Besides the juggernaut known as Apple (AAPL), some areas of the technology space face challenging times. One of the informational nuggets that came out this week was that the global semiconductor market is forecast to have its first quarterly decline in three years as slowdowns in Europe and China take hold. In addition, research firm Gartner now expects just 3% growth in worldwide spending on information technology in 2012 to $3.6 trillion. This has started to affect stocks within the technology sector. As just one example, ARM Holdings (ARMH) shares took an 8% dive Tuesday on the back of the global semiconductor forecast, as well as a downgrade to Sell by Deutsche Bank, and cautious comments from the company's CEO on the prospects for second-half demand.
To find good values in the technology sector, I want stocks on the opposite end of the spectrum. Here are two cheap, cash-rich tech stocks that received analyst upgrades in the last 48 hours. Both reacted positively to the positive comments and headed higher. Given their valuations, cash-rich balance sheets and improving technical support, they still look like they have further gains ahead despite headwinds in the technology sector.
Vishay Intertechnology (VSH) designs, manufactures and supplies discrete semiconductors and passive components in the U.S. and internationally.
Four reasons VSH has upside from $10 a share:
- Stifel Nicolaus upgraded the shares to Buy from Hold earlier in the week and slapped a $13 price target on the shares.
- The company has a fortress balance sheet with almost $500 million in net cash on the books, which accounts for approximately 35% of its market capitalization at current prices.
- The stock is cheap at only 91% of book value and less than 6x forward earnings (after subtracting net cash).
- The stock has good technical support at just under these price levels and crossed over its 100-day moving average Wednesday (see chart).
Informatica Corp. (INFA) provides enterprise data integration and data quality software and services worldwide.
Four reasons INFA is a solid pick up for growth investors at $34 a share:
- Both Evercore Partners and Robert W. Baird put Buy ratings on the stock Tuesday. This follows a Wedbush upgrade last week.
- The company has more than $550 million in cash on the balance sheet, which amounts to more than 15% of its market capitalization at the current stock price.
- The company has been a consistent performer over the past five years despite a difficult economic environment. Informatica has grown both earnings and revenues at better than a 17% annual clip over the past half-decade.
- INFA looks like it could have put in a short-term bottom and crossed its 50-day moving average on the strength of those analyst upgrades Tuesday (see chart).