Normally I shy away from big companies. Instead I look for smaller stocks that have room to grow since I plan to hold them for ten years or longer. I don’t want to buy something and then sell in a year or two. This creates a capital gain, forcing me to pay out some of my earnings in taxes rather than letting it grow. I also find it is easier to be right over the long-term than it does over the next year or two.
Still, this appears to be a special time where a lot of really high quality, big name brand technology companies appear to offer a great 3-5 year appreciation potential. Plus, most are rock-solid companies that can weather a storm and pay a dividend to boot. Here are four picks from the Technology sector for the few coming years:
International Business Machines (IBM): This was once the biggest of the blue chips, as its nickname, “Big Blue,” suggests. You would think that this company had little room to grow. Still, the stock is expected to return between 10% and 15% over the next few years. It also boasts a 2.3% dividend, which is a nice bonus.
Tiawan Semi (TSM): Taiwan is the world’s largest dedicated semiconductor foundry, with most of its foundries in Taiwan. I don’t usually like semiconductor stocks since they don’t tend to grow over long periods of time. They tend to be very cyclical, growing for a while and then falling back down to earth. This stock is on fire, however, with earnings growing by more than 14% per year and total returns of between 15 and 25% expected. This one has a 2.5% dividend.
Intel (INTC): At one point one would have thought that Intel ruled the world with no competition to speak of in the personal computer CPU market. As the use of personal computers has given way to smart phones and tablets, now they are just another CPU manufacturer and you worry that they might fade into the sunset. They have branched out into other markets, however, and things are going very well. They boost a 2.6% dividend and can see rates of return approaching 10% over the next several years. (Note, I own shares of Intel in my personal accounts.).
Cypress Semiconductor (CY): I’ve held shares of Cypress for quite sometime, even attending their shareholder meetings when I lived in the San Francisco Bay area. My friends and I soon learned that the stock always went to $11 per share. If it was at $8 per share, it would eventually go back up to $11. If it was at $20 per share, it would eventually fall back down to $11. I thought the streak was broken a few years ago when the stock price hit $42 before the 2008 market crash but, 2008 came and the shares fell back through the floor, hitting a low of $2.50 by the last quarter of the year. Right now they are trading $10.28 and starting to expand. Returns between 15 and 30% are possible over the next several years. Cypress semiconductor pays a great dividend of 4.3%, making this almost an income investment instead of a growth investment.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
