With the Dow near multi-year highs of around 14500, the market is currently driven by extreme greed (with the fear & greed index at 77). Greed is good to boost the market, but too much excessive greed may signal a selling sign for smart investors. Investors need to be more careful as a “flight-to-quality” can begin anytime as market corrects.
In this article, three quality technology stocks with strong fundamentals and high liquidity will be presented, including Cisco Systems, Inc. (NASDAQ:CSCO), Oracle Corporation (NASDAQ:ORCL), and QUALCOMM, Inc. (NASDAQ:QCOM).
Cisco Systems, Inc. (NASDAQ:CSCO)
The company has a market cap of around $115 billion, and is currently trading at P/E of 12.60 and forward P/E of 10.39. The stock trading near its 52 week high, and analysts have a target price of $23.44, suggesting 6.93% upside potential. Fundamentally, the company has had high operating and net margins, and generates stronger ROE as compared to peers in the communication equipment industry.
Cisco Systems, Inc. (NASDAQ:CSCO) has total cash of $46.38 billion, which is much more than its total debt of $16.29 billion. Cisco Systems, Inc. (NASDAQ:CSCO) generated strong operating cash flow of $11.87 billion with a levered free cash flow of $8.28 billion. The company is currently trading at a P/B ratio of 2.1, which is slightly under-valued compared to the industry average of 2.2. The stock currently offers an annual dividend yield of 2.55%.
Buy, Sell, or Hold
Cisco Systems, Inc. (NASDAQ:CSCO) has a strong competitive advantage in its core markets of routing and switching. Cisco Systems, Inc. (NASDAQ:CSCO) remains a buy with its solid balance sheet, strong cash flow, and high margins. At the current valuation, there is still more upside potential supported by Cisco’s 8.40% annual EPS growth for the next 5 years.
The company has a market cap of around $170 billion, and is currently trading at a trailing P/E of 17.14 and forward P/E of 12.32. The stock is pretty close to its 52-week high, and analysts have a target price of $38.28, suggesting upside potential of nearly 5%. Fundamentally, Oracle Corporation (NASDAQ:ORCL) has had high operating and net margins. However, Oracle Corporation (NASDAQ:ORCL) generates lower ROE, and has higher debt/equity ratio as compared to the industry average.
Oracle Corporation (NASDAQ:ORCL) is highlighted with its strong revenue growth of 16.9% (3 year average) as compared to the industry average of 8.2%. Oracle has total cash of $33.70 billion, which is 70.5% more than its total debt of $19.76 billion. Oracle Corporation (NASDAQ:ORCL) generated strong cash flow of $13.53 billion with a levered free cash flow of $11.55 billion. The stock currently offers an annual dividend yield of 0.66%.
Buy, Sell, or Hold
To achieve consistent, steady growth, Oracle continues to innovate and acquire. Oracle Corporation (NASDAQ:ORCL) has also successfully anticipated the threat of could computing. Oracle remains one of the most solid buys in the technology sector with its solid balance sheet and strong cash flow.
With the upcoming Q3 2013 earnings report on March 20, 2013, where analysts are expecting an EPS of $0.66 with revenue of $9.38B, it is likely that Oracle will meet the high end of expectation and upcoming guidance should be on the positive end. Recovering data software spending may help the bottom line, while new software license and cloud subscriptions may improve the top line.
The company has a market cap of $113 billion, and is currently trading at a P/E of 19.51 and a forward P/E of 13.29. The stock is near its 52-week high and analysts have a target price of $75.19, suggesting 15.73% upside potential. Fundamentally, Qualcomm has higher revenue growth, operating, and net margins, as well as stronger ROE than the industry average.
The company has a total cash of $13.28 billion, with a very small total debt of $31 million. Qualcomm generated solid cash flow of $6.19 billion, with a levered free cash flow of $4.37 billion. The company currently offers an annual dividend yield of 1.54%.
Buy, Sell, or Hold
With the recent share repurchase program of $5 billion and a 40% dividend increase, Qualcomm is returning more cash to its investors. With the launch of Snapdragon 800 and 600 in 2013, Qualcomm should continue to lead in the industry of wireless communication equipment, despite the catch up from Intel Corporation (NASDAQ:INTC). With the recent launch of Samsung’s Galaxy S4, Qualcomm's quad-core Snapdragon application processor is expected to be used in the United States. All things considered, Qualcomm remains a solid long-term buy.
Note: Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.
The article 3 Technology Companies to Own Even When Market Corrects originally appeared on Fool.com and is written by Nick Chiu.
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