With the fourth quarter underway, many of the top firms we cover on Wall Street have had another solid year for clients. While much of the gains for the past couple of years are attributable to some of the high-dollar technology stocks, there remains a wide variety of tech and tech-related companies that still are offering investors solid value for their investment dollar.
A new Deutsche Bank research report starts to look ahead with recommendations that should be solid picks for the new year. The report noted:
As we near year-end and start to think about how we want to be positioned into 2018, a few new themes have emerged for our coverage. First is the resurgence in on-premise spending, as highlighted by multiple legacy vendors in the second quarter of 2017. Second, is the impact of industrial and macro trends on our coverage, given fewer tailwinds are expected in 2018. Finally, we remain focused on where we are in the semiconductor cycle, which appears to be nearing a peak.
The analysts have four top calls for 2018, and all make good sense for long-term growth accounts that have a degree of risk tolerance. Of course, all are rated Buy at Deutsche Bank.
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Amphenol
This top pick has remained a favorite long-term pick at Deutsche Bank for some time. Amphenol Corp. (NYSE: APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.
Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. The company has a diversified presence as a leader in high-growth areas of the interconnect market, including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks.
The Deutsche Bank report noted this:
Under the scenario forecast by Deutsche Bank’s economists, we favor companies with a more diversified end-market strategy and exposure to secular growth trends like the Industrial Internet of Thing (IIoT). Amphenol remains a top long-term pick, driven by management’s consistent execution, above-market growth, and its strong capital return strategy.
Amphenol shareholders receive a 0.88% dividend. Deutsche Bank has a $95 price target on the stock, and the Wall Street consensus target is $84.00. Shares closed Thursday at $86.30.
CDW
CDW came back from private equity land over four years ago and has done outstanding since. CDW Corp. (NASDAQ: CDW) provides information technology (IT) products and services to business, government, education and health care customers in the United States and Canada. It offers discrete hardware and software products to integrated IT solutions, such as mobility, security, data center optimization, cloud computing, virtualization and collaboration.
This stock has been highlighted in the past as having virtually no exposure to China and as a very attractive and somewhat defensive small/midcap play for investors. Analysts also think that the company has benefited from the integration of U.K. IT services and solutions provider Kelway, although CDW has implied numbers for the quarter from Kelway will be down.
Analysts have cited in the past the unique culture and the compensation structure, and the Dell Partnership as among the top reasons to own the stock. They also have pointed out the company has negotiated weak PC sales periods in the past. They also think the tailwind from share repurchases may not be factored in.
CDW investors receive a 0.92% dividend. Deutsche Bank has a $71 price target. The consensus target is $69.50, and shares closed Thursday at $69.29.
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Hewlett Packard Enterprise
This company was part of the big split in operations at the iconic Hewlett-Packard. Hewlett Packard Enterprise Co. (NYSE: HPE) is now an industry leading technology company that enables customers to go further, faster. With the industry’s most comprehensive portfolio, spanning the cloud to the data center to workplace applications, the company’s technology and services help customers around the world make IT more efficient, more productive and more secure.
The company operates under four segments: Enterprise Group (50% of revenue) has servers, storage, networking hardware and Technology Services. Enterprise Services (37%) has a broad IT outsourcing focus. Software (7%) and Financial Services (7%) make up the remaining portfolio. The company has leading market share across many of its businesses.
Hewlett Packard Enterprise also has a partnership with Microsoft that offers new innovation in Hybrid Cloud computing through Microsoft Azure and Hewlett Packard Enterprise infrastructure and services, as well as new program offerings. The extended partnership appoints Microsoft Azure as a preferred public cloud partner.
Deutsche Bank analysts noted this:
The company has a broad hardware portfolio and is focused on selling solutions to enterprises. In addition, through its acquisitions and enhancements to its services portfolio, the company is positioning itself to provide hybrid solutions, which can optimize the interplay between public cloud and on-premise solutions. Despite these positives, the shares trade at a discount to other legacy peers, which we view as unwarranted.
Shareholders receive a 1.75% dividend. The $16 Deutsche Bank price target compares with the consensus target of $15.48. The shares closed Thursday at $14.83.
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HP
This is the printer and personal computer businesses of the old Hewlett-Packard. HP Inc. (NYSE: HPQ) provides products, technologies, software, solutions and services to individual consumers and small- and medium-sized businesses, as well as to the government, health and education sectors worldwide.
The company’s Personal Systems segment offers commercial personal computers (PCs), consumer PCs, workstations, thin client PCs, tablets, retail point-of-sale systems, calculators and other related accessories, software, support and services for the commercial and consumer markets.
The Printing segment provides consumer and commercial printer hardware, supplies, media, scanning device and software and services, as well as LaserJet and enterprise, inkjet and printing, graphics, and software and web services.
The Deutsche Bank report noted:
As a legacy tech company exposed to end markets that are challenged for growth, we believe HP Inc. should trade at similar valuations to other legacy hardware peers. This peer group includes names like IBM, Hewlett Packard Enterprise, NetApp, Cisco and Xerox. Based on peer group valuations, we believe the company should trade at 13x our fiscal year 2018 earnings per share, which is in line with the peer group. With shares trading below these levels, we rate the company a Buy.
HP investors receive a 2.61% dividend. Deutsche Bank has set its price target at $23. The consensus estimate is $21.81, and shares closed trading Thursday at $20.35.
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The Deutsche Bank analysts have four solid ideas for investors wanting to stay involved in technology and related areas of the sector, but they can do so without paying up for some of the very overcrowded mega-cap tech behemoths.
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