Why Old-School Tech Stocks May Be the Best Place to Invest Now

By Lee Jackson Updated Jan 30, 11:20PM EST · Published Mar 18, 8:25AM EDT

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Why Old-School Tech Stocks May Be the Best Place to Invest Now — © Justin Sullivan / Getty Images

The internet revolution and the ubiquitous spread of the smartphone have changed everything, and now, in 2019, we can hold all the knowledge of the world in the palm of our hands. However, there have been some disturbing trends and issues recently for some of the mega-cap tech giants that have benefited the most from the internet, cloud computing and social media.

Privacy issues, hacking and even partisan political censoring have dogged some of the biggest names in the industry, to the point where politicians like Senator Elizabeth Warren, who is running for president, says they should be broken up.

Needless to say, politicians making hay over outrage by consumers is nothing new, and mega-corporations have been broken up before. See Ma Bell and the legacy of AT&T. However, you can bet the political rhetoric will get more shrill the closer we get to the 2020 election.

One good idea is to go back to the future and buy some of the top-old school technology giants. We screened the Merrill Lynch technology research universe and found five oldie but goodies that could be big solid additions to growth portfolios.

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Adobe Systems

This high-profile old-school software company underwhelmed some when it posted its earnings last week. Adobe Systems Inc. (NASDAQ: ADBE | ADBE Price Prediction) is a diversified software company that offers electronic document technology and graphic content authoring applications to creative professionals, designers, knowledge workers, high-end consumers, developers and enterprises.

Flagship products from Adobe include Creative Suite, Photoshop, Acrobat, Premiere, Dreamweaver, Illustrator, InDesign and LiveCycle. PDF and flash technologies from the company have become industry standards and act as a platform for other Adobe products.

Despite the company delivering a seemingly strong quarter, the stock got hit hard last Friday. Nevertheless, the Merrill Lynch analysts were positive and maintained the firm’s $312 price target. That compares to the Wall Street consensus figure of $289.89, and the shares closed Friday’s trading at $257.09, down almost 4% for the day.

Cisco Systems

This top mega-cap technology company recently reported an outstanding quarter. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.

It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.

Cisco shareholders are paid a solid 2.65% dividend. The Merrill Lynch target price is $56, while the posted consensus price target is $54.96. The stock closed on Friday at $53.20 per share.

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Dell Technologies

Returning from private equity land has been good for this computer pioneer. Dell Technologies Inc. (NASDAQ: DELL) operates eight business units:

Infrastructure Solutions Group (ISG) provides servers, storage, hyper-converged infrastructure and networking.
Client Solutions Group (CSG) provides desktops, notebooks, workstations and displays.
VMWare provides virtualization
Pivotal is focused on native cloud development
SecureWorks is focused on information security
RSA Security is the cybersecurity unit
Virtustream is focused on infrastructure-as-a-service
Boomi is focused on cloud-based integration

Also, Dell Financial Services offers financing options.

The company reported solid numbers in its debut as a public company, and the Merrill Lynch analyst said this:

In its first quarter as a public company, Dell reported revenue higher than our estimate and both ISG and CSG margins grew. Dell continued to gain share in Servers and Storage in the fourth quarter. Fiscal 2020 revenue guide factors in $1b billion headwind from new lease standard. Our thesis is playing out and we reiterate Buy on Dell.

Merrill Lynch has a $63 price target, a little bit less than the $64.30 consensus estimate. The stock was last seen trading at $60.23 a share.

Intel

This semiconductor leader is working hard to focus more on Internet of Things and data center cloud spending. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.

The company’s platforms are used in various computing applications, comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.

Intel investors are paid a solid 2.36% dividend. The $57 Merrill Lynch price target compares with a $53.32 Wall Street consensus price objective, as well as the most recent close at $54.33 a share.

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Microsoft

This is yet another top old-school technology stock that posted all-time highs last year, and the company has a massive $133.6 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace so far this year and all of last.

Many Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service, while others maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the third-quarter earnings report, which was outstanding.

Microsoft shareholders currently receive a 1.57% dividend. Merrill Lynch has set a big $150 price target. The consensus price objective was last seen at $126.36, and the shares ended last week at changing hands at $115.91 apiece.

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These five great companies probably will avoid the ire of politicians as they go after Amazon, Google and Facebook. All make good sense for growth accounts looking to buy tech. With first-quarter earnings for most of them around the corner, it may make sense to buy partial positions now and wait for the results.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.