Having dry powder is always the best ammunition when the market is in a free fall. While the 2022 bear market could still have a way to go, now is the time for savvy investors to start looking at the stocks they would like to add at a substantial discount. Some of the best technology ideas are cheap and pay very enticing dividends.
The reasons for the sell-off this year are plentiful, and none are going away any time soon, despite the recent rally. Massive inflation, very hawkish Federal Reserve policy, a bitter war in Ukraine, supply chain issues, the periodic COVID-19 lockdowns in China and a host of additional issues will keep the pressure on stock prices. Many across Wall Street feel that the actual bottom for the venerable S&P 500 could be as low as 3,400. That is close to 15% or so downside from Wednesday’s closing print of 3,959.
We screened the BofA Securities technology sector universe looking for quality companies that have been absolutely crushed and found five that investors with a higher degree of risk tolerance may want to start buying partial positions in. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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ASE Technology
While perhaps a touch off-the-radar, this stock offers investors massive total return potential. ASE Technology Holding Co. Ltd. (NYSE: ASX | ASX Price Prediction) provides a range of semiconductor packaging and testing, as well as electronic manufacturing services, in the United States, Asia, Europe and elsewhere.
The company offers packaging services, including flip-chip ball grid array (BGA), flip-chip chip-scale package (CSP), advanced chip-scale packages, quad flat packages, low-profile and thin quad flat packages, bump chip carrier and quad flat no-lead (QFN) packages, advanced QFN packages, plastic BGAs and 3D chip packages. It offers stacked die solutions in various package types and copper and silver wire bonding solutions.
ASE also provides advanced packages, such as flip-chip BGA; heat-spreader FCBGA; flip-chip CSP; hybrid FCCSP; flip-chip package in package and package on package (POP); advanced single-sided substrate; high-bandwidth POP; fan-out wafer-level packaging; SESUB; and 2.5D silicon interposer.
In addition, it offers IC wire bonding packages; system-in-package products (SiP) and modules; and interconnect materials, as well as assembles automotive electronic products. It provides a range of semiconductor testing services, including front-end engineering testing, wafer probing, logic/mixed-signal/RF module and SiP/MEMS/discrete final testing and other test-related services, as well as drop shipment services.
ASE also develops, constructs, sells, leases and manages real estate properties; produces substrates; offers information software, equipment leasing, investment advisory and warehousing management services; processes and sells computer and communication peripherals, electronic components, telecommunications equipment and motherboards; and imports and exports goods and technology.
ASE Technology stock investors receive a 6.35% dividend. BofA Securities has a Buy rating and an $8.80 target price. The consensus target is $7.97, and shares closed on Wednesday at $5.58.
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Broadcom
This stock has been crushed, and while suitable only for more aggressive investors, Wall Street continues to like the company for dividend growth. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, servers and storage, factory automation, power generation and alternative energy systems and displays.
The BofA analysts and many on Wall Street are positive on the company’s massive $10 billion share repurchase authorization through December of 2023, which represents about 4.2% of the company’s market cap.
Investors receive a 3.22% dividend. BofA Securities has a Buy rating on Broadcom stock, which is on the firm’s US 1 list of top picks. The firm’s $625 price target is lower than the $681.76 consensus target but well above the most recent close at $511.77.
Dell Technologies
This is a high-quality company paying a solid dividend, that like the rest it has been hit hard and is incredibly cheap. Dell Technologies Inc. (NYSE: DELL) designs, develops, manufactures, markets, sells and supports information technology (IT) hardware, software and services solutions worldwide. It operates through three segments.
Infrastructure Solutions Group provides traditional and next-generation storage solutions, and rack, blade, tower and hyperscale servers. It also offers networking products and services that help its business customers to transform and modernize their infrastructure, mobilize and enrich end-user experiences and accelerate business applications and processes. It also offers attached software and peripherals, as well as support and deployment, configuration and extended warranty services.
Dell’s The Client Solutions Group offers desktops, notebooks and workstations; displays and projectors; attached and third-party software and peripherals; as well as support and deployment, configuration and extended warranty services.
The VMware segment supports customers in the areas of hybrid and multi-cloud, modern applications, networking, security and digital workspaces, helping customers to manage IT resources across private clouds and complex multi-cloud, multi-device environments.
Dell also provides information security and cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments.
Investors receive a 3.00% dividend. The $67 BofA Securities price target on the Buy-rated stock is a Wall Street high. The consensus target for Dell Technologies stock is $59.79. Wednesday’s close was at $44.17 a share.
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IBM
This blue-chip giant still offers investors a very solid entry point and a huge dividend. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide through these four business segments.
The Software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solutions; software for business automation, AIOps and management, integration, and application servers; data and artificial intelligence solutions; and security software and services for threat, data and identity. This segment also provides transaction processing software that supports clients’ mission-critical and on-premise workloads in banking, airlines and retail industries.
The Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services; technology consulting services; and application and cloud platform services.
The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads; and support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment.
The Financing segment offers lease, installment payment, loan financing and short-term working capital financing services.
For the second quarter, IBM posted revenue of $15.5 billion, solidly higher than a year ago and better than the Wall Street consensus estimate. Profits also exceeded the consensus forecast.
IBM stock comes with a 5.04% dividend. BofA Securities has a Buy rating, and its $165 price target compares with a $143.68 consensus target and Wednesday’s closing print of $129.18.
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Seagate Technology
This disk drive giant is hitting on all cylinders and looks reasonable at current trading levels. Seagate Technology Holdings PLC (NASDAQ: STX) provides data storage technology and solutions in Singapore, the United States, the Netherlands and elsewhere.
The company offers hard disk and solid-state drives, including serial advanced technology attachment, serial attached SCSI and non-volatile memory express products; solid-state hybrid drives; and storage subsystems. Its products are used in enterprise servers and storage systems and edge compute and non-compute applications.
Seagate also provides an enterprise data solutions portfolio, comprising storage subsystems and mass capacity optimized private cloud storage solutions for enterprises, cloud service providers and scale-out storage servers and original equipment manufacturers. In addition, it offers external storage solutions under the Seagate Backup Plus and Expansion product lines, as well as under the LaCie and Maxtor brands in capacities up to 16 terabytes.
Shareholders enjoy a 3.47% dividend. The BofA Securities price objective of $120 would be a 52-week high. Seagate Technology stock closed on Wednesday at $82.07.
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To be clear, the selling may very well not be over. It makes sense to scale buy these five top stocks slowly, especially in front of second-quarter earnings. Buying partial positions now will get investors in the game but leave them the ability to add more shares if the selling resumes, which it likely will. None of the current issues causing the selling are going away anytime soon, but by later this year, it is very possible that they may have calmed down some. In the meantime, the solid dividends will pay investors to wait.
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