On the back of the worst daily decline since early November, stocks opened higher this morning, with the S&P 500 (^GSPC 0.02%) and the narrower, price-weighted Dow Jones Industrial Average (^DJI -0.11%) up 0.64% and 0.88%, respectively, as of 10:05 a.m. EST.
The "Old Tech" trade
Deutsche Bank is recommending what it calls the "Enduring 8" -- stalwart technology companies Cisco, EMC, Hewlett-Packard (HPQ 1.55%), IBM, Intel, Microsoft, Oracle, and NetApp. In a low-growth economy, this seems a reasonable idea, on the face of it. The numbers certainly back it up:
|
Enduring 8 (average, market-cap weighted) | |
|---|---|
|
Forward P/E |
10.6 |
|
Return on equity, trailing 12 months |
35% |
|
Return on capital, trailing 12 months |
17.7% |
Source: S&P Capital IQ.
All three of these metrics compare favorably with those of the S&P 500 (or for the Nasdaq, I suspect). However, if you're going to be picking stocks, it may be worth a deeper dive to select the most promising of these "Enduring 8"; some of these companies are facing significant secular headwinds, such as the shift from the PC to the tablet and smartphone (I'm looking at you, HP).
Home Depot's earnings
This morning, home improvement retailer and Dow component Home Depot (HD -1.77%) reported results for its fiscal fourth quarter ended Feb. 3, and the numbers were encouraging.
The company earned $0.68 per share on $18.2 billion in revenue, which compares favorably with Wall Street's forecasts of $0.64 and $17.7 billion, respectively. For the full fiscal year, U.S. comparable-store sales grew 4.9% -- roughly 1 percentage point faster than the growth rate of the economy. The company also announced a 34% increase in its dividend to $0.50 per share (equivalent to a 3.1 dividend yield, based on yesterday's closing share price) and a massive new $17 billion share repurchase authorization (nearly a fifth of the company's current market value). Accordingly, Home Depot shares are up 5.6% as of 10:10 a.m. EST.
