Stocks that are involved in the development of new technologies fall into this category. This can involve both hardware and software firms. Electronics, computers, services that develop new software, and periphery businesses all fall under the heading of technology stocks. Technology is being used increasingly in all sectors of the economy, which is why this sector is a growing field. New developments in hardware and software are being made every day and innovation continues to enhance our society.
Getting a sense of where stocks are going to go in the year ahead is always difficult with the major indices at their all-time highs.
The fundamental backdrop is still very favorable for equities. While the Federal Reserve has put off raising interest rates for the near future, the cost of capital, especially for corporations, remains extremely low. And corporate balance sheets remain in excellent condition with strong cash positions and good prospects for rising dividends going forward.
The stock market recovered extremely well from the financial crisis and subsequent crash in 2008/2009. But it wasn’t until early 2013 that I saw the beginning of a new cycle for stocks, or a bull market as it were.
Until then, I viewed the market’s performance purely as a recovery period from the previous cycle, which was the technology bubble.
Many of the technology stocks have only now recovered to their previous highs set in 1999 and 2000. The recovery cycle took a long time to play out and the catalyst for its breakout was, not surprisingly, the Federal Reserve.
Stocks can move significantly higher in a rising interest rate environment, but only from a low base, which is what we have now. And within the context of a new market cycle or bull market, the economy can experience a full-blown recession and stocks can experience meaningful corrections.
The two most important catalysts for the equity market near-term are what corporations actually report about their businesses and the Federal Reserve’s actions.
The surprising weakness in oil prices should be evident in corporate financial results (especially in the fourth quarter). Old economy industries … Read More
Large-cap technology stocks, particularly old-school names, have really been on the rise, though they remain an untold story this year.
Microsoft Corporation (MSFT) is on a major upward price trend and is getting close to its all-time record-high set during the technology bubble of 1999.
The company’s stock market performance has been tremendous as of late, rising from around $27.00 a share at the beginning of 2013 to its current level of approximately $47.00, its 52-week high. Its share price has increased by more than $10.00 this year alone. (See “Eight Stocks to Beat the Street.”) And that’s with a current dividend yield of 2.6% and a trailing price-to-earnings ratio of just less than 15.
I think Microsoft is going to keep on ticking higher right into 2015 based on its sales and earnings growth momentum combined with a solid interest on the part of institutional investors seeking earnings predictability in a slow-growth environment.
Microsoft would be a solid investment-grade pick in this market for those investors considering new positions and looking for income.
Even without the company’s dividends, it should experience solid sales and earnings growth going into its next fiscal year. And in an environment where institutional investors are bidding old-school names that are offering earnings reliability, $50.00 a share shouldn’t be too difficult for Microsoft to achieve by year-end.
Share price momentum in previous technology growth stocks like Microsoft and Intel is indicative of a bull market, but one that’s still risk-averse.
Price momentum in these stocks is healthy for the broader market because large-cap tech companies like Amazon.com, Inc. (AMZN) and Facebook, Inc. (FB) … Read More
No doubt, trading volume for a lot of stocks has been on the decline, and while this is traditionally a sign of a market that’s topping out, this potential outcome would be well-deserved and no surprise.
It’s the lull between earnings seasons and the beginning of summer trading action. Volume is going to be lighter, and stocks are due for a correction—even a big one. So I don’t think this market is running out of gas; it’s just tired and investors are looking for catalysts.
Following earnings forecasts, old-school technology stocks like Microsoft Corporation (MSFT) and Oracle Corporation (ORCL) are seeing their estimates going up for 2015. And Wall Street’s even nudging estimates for the financials higher.
Even if stocks are tired and volume is declining, rising estimates for next year is a positive trend.
As most blue chip corporations did OK in the first quarter of 2014 (see “1Q Earnings Not Giving the Market the Boost It Needs”), one commonality among many multinational companies was improving business conditions in Europe. It will be very interesting to see if this trend holds during second-quarter reporting. If it does, it increases the likelihood that multinational businesses will see their 2015 earnings estimates nudged higher yet.
Street estimates for Caterpillar Inc. (CAT), which is a very international business, have been going up across the board for this year and next. While the market expects total sales to be basically flat in 2014 (compared to 2013), current consensus is for around six-percent sales growth in 2015.
And there’s a similar scenario with other Dow Jones stocks like Cisco Systems, Inc. (CSCO) … Read More
You know another earnings season is right around the corner because Oracle Corporation (ORCL) and Adobe Systems Incorporated (ADBE) always report their fiscal results just ahead of the calendar quarter end.
Both technology stocks are bellwethers, and while they are mature enterprises, they do help set the tone in sentiment. It’s exactly what the marketplace needs now so investors can have something else to worry about over geopolitical events.
Oracle’s been going through its own issues trying to generate top-line growth. Revenue and earnings the last several quarters have been very modest.
And so have Adobe’s numbers, but Wall Street analysts have been boosting their earnings estimates for the company in 2015 and the stock has doubled over the last 18 months.
Oracle is definitely more of a value play, and the company pays a dividend. Adobe is expensively priced and while much smaller, still boasts a stock market capitalization of approximately $34.0 billion.
In previous quarters, it was pretty obvious what the Street was looking for in terms of earnings results. At the beginning of 2013, investors just wanted to know that corporate earnings would hold up. Then they were happy with modest growth so long as dividends were increased.
This quarter, there doesn’t seem to be a financial metric that the market is looking for just yet. The choppy trading action is a reflection of all the uncertainty in the world, but also a market that hasn’t experienced a material price correction since 2008/2009, which is a long time to go.
As much as a broad stock market correction would be a healthy development for the long-run trend, … Read More
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