Which Tech Stocks Will Make You Money In 2013?
Bill is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Many firms in the mobile device and personal computer space are engaged in fierce competition. Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) have dominant positions in the mobile device market. Microsoft (NASDAQ: MSFT), Hewlett-Packard (NYSE: HPQ), and Research In Motion (NASDAQ: BBRY) are struggling to remain relevant.
For investors, all this drama is noise. We should be primarily interested in buying stocks at less than what they are worth. Do any of these stocks at their current prices represent deals for investors?
Hewlett-Packard Warms Up to Asset Disposals
Hewlett-Packard may have to sell off underperforming units as pressure for it to realize shareholder value intensifies from Wall Street. This shift in strategy comes after Chief Executive Officer Meg Whitman’s insistence that she would not shed the Personal-Computer unit over a year ago. Although former CEO Leo Apotheker had considered selling off the unit, Whitman opted to combine the PC and printer units under the management of Todd Bradley. The printer unit contributed about 20 percent of total revenue. Palo Alto, the HP unit based in California has had consistently declining revenues with no clearly defined synergies for its business units, making it ripe for spin-offs.
Autonomy has also been performing poorly and investigations are underway to determine if there was factual misrepresentation prior to its purchase in 2011. The software company wrote down about $8.8 billion of book value after acquisition.
The plans to shed business units were expressed as the company submitted its year-end 10-K regulatory filing. The disclosures in its 10-K also listed the challenges that would result from disposals as a risk factor. Although HP’s spokesperson declined to comment further, the company may have a tough time getting buyers and it may have to settle lower-than-expected valuation. The company indicated that, “When we decide to sell assets or a business we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner which could delay the achievement of our strategic objectives.”
This represents good news for investors who should fear any stubborn attempts to live in the past.
Developer Interest Pushes RIMM Shares Higher
Research In Motion is betting big on its Blackberry 10 platform as there has been a decline in their smartphone segment in US where the major competitors are Apple’s iOS and Google’s Android. Data for 12 weeks ending October 28 shows how sales have decreased to 6.9 percentage points to 1.6 percent from a year earlier. On December 12, the stock price of Research In Motion climbed to a seven-month high and the stock has almost doubled since September 24.
Research In Motion’s Blackberry 10 is expected to be launched on January 30, 2013, before becoming available to different markets in February 2013.
Research In Motion’s vice-president Alec Saunders said, “The focus we have had on building a true developer ecosystem and community is clearly working”. This has been an important statement as U.S. app developers are supporting the new BlackBerry 10 platform. Additionally, the recent report by Pivot Point Research revealed, “Fifty-eight percent of developers questioned between May and October said they would recommend BlackBerry 10.”
At this point much of the money to be made pre-release has already been made, and investors should be weary of buying Research In Motion Stock at current price levels.
Microsoft Pushing Surface RT
Microsoft in a recent announcement stated that it has increased the production of Surface running Windows RT software. Microsoft currently distributes through more than 60 retail locations in the U.S. and Canada, and through its online channel in the seven countries.
There is an increase in distributor locations through retail stores in the U.S. and Australia such as Staples (SPLS) and Best Buy (BBY). The current increase in production will be able to meet the demand in the different regions. Analysts predict that with the additional distribution chain in U.S. & Australia, Microsoft will be able to sell a million units this quarter.
Nomura Holdings analyst Rick Sherlund said, “Microsoft said last month that it will introduce a new model of the device, the Surface Pro, in January. That device features an Intel (INTC) i5 processor. Microsoft may release a version with Intel’s Clover Trail chip, which would offer better battery life and performance”
Are there any standout bargains among consumer computing companies?
Google and is too expensive to be considered a bargain. Lenovo (LNVGY.PK) is not as richly priced, but it is only fairly priced in a very competitive industry and by no means should be thought of as a bargain.
Hewlett-Packard would be an attractive bet if plans of asset disposals became more substantial. Dell (DELL) appears attractive based on its price multiples. These stocks would be speculative bets in a broadly diversified portfolio.
Research In Motion and Nokia (NOK) both trade at higher price-to-sales multiples, and have future prospects tied to new product launches. Thus, they are both riskier and arguably more expensively priced than Hewlett-Packard or Dell.
Investors should also consider buying shares of Apple. Apple trades at a low earnings multiple while having a bright outlook for future earnings growth. It is currently profitable and much less speculative than the other firms on this list (except Google). Investors should consider Apple as another buy candidate offering growth at a reasonable price.
BillEdson11 has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!