Technology 2013 Outlook: Three Predictions for the Most High-Profile Companies
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Technology is the sector of innovation and transcendence, the frontline of the must-have products and services. It’s an industry where we place bets in the adoption of a product, and then enjoy market leading returns (or losses) on the outcome. With that being said, 2013 is setting itself up to be a remarkable year for tech, due to innovation in products, the cloud, social media, and all things technology. Therefore, I am looking at an array of technology stocks and providing predictions for the upcoming year.
The Funds Will Return to Apple
Let’s start with the biggest question on the minds of investors: What happens with Apple (NASDAQ: AAPL)? First off, Apple has not fallen because of fundamental weakness; it is still growing at a market leading pace. The company has fallen for two reasons: Concerns regarding capital gains and dividend taxes and a fund overload effect.
Following a 75% return in 2012, when Apple was at all-time highs, the stock began to fall and has continued as a domino effect. The stock has continued to be the number one holding of almost all large funds, and as the stock has fallen these large funds have sold some of their positions. I know this because in order for Apple to lose so much value, and so fast, funds would have to be dumping their shares. However, once 2013 begins and funds rebalance, look for an Apple buying frenzy. The stock is simply too cheap and too strong to be this cheap. Therefore, funds will re-buy and Apple will rise in 1Q13.
Simply Short Linkedin
In an article published on Friday, I made a case for shorting Linkedin (NYSE: LNKD). I believe that because of slowing growth and an overvalued price that shares of the social media company will begin to falter in 2013. I don’t know if it will be to the same degree as companies such as Netflix and Green Mountain Coffee Roasters, but I do believe it falls below the $80 mark, and even then it will still be overvalued.
Hard Disk Drives Will Prove Stronger Than Expected
For the last few months, shares of hard disk drive leaders Seagate Technology (NASDAQ: STX) and Western Digital (NASDAQ: WDC) have pulled back and are now trading at very low multiples compared to fundamentals. These are companies that are very shareholder-friendly with market leading yields, yet have fallen as the demand for PCs and laptops has fallen.
A lot of people don’t realize that hard disk drives are used in more than just PCs and laptops; they are also used in supercomputers, DVRs, game consoles, home entertainment, etc. But more importantly, they benefit from the growth of the cloud. As the cloud continues to grow, storage on HDDs will also grow in demand, and this fact will create optimism in shares of the leaders in this space. The HDD industry is valued for a worst case scenario, and I predict that because of the growing cloud, sales and performance in the space will be better than expected, leading to gains for STX and WDC.
In short, there are several predictions in technology that I believe could become a reality. I expect Nokia’s rally to end as data shows that sold out Lumia phones were more related to supply than demand. I also believe we will see a boost in acquisitions of companies such as Hewlett-Packard and innovating companies such as 3D Systems. However, while there are many possibilities, the three in this article are the ones that I believe are most likely, and they are ones that I’d watch for in 2013.
BrianNichols owns shares of Apple and Seagate. The Motley Fool owns shares of Apple, LinkedIn, and Western Digital. Motley Fool newsletter services recommend Apple and LinkedIn. 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!