President-elect Donald Trump met on Wednesday with key Silicon Valley technology executives to discuss his administration's perspective towards the technology industry. Contrary to what many people expected, this did not turn out to be a contentious session (like the one with media executives). The message was conciliatory and focused on outlining the President-elect's pledge that he is focused on helping technology companies going forward.
Some big names in the tech space have been under pressure based on the view that the new administration would negatively impact their fortunes. Given that the tech summit focused more on cooperation than condemnation, we believe the market overhang on certain names should begin to lift. Here are some of the names that we believe merit consideration from investors right now.
Apple has an attractive valuation. It is trading at a forward price to earnings ratio of 12.9 times with a net cash balance of $150 billion. There is likely to be a huge super-cycle upgrade opportunity when iPhone released next year for 10th anniversary. The stock has been range bound but current multiples suggest a possible 10% bounce from here
MasterCard is leveraging the shift from cash/check towards electronic payments (like credit cards). The company is positioned to succeed in a cashless environment as e-commerce payments continue to accelerate. It's not strictly defined as a technology company but it's very connected to the transformation of payment processes. It continues to trade at a discount to VISA on a P/E basis; parity we think makes sense.
Google is a leader in online search with unmatched ability to monetize clicks and views. It's got huge reach in a variety of businesses related to Internet, search, and advertising. For some reason investors seem to be questioning Google as a growth name. We think it still has upside as online ad revenues continue to grow.
AT&T is a leading telecom provider in the U.S. It is benefitting from the continuation of the wireless story and the shift away from cable TV (cord cutting) and towards streaming. It offers an attractive dividend yield. It's proposed merger with Time Warner is an uncertainty but it is likely to go through in a deregulation focused environment. ATT is likely to increase its reach with its recent deals and offerings.
Cyclical companies have rallied strongly and it's only right to wonder if assets that have not participated in this recent bump are poised to catch up to positions that have already made strong gains. Technology and telecom companies certainly fall in this category and we believe investors should take another look at the earning streams delivered by these firms. Compared to many cyclical companies, these stocks now actually look somewhat cheap on a relative basis and you can't say that very often.