6 Tech Stock Favorites Poised for Second-Half Gains

Last January, MoneyShow.com asked the leading newsletter advisors to select their favorite stocks for 2019. Healthcare was a popular sector in that survey, with several big first-half winners. Here's a review of technology ideas that remain favorites for the second half. John Buckingham, The Prudent Speculator I chose IBM as my favorite investment idea for 2019. The tech firm has since risen 21.3%. Despite its gains over the first half of 2019, little has changed in our affection for the stock or our investment thesis for the provider of enterprise solutions, offering a broad portfolio of IT hardware, business and IT services, and a full suite of software solutions. No doubt, Big Blue has struggled to keep up with the explosive growth of the Info Tech sector in recent years and we would like to see the top- and bottom-line grow faster, but we are pleased that the company's Strategic Imperatives businesses (led by Analytics and Cloud) have steadily become a larger share of the overall sales pie. We are also intrigued by the Red Hat acquisition that is expected to close later this year, as we remain enthused about the prospect that Red Hat's OpenShift software runs on private clouds (owned by one company) or public clouds (like AWS or Microsoft Azure), and could finally let Watson, IBM's learning engine, grow nearer to its potential. Assuming it can close the Red Hat deal and overcome the integration risks, we believe it will be better able to keep up with its cloud computing peers. True, IBM plans to suspend share repurchase in 2020 and 2021 as it pays down Red Hat debt in order to get back to its targeted leverage ratio, but the company has long been committed to returning cash to shareholders. For example, $2.3 billion was doled out in first-quarter 2019, including $1.4 billion of dividends and over $900 million of gross share repurchases, bringing the total to $10.3 billion over the last 12 months. And at the end of the first quarter, there was $2.4 billion remaining under the buyback authorization. IBM estimates that the global Cloud is only 20% built out, so there is plenty of growth potential, yet its stock trades for just 10 times trailing earnings and yields 4.8%. The company also expects to post full-year 2019 operating EPS of at least $13.90 and free cash flow of about $12 billion, both massive numbers! Harry Domash, Dividend Detective In 2011, the former Motorola, Inc. spun off its supposedly slow growth businesses into Motorola Solutions , which I recommended as my favorite speculation for 2019. The stock rose 45% in the first half of the year. The firm provides communications services to government and police agencies, large enterprises, and wireless infrastructure service providers. Products include two-way radios, and other voice and data communications products and systems. However, as is the case for so many other sectors, public safety communications systems requirements are rapidly evolving. Instead of operating stand-alone communications systems, the federal government will soon require public safety agencies to be interconnected via its FirstNet broadband network, and Motorola Solutions intends to be a major player. To help achieve that goal, Motorola has made some key acquisitions, acquiring Airwave, a U.K.-based systems supplier in 2016, and video surveillance and analytics provider Avigilon in 2018. So far this year, Motorola acquired Avtec, a maker of dispatching communications systems utilizing Internet and other broadband networks, and VaaS International Holdings which offers data and image analytical systems that provide vehicle location data to law enforcement agencies. Motorola revenues were stuck in the $6.0 billion range from 2012 through 2017. Then, last year Motorola's acquisitions and other moves began to pay off and revenues jumped 15% to $7.3 billion. That trend is continuing. March quarter earnings rose 16% on 13% higher sales. But, analysts weren't impressed. They're only forecasting 8% EPS and 7% sales growth for all of 2019. Thus, there's still plenty of opportunity for upside surprises, which, of course, would drive share prices higher. Thanks to it rising share price, Motorola's dividend yield has shrunk to 1.4%. But Motorola typically announces 10% to 20% dividend hikes in November. Dr. Joe Duarte, In the Money Options In January, I chose Texas Instruments as my favorite investment idea. The stock has since risen 21.4%. It remains a premier company in the semiconductor sector -- a fact that is especially impressive during a period of time when the industry cycle is on the down side and there is a high level of pressure on tech companies as a result of the U.S.-China trade war. Moreover the stock is up nearly 29% for the year and is within a few points from its high for the year as many of its competitors recently made new lows, which shows that investors remain interested in owning the shares, as evidenced by aggressive buying on the dips all year. The company continues to grow its main metric, free cash flow, continues to buy back its shares, and continues to invest in the industrial and auto sector which is nearly 60% of its book of business while increasing its commitment to R&D due to its deep pockets and its economies of scales such as owning its own factories while expanding its manufacturing capacity further. Buy Texas Instruments but exercise caution in the near term due to the potential for major market disruptions due to the economic cycle, the geopolitical situation, and the U.S.-China trade war. Jim Woods, Bullseye Stock Trader At the start of the year, I chose Match Group as my top speculative idea for 2019. The stock has since risen 57%. In addition to Tinder and its namesake Match.com, the company also operates high-profile dating sites such as Plenty Of Fish, Meetic, Ok Cupid, Pairs, Twoo, and OurTime. This year, the stock has been powered by big earnings growth, as well as growth in the company's app downloads. Today, asking someone out on a date is as easy as swiping right. That's the parlance used by the online dating app Tinder. And while Tinder's demographic is more in the 20 something group, there are plenty of online dating sites that cater to an older demographic, and/or some specific demographic that appeals to specific interests. I suspect the online dating site will continue to move higher in front of its second-quarter earnings report slated for early August. In fact, the latest check of the download metrics gives us early hints of just how robust earnings may continue to be, and we know that via a recent report from Jefferies analyst Brent Thill, who wrote, Our data checks for Tinder continue to look strong. With less than a week remaining in the quarter, Q2 U.S. app rankings have come in above both Q1 2019 and 2018 quarterly levels. Richard Moroney, Dow Theory Forecasts I selected Zebra Technologies as my top investment idea for 2019. The stock rose 31.5% in the first half of the year. Zebra makes computer printing and tracking produces, such as smart label printers and card readers. The firm produces most of its goods in China, Mexico, and Brazil. Last year, few of Zebra's imports from China were affected by tariffs, and management's 2019 outlook already includes a modest level of tariffs on certain products. The company doesn't break out sales by country, though the Asia-Paciﬁc region accounted for just 10% of 2018 sales. Nevertheless, Zebra boasts a strong track record for growth, with per-share proﬁts, sales, operating cash ﬂow, and free cash ﬂow up at double-digit rates in the 12 months ended March. Its operating proﬁt margin has expanded in 12 straight quarters, though at a slower pace recently. Consensus per-share-profit estimates for 2019 and 2020 have edged higher in recent months, with growth forecast at 14% for 2019 and 8% for 2020. Zebra, expected to post June-quarter results on July 30, is a long-term buy. Mike Cintolo, Cabot Top Ten Trader I chose Ciena Corp. as a favorite speculative idea for 2019 in the growth oriented advisory service Cabot Top Ten Trader. The stock has since risen 21%. The firm certainly had the look of an early leader of the new bull phase back in January, as it held up well during the fourth quarter debacle and was one of the first growth stocks to hit new highs in 2019. And it did get off to a good start, rising as high as $45 in early March before the selling set in. Why did the stock fall? For no real reason when it came to Ciena -- fourth-quarter results were solid and analyst earnings estimates never budged. They currently are looking for a 50% bump this year and a 23% gain in 2020. But the networking sector as a whole got hit, as did many 5G stocks. Throw in fears of a slowing economy and uncertainty from the U.S.-China trade war and the stock slipped to $33 during the market's May correction. But it looks like the original thesis is now back on track -- Ciena soared back to new highs after a fantastic first-quarter report in early June, and ironically, it appears the trade war is actually helping the company, as the blacklisting of Huawei and some issues with one of Ciena's competitors is boosting business. To be fair, CIEN probably isn't going to be the powerful leading stock we thought early in the year, but having already ridden through a correction and some uncertainties, the path of least resistance remains up. We're positive on this name in the months ahead.

6 Tech Stock Favorites Poised for Second-Half Gains

These technology picks remain big favorites for the second half of 2019.

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