The numbers are still coming in pretty good this earnings season and corporate outlooks are holding up well for the year.
Stocks have been trading off of Federal Reserve Chairman Janet Yellen’s monetary policy report to Congress, and less so on earnings.
This market is tired and you can see it in the trading action of individual stocks that beat the Street with their earnings. Most market reaction is pretty mute.
One that wasn’t, however, was Intel Corporation (INTC). The company’s second quarter really got institutional investors fired up. The stock was $26.00 a share mid-May; now it’s close to $34.00, which is a very big move for this company.
Microsoft Corporation (MSFT) doesn’t report until next week, but the company’s shares moved commensurately with Intel’s.
Earnings strength from these older technology benchmarks is really good news for both the stock market and the economy in general. It means that the enterprise market is spending money again, and that’s exactly what the technology industry needs.
Even Cisco Systems, Inc. (CSCO) got a boost from Intel’s earnings results. This stock has been trying to break out of a long price consolidation. It hasn’t really done anything on the stock market since its bubble burst in 2000.
I actually view Microsoft as an attractive company for equity portfolios looking for higher-quality stocks.
The position is very fairly priced and offers a current dividend yield of just less than three percent. And management has a multifaceted business plan focused on growth in personal computers (PCs), the cloud, and devices.
But the best potential with a company like Microsoft is its prospects for increased share repurchases and rising dividends.
The company is awash in cash and is now much more investor-friendly than previously. Microsoft’s medium-term stock chart is featured below.
Chart courtesy of www.StockCharts.com
Operational and stock market momentum among older large-cap technology names serves as backbone strength for the broader technology sector.
Even Hewlett-Packard Company (HPQ) has been trending nicely higher on the stock market, and the position is fairly priced. This stock has been stuck for years, and it’s great to see it breaking out.
But if I had to choose one “old school” technology name for a conservative equity portfolio, I’d go with Microsoft. (See “Top Stock to Watch Among These Three Winning Techs.”)
Earnings-per-share estimates are kind of all over the map, as the Street still isn’t quite sure where the company is going to experience the most robust operational growth.
But if Intel’s improving results were an indicator, the company should post a decent second quarter next week. After the company’s numbers and outlook, it should be worthy of consideration by lower-risk portfolios looking for exposure to the technology sector.
Management is currently effecting a global restructuring and some Street ratings have been upgraded. But as I already mentioned, perhaps the best attribute about this company currently is its prospect for rising dividends over the next several years.
The position is an attractive candidate for dividend reinvestment for those who do not require the regular income at this time.