A Large-Cap Tech With Room to Grow

By Covering Business     March 15, 2012

By Nish Amarnath
Columbia Journalsim School ’12 

Large-cap tech companies have helped drive the stock market rally, outperforming the broader market so far this year. The Nasdaq 100 Technology Sector Index, which includes techs with a market cap of at least $5 billion, has climbed 16 percent so far this year, compared to 10 percent for the broader S&P 500.

Investors looking for big, dependable tech companies with staying power might consider those that are expanding in emerging markets, where foreign investment and a growing middle class should drive demand beyond the rally.

A stock screen for global, large-cap tech companies that are relatively cheap, have a low beta and contain significant exposure to emerging markets turns up 28 stocks, including Apple, Cisco, Google and Hitachi.

Although Apple continues to soar ever higher, the sheer law of averages suggests the company is due to come back to earth at some point soon.

Meanwhile, Google faces new competition in the mobile phone market and the hardware space, which could be a drag on its stock in 2012.

Hitachi’s financial performance over the last several years has been highly volatile.

Cisco Systems is positioned for long and short-term success. The company recently reported strong sales growth in emerging markets, which bodes well for long-term growth, and Cisco stock also offers some price momentum right now. The $108 billion market-cap company hit a 52-week high last month.

Emerging markets have been a bright spot for Cisco. In 2011, sales from its emerging markets unit grew by 14%, outpacing sales growth in the U.S. and Europe (6 percent each).

Cisco is ramping up its investment in Africa this year. The company is expanding the availability of its Android-powered tablet Cius, currently sold in South Africa, to Kenya, Nigeria and North Africa.

Like IBM and Dell, Cisco is also tapping into the skill sets of its India-based innovation center to develop low-cost product and service lines to meet rising demand in Brazil, China, India and Russia.

The main risks to Cisco’s profitability and stock price are demand fluctuations in non-core businesses like telecom and price and product competition, the company said in a regulatory filing in January.

On the upside, management expects to pay out $1.3 billion in dividends this year.


This article was written for the Columbia Journalism School’s seminar on business journalism in the spring of 2012.

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