In 2015, the stock market continues to hang tough and the labor market continues to improve for job seekers across America.
That is setting the stage for a possible resurgence in corporate technology spending as businesses ramp up in anticipation of good times ahead.
Research firm Forrester said a few weeks ago that “CIOs can confidently push for 2015 budget increases of 4 percent to 6 percent in terms of the purchase of tech goods and services”
The global picture is a bit more depressed, but even international tech spending is in mild growth mode, too.
The bottom line is that businesses that want to grow in 2015 have to invest in the latest technologies to do so. Sometimes that’s data analytics, sometimes that’s cyber security and sometimes that’s cloud-computing software.
But any way you slice it, it adds up to gains for these attractive tech stocks.
Tech Stocks to Buy: Palo Alto Networks Inc (PANW)
Palo Alto Networks Inc (NYSE:PANW) is up more than 15% since Jan. 1, and up about 85% in the last 12 months thanks to an increased focus on cyber security.
And while this tech stock is currently operating at a small loss, remember it only went public back in 2012 and is very much in growth mode. PANW is investing in itself big-time in the hopes of being consistently profitable next year, and there’s a lot of reason to think it will be successful. Palo Alto Networks finished fiscal 2012 with $255 million in revenue and is forecast to hit about $880 million in revenue this year — better than 230% growth in three years.
Additionally, PANW has a strong balance sheet with almost $1.1 billion in cash and investments on the books, so there’s no risk of the growth plans running off the rails.
The biggest product of this cyber security stock is a proprietary firewall that protects a wide variety of businesses worldwide, trusted by firms like Motorola Solutions Inc (NYSE:MSI) and Raymond James Financial, Inc. (NYSE:RJF), and PANW will continue to do well as events like the Sony Corp (ADR) (NYSE:SNE) hacking or the Anthem Inc (NYSE:ANTM) data breach mean continued focus on security spending.
Either PANW is going to soar on its own merit, or it will be an increasingly attractive buyout target for other enterprise technology stocks in the next year or two.
Tech Stocks to Buy: Accenture Plc (ACN)
Accenture Plc (NYSE:ACN) is a technology consulting firm that has simply been on a tear since October, rising 17% in the past five months to nearly double the broader market’s returns in the same period.
And despite this recent run to new all-time highs, it’s still fairly valued with a lot of room to rise in the months ahead.
As Dan Burrows recently pointed out, the charts look great for Accenture after a recent golden cross, and right now, “ACN is in a two-month period of historical outperformance, gaining an average of 0.7% in March and 2% in April over the last decade.”
But beyond the charts and price history alone, there’s the continued hope of an IT spending recovery in 2015 as businesses continue to hire and expand. While the company doesn’t report earnings until March 26, its report from December was very strong and showed a beat on the top and bottom lines, as well as growth in four out of five core business groups. That bodes very well for its next quarterly report in a few weeks.
ACN has forward price-to-earnings ratio that’s lower than the S&P 500 at 17 vs. about 17.5 for the broader market — not a huge discount, but at least an indicator that its not in a bubble like other frothy tech stocks. And while its 2.3% dividend doesn’t burn the house down, it is higher than both the 1.8% average of the S&P and the 10-year T-Note right now.
But the biggest reason to buy ACN isn’t for the dividend or the bargain valuation — it’s the hopes of a continued recovery in enterprise tech spending across 2015 as businesses invest in themselves … and hire consulting firm Accenture to get their high-tech houses in order.
Tech Stocks to Buy: Cisco Systems, Inc. (CSCO)
Cisco Systems, Inc. (NASDAQ:CSCO) is a multifaceted mega-cap tech stock with its fingers in many pies. But the one common theme among Cisco’s different divisions is a focus on the business of information technology, and contracts with some of the biggest businesses on the planet.
And as a result, CSCO also will benefit from the tailwind of increased enterprise spending in 2015.
Additionally, CSCO stock provides some value right now with a forward P/E ratio of about 12.4, well below the S&P 500’s ratio. Cisco also boasts a 3% dividend and about $54 billion in cash and investments.
Cisco is stable and established, with a $140 billion market cap and one of the biggest brand names in technology. But it also boasts growth of late, as CSCO earnings in November included the “strongest (fiscal) Q1 revenue in history” according to a press release, and execs are “unabashedly bullish” in a follow-up earnings report just a few weeks ago in mid-February.
Although Cisco has underperformed in 2015, it’s worth noting that CSCO stock saw a big gap up in February on optimism around earnings, and investors are gaining more faith in this enterprise technology giant after a series of strong quarterly reports.
That makes now the perfect time to invest in Cisco before it begins another leg higher.
Tech Stocks to Buy Now: Fortinet Inc (FTNT)
Fortinet Inc (NASDAQ:FTNT) is another cyber security company that is en vogue lately. A mid-cap player with a market size of about $5.8 billion, the network-security provider is still a serious player both in its own right and as a potential acquisition target.
FTNT is the perfect “Goldilocks” cybersecurity stock — not too big and not too small. It serves large clients including the Nasdaq OMX exchange and Indiana University, while its growth metrics can impress in years ahead.
And unlike some other stocks in the space, Fortinet has seen impressive top-line growth married with a comfortably profitable operation that isn’t in cash-burn mode. Fiscal 2014 revenue hit $770 million, up almost 80% from $433 million in fiscal 2011 — an impressive growth rate even as the company has been turning a profit for many years now.
This strong performance means FTNT is well-capitalized, with $1 billion in cash and investments — all over zero debt.
Bears will note that Fortinet Inc had a difficult quarterly report a few weeks ago, with shares slipping after the company posted a serious dip in net income. But the details looked all right and apparently investors haven’t been too concerned since the stock is up more than 10% year-to-date despite this seemingly disappointing headline.
That’s because adjusted profit backing out one-time charges was actually in line with expectations, revenue was up 26%, and total billings up 35% year-over-year. As a result, the selloff didn’t last more than a few days, and Fortinet stock bounced back on hopes of a bright future.
Tech Stocks to Buy: Microsoft Corporation (MSFT)
Microsoft Corporation (NASDAQ:MSFT) has underperformed since around Thanksgiving, but investors should consider taking a position in this tech stock despite recent weakness and a selloff after January earnings.
The biggest reason in my mind is that, unlike other high-flying companies that could be at risk of a bubble, Microsoft is unloved — and you can buy it at a bargain. That’s not easy to come by in tech right now.
Consider MSFT has a forward price-to-earnings ratio of 14.2, which is not only less than other tech stocks but less than the forward P/E of about 17.5 for the entire S&P.
Furthermore, while MSFT stock took a hit in January on word that its Windows business wasn’t as robust as projected, the company continues to evolve with big growth in its cloud software division and its Surface tablet hardware line.
And, of course, Microsoft is one of the biggest brands on the planet and a super-stable company with more than $100 billion in cash and investments, and a generous plan for stock buybacks and dividends going forward.
With MSFT yielding about 3% right now and with all the negativity priced in, you could do worse than trust this big-name tech stock to at least protect your money in an otherwise frothy tech sector.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at email@example.com or follow him on Twitter via@JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
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