- These tech stocks to buy in May are prime candidates for a rebound.
- Dell Technologies (DELL): Strong sales growth and a dividend yield make it a compelling buy.
- Micron Technology (MU): A semiconductor stock that is cheap with a balance in value and growth.
- HP (HPQ): A personal computing giant with strong profitability and surging free cash flow that offers an attractive dividend yield as a bonus.
2022 has been until today a turbulent year for the U.S. stock market and other global financial markets. The Nasdaq Composite closed at 12,488.93 points on April 27, having losses of -20.17% year-to-date. It is almost at the level of 12,464 back in late November 2020. So many reasons have caused the latest tech stocks rout, the uncertainty of war in Ukraine, the high inflation rate, the Federal Reserve and its hawkish statements about interest rate hikes, high energy prices, and broader risk-off investment sentiment.
The adage “sell in May and go away” this year may not apply. Of course, it does not mean that it is a universal rule of stock investing by no means. If only investing in stocks was that easy. Why may this adage not occur this May? Stocks and especially tech stocks have been beaten down and could well be in a rebound soon. Here is a tricky part. Or to be more precise a very risky and tricky factor to consider now.
The Federal Reserve could surprise us with a 50-basis interest rate hike soon. This scenario could be an early shock until all market participants realize its deeper implications. So instead of buying tech stocks that even after their latest decline remain overvalued, the scenario of investing in high-quality, undervalued tech stocks with strong fundamentals seems better to withstand future selling waves and provide risk-adjusted returns.
These top tech stocks to buy offer a balance in terms of growth, valuation, and strong fundamentals. Let’s dive into them.
| DELL | Dell Technologies | $46.72 |
| MU | Micron Technology | $68.63 |
| HPQ | HP | $36.29 |
Dell Technologies (DELL)
Dell Technologies (NYSE:DELL) have losses of nearly 17% year-to-date and now presents a very attractive investment opportunity. It is not just the price-earnings (PE) ratio trailing 12 months (TTM) of 6.63 as of Apr. 27 but there is a combination of factors that are in the stock’s favor here. The forward dividend & yield of $1.32 and 2.81% respectively can generate additional passive income. The 1-year estimated price target is $61.78.
In FY 2022 the company reported sales growth of 16.45% to $101.04 billion and a net income of $4.95 billion surged 120.01%.
There is one key metric, in particular, to get excited about that reflects how well Dell Technologies adds value to its shareholders. The return on equity % ratio for FY 2021 was 324.03% and for FY 2022 it increased to 878.83%. This is a very strong financial performance.
With an expected earnings-per-share (EPS) growth of 12% for the next three to five years and a price/earnings-to-growth (PEG) ratio of 0.59, DELL stock is hard to ignore today.
Micron Technology (MU)
Shares of Micron Technology (NASDAQ:MU) were trading at nearly $96 back in February 2022 and as of April 27, the closing price was $66.47. This decline of nearly 30% should not be the sole reason to invest in MU stock as it is a naïve investment decision, buying the dip is not always a good idea. On the contrary, I consider this selloff ideal for patient investors, and for traders that want to buy a value and growth stock at a severe discount now.
Micron technologies in its latest earnings report on March 2022 reported a beat on EPS and revenue.
A EPS generally accepted accounting principles (GAAP) of $2 was a beat by 16 cents, and revenue of $7.79 billion was a beat by $241.85 million. The stock has a PE Ratio (TTM) of 8.56 and it should benefit from the global chip shortage over the next quarters. One specific reason to be very bullish on Micron Technology is the company’s free cash flow (FCF) growth of 2,837.35% in 2021 to $2.44 billion compared to a FCF of $83 million in 2020.
The 1-year target estimate on Yahoo Finance is $111.82 and the stock is having a PEG ratio of only 0.22 and an expected three to five year EPS growth of 32.04%.
HP (HPQ)
HP (NYSE:HPQ) has seen its shares maintain resiliency to the broader stock market selloff, as they have losses of nearly 2% year-to-date. The PE Ratio (TTM) of 6.64 is cheap and the forward dividend and yield of 1.00 and 2.75% respectively are attractive.
HP had a strong latest quarter’s earnings report back in late February 2022, reporting EPS GAAP of 99 cents a beat by 1 cent, and revenue of $17.03 billion, a beat by $504.85 million. For FY 2021 HP had a sales growth of 12.68% to $63.7 billion and a significant increase in net income of 128.66% to $6.5 billion compared to a net income of $2.84 billion in 2020.
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) has disclosed a stake of 11% in HP and that can be fully justified. HP has improved its gross margin, net margin, and return on assets (ROA) in 2021.
These are signs of strong financial performance, and improved efficiency, the type of companies legendary Warren Buffet invests in. FCF increased 55.97% in 2021 to $5.83 billion, another very positive factor to be bullish for HPQ stock. This makes it a real player among these top tech stocks to buy.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
