3 Large-Cap Technology Names to Consider

Stocks have opened higher today, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.3% and 0.24%, respectively, as of 10:15 a.m. EST.

Beyond Apple
With three technology bellwethers -- Apple, IBM, and Microsoft -- having reported results for the fourth quarter this week, it's worth taking a magnifying glass to the sector. As noted in yesterday's column, technology is effectively the cheapest sector in the S&P 500, which is pretty remarkable if one considers that it is also one the sectors with the highest earnings-per-share growth estimate for 2013, which suggests that it contains opportunities for patient investors.

Running through some of the valuation and profitability metrics for the sector, three large-cap names stand out to me: Cisco (NASDAQ: CSCO  ) , Oracle (NYSE: ORCL  ) , and IBM (NYSE: IBM  ) . None of these three names attracts the sort of megawatt exposure associated with consumer-focused technology brands (Apple takes the crown in this arena). Conversely, they're not exposed to the risk of fast-changing consumer preferences with regard to devices and functionality. That's an attractive combination for investors when it produces price-to-earnings ratios of less than 13 (based on estimates of the next 12 months' EPS).

All three companies cater mainly to businesses, which are much more deliberate, and therefore slower, than individuals in switching to a new technology or a new vendor. Furthermore, unlike Apple, their operating profit margins over the trailing 12 months are at or below their 10-year average; as such, their profitability is likely less vulnerable to mean-reversion -- rich profit margins attract competition! Samsung didn't earn record profits last year by giving Apple free rein over the smartphone market.

Remember: Stock picking isn't about buying the flashiest names; it's about getting more than what you pay for. The three names above aren't sexy, but they may well meet the latter criterion.

Learn more about Cisco
Once a highflying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the lowdown on the routing juggernaut in The Motley Fool's premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as its story changes, so click here now to read more.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2215728, ~/Articles/ArticleHandler.aspx, 9/30/2016 6:29:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 4:00 PM
CSCO $31.39 Down -0.11 -0.35%
Cisco Systems CAPS Rating: ****
IBM $158.11 Down -0.18 -0.11%
IBM CAPS Rating: ****
ORCL $39.12 Down -0.32 -0.81%
Oracle CAPS Rating: ****