BOSTON (TheStreet) -- Technology stocks in the S&P 500 have generated an average gain of 16% in 2010, ranking as the third worst-performing industry group. But as the recovery ramps up next year, tech stocks may lead, analysts say. Value-focused Morningstar covers hundreds of technology stocks, but awards its highest five-star rating to only four.
Here is a closer look at those four technology value stocks. They are expected to rise at least 53% and as much as 99%. Below, the stocks are ordered by potential return, from great to colossal.
4. Dow component Cisco Systems (CSCO) makes networking equipment. It holds the dominant position in ethernet switches, with roughly 70% market share, a stable figure. It is also the leader in routers, with Juniper (JNPR) grabbing second place.
Morningstar believes that Cisco's growth forecast, at 12% to 17% long-term, is too aggressive and its movement into the mature blade-server market is ill-advised, potentially threatening important tech partnerships with little chance of profit growth.Still, at a forward earnings multiple around 10 and a cash flow multiple of 11, 43% and 37% industry discounts, Cisco is grossly undervalued. If management can avoid overpaying for acquisitions and focus on gaining market share in emerging and frontier markets, Cisco's stock will benefit enormously. Morningstar estimates Cisco's intrinsic fair-value at $30. 12-Month Sales Growth: 20%
12-Month Net Income Growth: 38%
Operating Profit Margin: 22%
Debt-to-Equity Ratio: 0.3
5-Year Average P/E: 20
Current P/E: 15
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV