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Welcome to Profit Confidential • Wednesday, May 23, 2012

Why Technology’s Still at Top
of My Investment List

Monday, October 17th, 2011
By George Leong, B.Comm. for Profit Confidential

Why technology is still at the top of George Leong's list of potential investments; three examples of the kind of technology stocks to look into.The third-quarter earnings season has begun and, depending on the results, it will help determine the direction of the stock market trading over the next several months. There are clearly some high hopes of seeing sales growth in addition to earnings acceleration, as the economy recovers; but hopefully it will be an improvement over the second quarter.

The second quarter was above average. For the third quarter, the current estimates call for earnings to rise 13.3%, down from 17.0% in July 1, according to Thomson Reuters. In the second quarter, 71% beat estimates and 19% were short of estimates. Wall Street’s whispering about strong earnings growth to come, although I’m not that convinced.

In my view, the key will continue to be the ability of companies to report higher sales, which is what you want to see during an economic recovery, as it indicates increased spending. Earnings can be made to look better via cost cuts and control. In addition, you should watch for guidance going forward, as this will also be a key factor.

My top area for growth continues to be technology, which has provided much of the leadership over the last several years. So here I present three of my top tech plays as examples.

Internet star Google Inc. (NASDAQ/GOOG) demonstrates why I love technology stocks. The company continues to deliver strong results, and it has been a major acquirer of tech companies over the past several years. In the third quarter, Google blew away on revenues and earnings by a wide margin. Revenues of $9.72 billion in the third quarter surged 37% year-over-year, as Google continues to be the star in technology. The company’s addition of Motorola Mobility Holdings, Inc. (NYSE/MMI) will help Google in aggressively pushing sales of its “Android” phones.

In large-cap tech, I also favor Apple Inc. (NASDAQ/AAPL) in spite of the passing of founder Steve Jobs. Apple is the largest company in the world. The “iPhone 4S” made its debut last Friday to great fanfare and record first-day sales. Estimates call for the phone to sell over three million units. The company is on fire and there is no stopping the momentum now. But, trading at over $400.00, the cost may be out of reach for many investors. A viable alternative would be to play Apple via call options.

I also like Microsoft Corporation (NASDAQ/MSFT), which is advancing higher after focusing more on the lucrative mobile market where the money is. The company took a leap forward with its $8.5-billion acquisition of Skype, which was approved in the United States in June 2011 and is currently awaiting approval in Europe from the competition bureaus. The addition of the Skype communication application will strengthen the product offering, especially with the upcoming “Windows Phone” from Microsoft and Nokia Corporation (NYSE/NOK). Microsoft will provide the Windows software to develop a high-power next-generation Nokia smartphone to compete against the likes of Apple, Research In Motion (NASDAQ/RIMM), Samsung, and Google.

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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