Several tech stocks have been dragged down by the recent crisis in Japan, and many investors are looking for ways to protect themselves against the fallout.
The country is one of the biggest consumers of semiconductors and is home to many electronic device makers. IDC estimates that Japan has accounted for just over 4% of worldwide PC unit demand in recent quarters.
"Given recent concerns over sluggish PC demand and excess hard drive inventory, even slight weakness from Japan could be problematic for both industries over the near term," writes Morningstar's Grady Burkett. "More important for the PC manufacturers, however, is that we are likely to see price increases and possibly shortages in some components required for PC production."
"In short, we expect most technology firms with global exposure to be affected in some way by this unfortunate disaster."
So how can you find tech stocks that won't be dragged down by the crisis? Look for financially strong tech firms that have solid competitive positions and generate solid cash flow throughout the business cycle.
All of the stocks mentioned below have significant cash holdings relative to their average quarterly operating expenses. In addition, all of these stocks have seen significant institutional buying over the last three months (data sourced from Reuters).
Smart money investors appear confident that these tech stocks have what it takes to get through supply chain disruptions -- do you agree? (Access free, interactive tools to analyze these ideas by clicking here.)
1. Sycamore Networks
2. Actions Semiconductor
3. Vital Images
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
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