It was one of the top-performing sectors in 2012, with many companies from the group hitting new 52-week highs. And with this bullish trend still in play, these stocks are in position for more of the same in 2013.
I’m talking about big technology.
With investors searching for stability in 2012, big technology was especially hot this year. That pushed mega-cap technology companies such as International Business Machines Corp. (NYSE:IBM) and Oracle Corporation (NASDAQ:ORCL) to new all-time highs. It also lifted the Nasdaq 100, an index of major technology companies, to a new all-time high. Take a look at the chart below…
Simply put, big technology has never been stronger.
The industry is sitting on record earnings. In fact, earnings of big technology companies are well ahead of 12 years ago, when the Nasdaq crossed the 5,000 mark. After 12 long years of a bear market in technology, strong earnings growth has many former high-fliers trading at record low valuations. The list includes Microsoft Corporation (NASDAQ:MSFT), delivering full-year earnings of $2.69 per share in 2011, an all-time high and 28% increase from the previous year. Cisco Systems, Inc. (NASDAQ:CSCO) is on pace to deliver earnings of $1.77 per share in 2013, an all-time high as well.
Beyond earnings, big technology also has pricing power. With global markets, suppliers and distribution networks, there are few companies more equipped to handle economic volatility with pricing power than firms from this group. Not to mention, the technology industry is also swimming in cash. For the time being, these big cash positions are being managed conservatively. But longer term, this extra cash will likely create opportunities for big technology to invest in growth, pay dividends and buy shares back.
A lot of big technology companies actually pay a dividend now, too. Take Intel Corporation (NASDAQ:INTC) for example, which isn’t typically thought of as a dividend stock. The company now sports a dividend yieldof almost 4.5%, more than twice the return of a 10-year Treasury note.
And with the outlook for 2013 being murky at best, with tons of landmines just like we’ve seen in the past few years, big technology looks well positioned to navigate this volatility. And this trend should set the foundation for another strong performance in 2013.
In fact, these four stocks could shine even brighter in 2013…