Thanksgiving. So investors clearly think a lot of this pessimism is priced in.
Longer term, as I wrote a few months ago, I remain convinced that there is a cyclical recovery in store for enterprise technology across the next few years. In addition to pent up demand at businesses that need routers and servers, there’s also the hope of new businesses and organic growth in the tech sector.
With a forward price-to-earnings ratio of about 10.7 and a hefty $47 billion in the bank, Cisco seems to be a fair value at current pricing. Long-term investors who want to play the tech sector and get a good dividend could do worse than look Cisco’s way.
Cisco doesn’t report earnings again until mid-May.
Tech Stocks: Microsoft (MSFT)
Microsoft (MSFT) is another tech stock that has been written off as dead money by a lot of investors. But perhaps those investors haven’t been paying attention to MSFT stock in 2014, since the stock is up 7% YTD to beat the market.
With roughly $98 billion in cash and investments and a still-dominant tech brand, it’s hard to argue against the fact that Microsoft has staying power. But does that make it a buy after this run?
I say “yes.”
One big reason is change on the executive team, with the promotion of Satya Nadella to CEO in February as the replacement for Steve Ballmer, as part of a massive restructuring unveiled about a year ago.
Additionally, the purchase of the Nokia (NOK) devices and services division has helped push the company toward a better mobile hardware footprint, and the recent release of Office software for iPhone and iPad has proven that the company is willing to think differently to achieve growth.
With the crumbling of BlackBerry (BBRY), MSFT is the only legitimate No. 3 in the global smartphone software space — and given its enterprise chops, Windows Phone seems full of potential for business and government use. Furthermore, Microsoft continues to push innovation (or at least imitation) with its Cortana voice-control interface that it contends is better than Apple (AAPL) voice assistant Siri.
There might not be a lot of short-term outperformance left after its big run and the broader volatility, sure … but I wouldn’t hesitate to add to MSFT stock holdings now considering the very juicy dividend and big hopes for new technology and business efforts.
Watch for Microsoft earnings on Thursday, April 24.
Tech Stocks: Electronic Arts (EA)
Electronic Arts (EA) is the iconic video game company behind such console-based hits like the Madden football series and the Battlefield action combat game series.
This latter franchise has long been a cash cow, but EA stock took it on the chin this December on fears that the video game company had botched the latest incarnation through a host of technical bugs that created big headaches for players.
However, sentiment has rebounded on both the game and on EA stock as a result. Shares have gained back everything they lost over the rocky holiday launch of Battlefield 4, and while EA has softened from its 52-week high in early March, it still remains up strongly since Jan. 1. Specifically, EA stock is sitting on a YTD return of more than 20% to trounce the S&P 500 in the same period.
In fact, in mid-March, EA was up against a new 52-week high before the market decided to get all gloomy.
The market is struggling to figure out how to fairly price entertainment software companies, with mobile gaming stock Zynga (ZNGA) crashing and burning in2012 and more recently newly minted King Digital Entertainment (KING) collapsing after a hasty IPO.
Meanwhile, EA is comfortably profitable with massively successful franchises to keep parceling out with sequels and a big $2 billion in cash and investments as a cushion.
You could find a nice home in Electronic Arts right now given the recent softness and value status of the software giant.
Tech Stocks: Akamai (AKAM)
Akamai (AKAM) may not have the name recognition with consumers as some of these other picks because it is very much a behind-the-scenes Internet stock. But with a broad base of clients including Apple (AAPL), MTV and Staples (SPLS) using Akamai for networking and e-commerce solutions, AKAM is hardly a bit player and is very much connected to the way the web works.
Akamai provides content delivery, networking services and cloud-based solutions to other Internet businesses that use the web to make money. That means as its big clients succeed in earning new clicks and new customers, so does Akamai.
AKAM is a volatile stock that has been prone to big gaps up and down in recent years, but investors have seen positive movement so far in 2014, with the stock tacking on more than 15% since January on great earnings to start the year. There’s a chance for a repeat performance at the beginning of May, too.
As companies get increasingly data-hungry with the way they provide streaming radio, online video, rich content and other media to Internet users, Akamai is in the right place to profit.
AKAM reports earnings on May 1.
Tech Stocks: Baidu (BIDU)
If you’re iffy on domestic large-cap tech stocks, then consider looking overseas — particularly to China and Internet giant Baidu (BIDU).
China is the biggest Internet market in the world, and Baidu controls about two-thirds of the search market there. And since Google (GOOG) and other western companies are reluctant to play by Beijing’s rules in the state-owned media space, BIDU has virtually no chance of ceding ground to rivals anytime soon.
BIDU stock has done quite well thanks to its search dominance, but it’s also worth noting that China has surpassed the U.S. as the largest market for smartphones in the world. Baidu is aggressively investing in mobile products to tap into this space and see continued growth in the future. This includes the acquisition of app store 91 Wireless last year for $1.9 billion,
Baidu just reported earnings in February, so investors have a while to wait for its next results. However, the stock is down 10% this year, and that could provide a good value buy.
Unlike other Chinese equities, BIDU stock has done very well lately with a 12-month return of more than 80%, so you may want to consider this tech stock as your safest way to play china right now.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.