Get to Know Lesser-Known Tech Names

 | May 09, 2013 | 3:30 PM EDT
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The technology industry is doing well, though judging by managements' responses to their stock prices, you'd think tech was in the doldrums. IBM (IBM) just announced it would increase its stock buyback program and its dividend. This came on the heels of Apple (AAPL) announcing the same actions. Management is telling us that it thinks tech stocks are underpriced given how well the industry is doing.

Tech is a large, diverse industry with many household names. Everyone knows IBM and Apple. But plenty of smaller players offer opportunities to investors willing to take a chance and exercise some patience.

One name is Insight Enterprises (NSIT), a company I would guess most readers have never heard of. It is a smallish player among those providing information technology solutions. Its clients cover a wide variety of companies and public agencies, while its offerings include hardware, software and various services, all with the goal of providing customers with a one-stop-shop solution to their IT needs.

Insight just reported a 5% drop in net sales and a 7% decline in gross profit. On the plus side, the company paid down debt by $19 million during the first quarter of 2013, ending the quarter with $61 million in long-term debt. These aren't the numbers of a company going gangbusters -- which is one of the reasons I am recommending it. Its industry is strong, its position in its industry is solid, and its stock is well priced.

The company is able to keep up with the trends its customers care about. Companies are grappling with the BYOD phenomenon (bring your own device), where employees are allowed to use any devices they want -- an iPhone, iPad, Android phone or tablet, or whatever -- for business purposes. This proliferation of devices can be a nightmare for IT departments to manage. Just last month, Insight launched its Choose Your Own Device Solution, which enables its clients to offer employees a choice of company-approved devices with appropriate security and standardization. The important takeaway is the company provides clients with a solution to a significant challenge. A solid position in a dynamic industry and an ability to address major customer needs are reasons investors should look seriously at Insight.

My Peter Lynch-based strategy, a computerized simulation I created from the writings of the great mutual fund manager, also recommends Insight. This strategy focuses on the PEG ratio, which is price-to-earnings relative to growth and is a measure of how much the investor is paying for growth. A PEG of up to 1.0 is acceptable. Right now, despite the company's momentary sales slip, its PEG is a very desirable 0.34, which suggests the stock is well priced. Its relatively small amount of debt is also an important variable in its favor.

Ingram Micro (IM) is another tech company you may be unaware of. In its corner of the market -- distribution --  it is a behemoth, being the world's largest technology distributor. The company's strong market position and solid financials reported in late April, along with the strength of the tech sector, all make this a company worth paying attention to. Like Insight, Ingram is a Lynch strategy favorite. Its yield-adjusted PEG is 0.94 and its total debt is reasonable. Ingram is a major factor in a strong market with a well-priced stock.

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