Since the coronavirus pandemic started in March 2020, big tech trading has really helped investors as lower interest rates, massive liquidity investments, and investments in digital transformation companies like Microsoft MSFT,
to new highs.
While there is little evidence that demand for technology will fade anytime soon, the recent sell-off in technology stocks shows that investors are turning to more stable value strategies.
With interest rates almost certain to rise in the US Federal Reserve’s efforts to cool off blistering inflation, I believe some names have the potential to serve as both value and Growth for investors.
These companies listed below represent a mix of stability, innovation and ROI while trading at significantly reduced ratios against the forward gains. And while the uptrend certainly won’t be as high as some of the big tech stars, these higher-rated companies offer a balance that can weather troubled markets while returning dividend income to shareholders.
Here are six companies to consider:
Technology is not a word that comes to mind when mentioning Honeywell HON,
but it should be. As the linchpin for software for industrial head start, the 116-year-old company has now generated more than $ 1 billion in sales with these products. Honeywell is well positioned to take advantage of the exponential growth in data being created outside of the data center.
I recently had the opportunity to meet with CEO Darius Adamczyk. With stock trading in the middle of a 52-week range, the company’s dividend yield of 1.81% makes it an attractive game despite recent Credit Suisse and Bank of America downgrades. The company represents a strong mix of value, rotation, and technology that should better weather the turbulence of growth stocks.
Hewlett Packard Enterprise
Three years ago, Hewlett Packard Enterprise launched HPE,
CEO Antonio Neri was aggressively committed to aligning the company with Everything-as-a-Service, taking over the entire portfolio, and making it more consumption-driven for its corporate customers.
That means it effectively becomes an on-premises cloud for nearly 75% of IT workloads that aren’t on AWS, Azure, or other public clouds. The company saw sales growth, albeit only 3%, for fiscal 2021, but order growth was 16%. Additionally, the company’s GreenLake Private Cloud as a Service revenue increased 36% to nearly $ 800 million, with order growth for total as-a-Service revenue increasing more than 100%. HPE traded fewer than seven times after 12 months (TTM) and was largely written off by investors despite its advances under Neri. At around $ 16 per share, the company has a dividend yield of roughly 2.8% and provides value investors with income while they wait for its share price to appreciate.
had a tremendous year in 2021 that returned over 39% for investors. The company is as stable as it gets. With over 70% of its revenue from predictable streams and a rapidly growing cloud business exceeding $ 10 billion per year, there’s a lot to like about Oracle. While some growth stocks are likely to experience earnings compression in the coming year, Oracle is hovering on the line between value and growth, and with a forward price / profit of around 18, the price is still tame compared to almost all high growth names. Oracle raised its dividend last year, offering investors 1.48% at current price.
and its huge portfolio of enterprise technology offers a nice mix of growth, value and return for investors who see long-term trends like hybrid work, cybersecurity and 5G as sustainable growth areas but are looking for a less volatile place to invest. Cisco’s growth has spiked over the past few quarters, and its stock price recently climbed to over 60.
However, with the P / E ratio for 2022 being below the actual 2021 fiscal year, there seems to be some runway for growth. And with its diverse mix of products touching so many key areas, it makes it a safer game for higher growth names to see a retreat. Cisco offers investors a current return of just under 2.5%.
Maybe a less visible name than others in this group, I think Juniper JNPR,
offers an interesting opportunity for investors. The company has vigorously implemented artificial intelligence into its portfolio of network and security solutions and has also seen significant diversification of its core customer base of telecommunications and service providers as it added large enterprise and cloud customers.
Last quarter, six of Juniper’s top 10 customers were cloud and cloud company revenue grew 20%. Software and annual recurring revenue (ARR) growth also deserve attention, as the company saw 67% growth in software revenue and 34% growth in ARR. Juniper’s dividend yield is 2.34%.
Under CEO Arvind Krishna, IBM IBM,
has focused its focus on key growth areas such as cloud and artificial intelligence, as well as some of its slowest growing segments, as evidenced by the recent Kyndryl spin-off.
Since the rotation of investors from certain technology and growth stocks began in November, IBM’s share price has risen more than 10%, which is a big step for Big Blue. With one of the highest dividends – 4.87% – on the Dow Jones Industrial Average, the stock is still trading at around 12 times projected earnings for 2022. IBM’s turnaround is still in its infancy, but I like its more focused approach, and its low rating makes it an attractive game for value investors looking to stay close to the technology.
Daniel Newman is the lead analyst at Futurum Research, which conducts or has provided research, analysis, advice and / or advice to Honeywell, Hewlett Packard Enterprise, Oracle and others mentioned in this column, as well as dozens of other companies. Neither he nor his company have any stakes in these companies. Follow him on Twitter@danielnewmanUV.