Statistics released on Friday indicate that corporate spending is up, a promising economic indicator that has boosted profit forecasts for computer and software markers.
In fact, profit forecasts are holding up better than any industry in the world, according to Bloomberg. It's "a sign of confidence that corporate spending will keep the American economy expanding next year" despite Europe's spreading debt crisis and China's slow growth.
Data breakdown
According to 2,900 analyst projections compiled by Bloomberg, net income at companies from Apple (Nasdaq: AAPL) to Oracle (Nasdaq: ORCL) will rise 11% in 2012 on average.
According to the Commerce Department, investment in equipment and software climbed at a 15.6% annual pace in the third quarter, its highest since 2008. Technology expenditures may climb 3.9% to $2.7 trillion in 2012, according to the research firm Gartner (via Bloomberg).
Projections for technology companies have fallen less than any other group in the MSCI World this year: Consider that the profit estimate for tech is down 2.3% while utility forecasts were cut the most at 29%.
Technology stocks on the MSCI have a PEG ratio of 0.87 (the closer the ratio is to 0, the cheaper the company). The valuations are comparatively cheap when you consider that the household product-makers trade at 1.49, and health care is at 1.11.
Investing ideas
Technology stocks have long been considered "undervalued." Could an increasing number of studies highlighting technology as the savior of the U.S. economy jump-start its valuations?
Are you interested in getting involved with the technology sector? If so, you may find it worthwhile to explore the sentiment of company insiders.
Insider buying (when its insiders like upper management and board executives personally buy company stock) is a bullish indicator for a company. Companies seeing this strong vote of confidence could outperform just like their employees predict.
When insiders buy their company's stock, it not only indicates that they have an optimistic outlook for the company, it may also indicate that they believe the stock is attractively priced.
Tech company insiders are buying up these names -- do you agree with their optimism? (Click here to access free, interactive tools to analyze these ideas.)
1. Motorola Solutions (NYSE: MSI): Provides business and mission critical communication products and services for enterprise and government customers worldwide. Market cap of $15.20B. Net insider shares purchased over the last six months at 17.60M, which is 6.73% of the company's 261.49M share float.
2. GeoEye (Nasdaq: GEOY): Provides earth imagery and imagery information products, as well as image processing services to the United States and foreign government defense and intelligence organizations, domestic federal and foreign civil agencies, and commercial customers. Market cap of $421.83M. Net insider shares purchased over the last six months at 810.0K, which is 4.07% of the company's 19.92M share float.
3. VMware (NYSE: VMW): Provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. Market cap of $39.71B. Net insider shares purchased over the last six months at 1.62M, which is 2.09% of the company's 77.69M share float.
4. Dell (Nasdaq: DELL): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap of $27.70B. Net insider shares purchased over the last six months at 17.23M, which is 1.13% of the company's 1.52B share float.
5. Merge Healthcare (Nasdaq: MRGE): Provides health information technology interoperability solutions. Market cap of $433.49M. Net insider shares purchased over the last six months at 281.0K, which is 1.07% of the company's 26.14M share float.
6. Take-Two Interactive Software (Nasdaq: TTWO): Develops, and distributes interactive entertainment software, hardware, and accessories worldwide. Market cap of $1.23B. Net insider shares purchased over the last six months at 458.75K, which is 0.63% of the company's 72.45M share float.
7. AOL (NYSE: AOL): Operates as a Web services company that offers a suite of brands and offerings for the worldwide audience. Market cap of $1.36B. Net insider shares purchased over the last six months at 490.0K, which is 0.51% of the company's 95.67M share float.
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.
Kapitall's Rebecca Lipman owns shares of Dell. Insider data sourced from Yahoo! Finance.
