Technology investments have been on a tear lately, and technology funds have beaten the market considerably in late 2010 and early 2011. But blue chip investors should realize that not all tech stocks are created equal. There are, in fact, a number of software stocks in the tech sector that are set for a rough few months ahead of them.
How can I tell? Simple: By looking at the fundamentals and looking at recent buying trends — or more specifically, selling trends. By these two metrics it’s clear that these give software blue chips are ready for a fall:
Microsoft Corp: Computer software giant Microsoft Corp (NASDAQ: MSFT) may be household name, but its stock has had a very unsuccessful year. In the last 12 months, shares of MSFT have dropped -10%, compared to gains of +19% and +16% for the NASDAQ and Dow Jones, respectively. Microsoft started 2011 on a high note, but in the last month has dropped -8%. Another statistic that is worrying shareholders is MSFT’s quarterly earnings growth, which was declined year-over-year in the company’s last financial report. Just because Microsoft has an enormous market cap of $217 billion doesn’t mean the company’s stock is worth buying.
Adobe Systems Inc: Next on the list is Adobe Systems Inc. (NASDAQ: ADBE), which barely broke even in the last year, up just +1%. Those who have owned ADBE shares for the whole year know about the ups and downs the company has gone through. In late September, the company’s stock lost -20% in a single day! Despite some recent gains to claw back to September levels, ADBE hasn’t shown consistent enough growth for me.
Activision Blizzard: In the last three months, video game company Activision Blizzard (NASDAQ: ATVI) has watched its stock drop -7%, compared to gains by the broader markets. More recently, the stock has lost almost -6% in the last month alone. While earnings numbers are not completely terrible, experts are projecting a one-cent slip from the EPS ATVI posted this quarter last year. Another startling statistic from the company’s last income statement was its quarterly revenue growth, which was -8%, year-over-year. With the holiday shopping season long gone and unemployment still high, it appears not many people are in the market for expensive video games.
Symantec Corp: Known for its security, storage, and systems management solutions Symantec Corp. (NASDAQ: SYMC) has seen its stock decline -3% over the last 30 days. Experts are projecting a four cent drop in earnings this quarter, compared to the earnings SYMC posted last year. Despite gains over the past several months, the drop over the past 30 days is alarming, and could be the sign of bigger drops ahead. Sell this stock before it does any more damage to your portfolio.
CA Inc: Information technology company CA Inc. (NASDAQ: CA) has also seen its stock lose value in the last month, at -6%. Shareholders should also be wary of the company’s quarterly earnings growth, which was listed at -22%, year-over-year, in its last income statement. Looking back at the past three months, CA stock is down -1%, despite solid growth in January. CA is trading in the middle of its 52-week range of $17.70 to $25.68, but with less than stellar stock performance and earnings numbers, this tech stock is worth avoiding.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
