Another sector that is looking undervalued is technology. When an investor looks at legacy companies like Microsoft (MSFT - Get Report) with its nearly 3.3% dividend and trading at just nine times forward earnings, one could envision a one-year total return of 25 to 30%.
Yet another technology company that could be investors "next PG" is also a Nasdaq 100 stock that short-sellers like to short. KLA-Tencor (KLAC - Get Report) designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nano-electronics industries. KLAC also serves the light emitting diode (LED), data storage and photovoltaic industries, as well as cutting-edge materials research for the microprocessor industry. It pays a sustainable (37% payout ratio) dividend of 3.12% based on a share price of $51.35. A quick and unexpected market correction may see KLAC's stock price temporarily drop below $49, which would increase the yield-to-price. The following one-year chart illustrates how far this productive company has rebounded. Over the past few weeks the share price has been correcting, making for favorable buying conditions. KLAC data by YCharts
This major player in the semiconductor industry had, as of the end of 2012, $2.58 billion in total cash and operating cash flow (TTM) of over $858 billion. KLAC management guided conservatively for 2013 and if it can surprise to the upside on revenues and EPS (as it did three out of four quarters in 2012) the stock may surge. This would be accelerated by the potential of a short-covering squeeze.