5 Famous Pharma Stocks to Sell Now

There’s a lot of talk about the recently passed health-care reforms in the wake of the election, and some investors are wondering if provisions of the legislation could be rolled back. I won’t pretend to know what’s going to happen in Washington in the future, but I can tell you that no matter what happens to the so-called “Obamacare” initiative, a number of health-care stocks are in dire straits — and no amount of politicking is going to help them.
Specifically, I’m talking about a group of battered drug makers that have seen poor earnings performances lately and are up against looming patent expirations and fierce competition in emerging markets.
Here are five famous pharmaceutical stocks that you should sell immediately:

Abbott Laboratories (ABT)

Abbott Laboratories (NYSE: ABT) is engaged in the discovery, development, manufacture and sale of a variety of health-care products.  Since January, ABT stock has dropped 6.6%, compared to gains of 9.5% and 9.3% for the S&P 500 and Dow Jones, respectively. While the stock regained slightly in September, ABT has lost 3.5% since October.  While ABT has outperformed earnings estimates for four consecutive quarters, it has been by only one cent each quarter.  Abbott stock currently trades at $50.45.

Sanofi-Aventis S.A. ADS (SNY)

Sanofi-Aventis (NYSE: SNY) is also involved with the research, development, manufacture and marketing of health-care products.  The company is known for its pharmaceuticals, including vaccines, as well as its animal health-care products.  Year-to-date, SNY stock has slid 9.4%.  Additionally, Sanofi-Aventis has missed earnings estimates two of the last three quarters.  While the stock has regained slightly in the last few months, it is still down from its 52-week high of $41.59, with a current price of $35.62

Teva Pharmaceutical Industries (TEVA)

Global pharmaceutical company Teva Pharmaceutical Industries (NASDAQ: TEVA) produces and markets a wide range of generic drugs.  Its major products are Copaxone for multiple sclerosis and Azilect for Parkinson’s disease.  Since January, TEVA is down 9.6%, compared to gains by the broader markets.  After a productive September, TEVA has dropped 3.7% since the start of October.  Trading at $50.80, TEVA is only a few dollars removed from its 52-week low of $46.99.

GlaxoSmithKline PLC ADS (GSK)

GlaxoSmithKline (NYSE: GSK) works with vaccines, over-the-counter medications and various other health-care consumer products.  The company’s main products deal with the following: respiratory system, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, oncology and emesis, dermatalogicals and vaccines.  GSK stock is down 4.1% in 2010, despite seeing gains in September and October.  Additionally, GSK reported a quarterly earnings drop of 3.5% in its last income statement, which certainly has disappointed shareholders.

Pfizer Inc. (PFE)

Research-based, global pharmaceutical company Pfizer Inc. (NYSE: PFE) rounds out the list of big pharma stocks to sell. Year-to-date, Pfizer has watched its stock decrease 6.5%, compared to gains by the broader markets.  Analysts aren’t buying into Pfizer, as they have downgraded their earnings estimates to 47 cents a share this quarter after and actual EPS of 54 cents a share last quarter.  A quarterly earnings decline of nearly 70% is another reason why Pfizer is a stock worth selling.
As of this writing, Louis Navellier did not own a position in any of the stocks named here

4 Best Mutual Funds at Vanguard Now

In the mutual fund industry, Vanguard founder Jack Bogle is a legend.  After college, he got a job at Wellington Management Company and quickly rose up the ranks, becoming the company’s chairman.  However, he was eventually fired because of a bad merger. But this turned out to be fortuitous since he started the mutual fund giant Vanguard in 1974.
His laser-like focus at Vanguard was on the interests on investors.  To this end, he developed low-cost mutual funds that focused on indexing.  Hey, why should investors spend high amounts on fees when many portfolio managers underperform the market?
Now, thanks to this legacy, Vanguard is a mutual fund investing powerhouse.  There are $1.4 trillion in assets, with 160 U.S. funds and 50 international funds.  And while many are strong, there are some that are standouts above the rest. Let’s take a look:

Vanguard International Growth (VWIGX)

Started in the early 1980s, the Vanguard International Growth Fund (MUTF: VWIGX) now has $18.8 billion in assets.  The portfolio is diversified across the world, with 11.58% in the Americas, 53.81% in Europe and 34.61% in Asia.  There is also 21.11% in emerging markets.
The Vanguard fund is composed of a variety of best-of-breed international money managers, from firms like Schroder Investment Management, Baillie Gifford and M&G Investment Management.   The general approach is to focus on high quality companies with strong growth prospects.
As should be no surprise, the expense ratio is only 0.49% and the turnover is 44%. Top holdings now include Baidu (NASDAQ: BIDU), Petrobras (NYSE: PBR) and SAP AG (NYSE: SAP).

Vanguard Small Cap Growth Index (VSGIX)

The MSCI U.S. Small Cap 1750 Index tracks the performance of a diverse set of small capitalization stocks in the US.  It is widely followed and a good barometer of the category.
If you want to invest based on this index, then a good mutual fund choice is the Vanguard Small Cap Growth Index Fund (MUTF: VSGIX), which has $8.8 billion in assets.  True, there has been volatility — which is to be expected.  Although, the index has a good amount of mid-cap stocks, which helps with the swings.
For the past three years, the average annual return was 10.33%. Top holdings include JDS Uniphase (NASDAQ: JDSU), Informatica (NASDAQ: INFA)  and Brigham Exploration Company (NASDAQ: BEXP).

Best Energy Stocks Pick For 2012

President Obama made a speech where he announced a goal of cutting oil imports by a third over the next decade. He included a pledge to have federal agencies buy only alt-fuel vehicles by 2015 and a promise to expand U.S. oil exploration and production.
Transitioning half the cars and trucks in the U.S. to natural gas transportation over the next 5 to 10 years could reduce foreign oil imports by 5 million barrels every day.
So natural gas is an obvious play. Renewable/alternative fuels are other good choices.
Here are my four best picks that could make investors a bundle from  the President’s new policy:
Best Energy Stocks Pick For 2012#1—
Clean Energy Fuels (CLNE)
The company owns and/or supplies more than 200 natural gas fueling stations across the U.S. and Canada. It serves over 320 fleet customers operating over 20,000 natural gas vehicles. The customers can use Clean Energy’s fuel stations to tank up their vehicles with compressed natural gas (CNG) or liquefied natural gas (LNG).
Clean Energy Fuels also provides natural gas vehicle systems and conversions for taxis, limousines, vans, pick-up trucks, and shuttle buses through its BAF subsidiary in Texas. Clean Energy helps customers buy and finance natural gas vehicles and obtain government incentives.
The company buys CNG from local utilities and produces LNG at its two plants (in California and Texas) with a combined capacity of 260,000 gallons per day.
Clean Energy owns and operates an LNG liquefaction plant near Houston, Texas, which it calls the Pickens Plant, capable of producing up to 35 million gallons of LNG per year.
And investors who buy CLNE won’t be alone …
Founder and billionaire oilman T. Boone Pickens owns a sizeable chunk of Clean Energy.
Best Energy Stocks Pick For 2012 #2—
Westport Innovations (WPRT)
This company makes natural gas engines for forklifts, oilfield services engines, trucks and buses and automobiles. Its 50-50 joint venture Cummins Westport project builds natural gas vehicle engines for trucks and buses that could refill at the clean energy stations built by Clean Energy.
It made revenues of $154 million in the last year and isn’t close to profitability yet. But a concerted push toward natural-gas powered vehicles could change that.
WPRT is at the top of its 52-week range. So I’d wait for a pullback.
Best Energy Stocks Pick For 2012 #3—
Talisman Energy (TLM)
Talisman had 1.4 billion barrels of oil equivalent in reserves last year. It has material positions in three world-class, liquids-heavy shale plays in North America: The Marcellus shale (Pennsylvania), Montney shale (British Columbia) and Utica shale (Quebec). It is also expanding its Eagle Ford shale properties, in a 50-50 joint venture with Statoil.
The company also signed two $1.05 billion deals with Sasol of South Africa. This partnership is sketching out plans for a new multibillion-dollar facility near Edmonton that could process as much as a billion cubic feet of natural gas a day into 96,000 barrels of refined products through the Fischer-Tropsch process.
Fischer-Tropsch works by using heat and chemical catalysts to break down a substance like natural gas into its molecular basics and then rebuild those molecules into something else — such as diesel.
Why do that?
A barrel of oil contains roughly six times the energy content of a thousand cubic feet of gas. Since 6 thousand cubic feet of gas is worth about $24 (U.S.), and one barrel of oil is worth about $100, there is a tremendous profit margin if you can convert one to the other cost-effectively.
Best Energy Stocks Pick For 2012 #4—
PowerShares Wilderhill
Clean Energy Fund (PBW)
This is one of the largest alternative energy ETFs with over $500 million in assets. Large holdings include GT Solar, Yingli Green Energy, SunPower Corp., Trina Solar and more.

Best Cheap Stocks to Buy For 2012

This has been quite a winter.
From Arab states falling to Twitter revolutions, to U.S. states finally owning up to their own fiscal shortfalls, to natural disasters in New Zealand, Australia and now Japan, stock markets around the world have been swinging up and down in manic runs from hope to despair.
And one other thing is true: The markets hate uncertainty. That means, in our current circumstances, smart investors are looking for real assets — tangible commodities and resources that the world has to have to survive or hedge against uncertainty.  In 2010, I picked silver miner Silver Wheaton (NYSE: SLW) as my top stock for the year. It doesn’t get much more tangible than silver, and with the metal’s run higher, the stock was up more than 150%.
This year, I’ve found a couple more standouts in the real asset sector.
This duo is a real asset play on the same megatrend that’s been building since the dawn of man: The world’s need for food…

Best Cheap Stocks For 2012: Agricultural demand is growing

China, for instance, has a lot of mouths to feed — 1.3 billion at last count, or 15-20% of the world’s population. Unfortunately, it only has 7% of the planet’s arable land (and most of that is relatively unproductive).
On a per-capita basis, China has just a fraction of the available farmland as most other countries. And the gap is getting wider. Population is growing by around 10 million per year, while millions of acres of prime agricultural land are lost to soil erosion, urban construction, and heavy metals pollution.
This dire situation presents ongoing challenges for farmers — but unique opportunities for companies whose products can boost crop yields.
That’s where Yongye (Nasdaq: YONG) comes in. The firm is an emerging leader in the “green” agriculture movement, specializing in organic crop nutrients and animal feed supplements. The company has several advantages over the competition.
First, its chief marketing officer literally wrote the book on reaching out to rural farmers.
Second, its Shengmingsu brand’s liquid nutrient has proven to increase output by 22% and reduce harvest time by up to two weeks.
Finally, Yongye has been negotiating with independently owned supply stores to prominently display (and push) the Shengmingsu brand. The company has a year-end goal of 30,000 stores selling its product.
Ordinarily, you’d have to pay a rich premium for all this — but Yongye is trading at just five times forward earnings, a sharp discount to its expected 40%-plus growth rate. This stock could double in the next 12 months.

Best Cheap Stocks For 2012: Prices for agricultural staples are rising

The bureaucrats can say all they want about benign inflation. Apparently, they haven’t been to a grocery store lately.
And prices are still rising at the wholesale level, which means more retail markups in the weeks and months ahead. According to the U.S. Department of Agriculture, producers fetched higher prices for corn, soybeans, eggs, milk and apples last month.
Some of the blame (or credit, depending on your perspective) belongs to the Fed‘s dollar debasement policies. By definition, a depreciating dollar boosts the prices of dollar-denominated agricultural commodities.
But old-fashioned supply/demand imbalances are also playing a major role. A bad Russian winter wheat harvest and subsequent export ban sent prices skyrocketing. Here in the United States, torrential rains in the Corn Belt have left supplies at the lowest levels in 15 years.
Growing demand and shrinking supplies intersect at rising prices. Corn futures have spiked more than 70% since June. Wheat prices have spiked 35% so far this year. Soybeans and sugar are the same story.
And, because beef, pork and dairy producers have to buy mountains of feed for their livestock, rising grain prices will likely spill into the meat aisle as well (there’s typically a six-month lag).
With all this in mind, I strongly recommend readers fight back against the relentless price hikes by converting a few dollars into bacon and cereal — or at least pork bellies and corn.
==========================    Part 2    ==========================
Large pharmaceutical companies are facing a crisis. The industry spent a record $65 billion on research and development (R&D) in 2009, but approval rates for new drugs have fallen 44% during the past decade and continue to drop. Also in 2009, drugs launched in the previous five years accounted for only 7% of all sales, meaning that older drugs closer to patent expiration make up the vast majority of sales. The failure rate of drugs in the final stages of development has doubled in recent years.

Best Cheap Stocks For 2012: PFE,GSK

These facts are sobering proof that productivity levels for bringing successful drugs to market have declined severely in recent years. It is leading to soul searching in the industry and large cutbacks in R&D expenditure. Pfizer (NYSE: PFE), one of the largest of the Big Pharma firms, is cutting R&D from 2010 levels of $9.4 billion to between $6.5 billion and $7 billion by 2012. European drug giant GlaxoSmithKline (NYSE: GSK) will cut spending by up to $4 billion and plans to radically change how it tries to bring new drugs to market. One industry source found it extremely troubling that the market sees R&D as destroying shareholder value.
Part of Glaxo’s shifting approach will be to outsource the initial stages of drug development. These earlier stages are the riskiest, as failure rates are high and are also costly, given the large number of compounds that must be tested. Finding the needle in a haystack is an understatement when it comes to bringing successful drugs to market. Other companies are following suit.The general belief is that Big Pharma will eventually outsource most of its drug development work to outsiders, be they university laboratories, smaller development-stage pharmaceutical and biotech startups, or companies known as contract research organizations (CROs).
Below is a list of the leading CROs…

Covance (NYSE: CVD) is the largest CRO in terms of sales and market capitalization, but not by a wide margin compared to Pharmaceutical Product Development Inc. (Nasdaq: PPDI). Charles River Labs (NYSE: CRL) and Parexel (Nasdaq: PRXL) are similar in terms of sales, while Icon plc (Nasdaq: ICLR), out of Ireland, is the smallest.
Here is an overview of the two that look most compelling to me from an investment standpoint.

Best Cheap Stocks For 2012: Icon plc (Nasdaq: ICLR)

Hands down, Icon has been the fastest growing of the CROs. In the past three, five, and 10-year periods, sales growth has averaged more than 20% annually, as has profit growth. 55% of its business stems from long-term contracts that are fixed in price, which provides a fair level of revenue stability. The company also counts the top 20 pharmaceutical companies in the world as clients and boasts more than 650 clients total.
Icon is one of the most globally diversified CROs and is also impressively profitable. The company posted operating margins of 11.2% and returns on invested capital (ROIC) in the mid-teens (see table above) in its latest fiscal year. The stock looks a bit expensive looking at the forward P/E and trailing free cash flow, but the company is using this year to invest in its business and expects profits to take a short-term dip, after which growth has a solid chance of returning to historical levels and generating impressive returns for investors.
Best Cheap Stocks For 2012: Pharmaceutical Product Development Inc. (Nasdaq: PPDI)
Pharmaceutical Product Development Inc., or PPDI for short, has been another consistent grower over time that is impressively profitable. The company has been around for more than 25 years, which makes it one of the oldest CRO firms, allowing it time to extend its services to 43 countries. It has strong capabilities in the earliest stages of drug development, such as Phase I clinical trials.

Best Cheap Stocks For 2012: Merck (NYSE: MRK)

PPDI trades for one of the lowest free cash flow multiples and also boasts double-digit returns on invested capital. The company has a reputation for low client turnover, and counts Merck (NYSE: MRK) as a key strategic client. It is also the only CRO to pay a dividend, which demonstrates its confidence in generating stable and consistent profits. Its current dividend yield is 2.1% and should appeal to income-oriented investors.

Gold and Silver Surge in First Trading Session of 2012

The new year started off with a bang in the financial markets.? Although many investors were cheerful of the big rally in the Dow Jones Industrial Average, precious metals out-shined the competition.

On Tuesday, the U.S. dollar declined as the euro currency and equities edged higher. Gold prices climbed $33 to settle back above $1,600 per ounce.? It was the biggest jump for gold in 10 weeks.? Meanwhile, silver prices surged $1.66 to close at $29.57 per ounce.? During the trading highs on Tuesday, silver surged the most in over three years.?  Fear trade is back because of Iran,  Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview.  Also, we are seeing buying across commodities because of the weaker dollar.

Investor Insight: How Did Gold and Silver Perform in 2011?

Tensions continue to build between the U.S. and Iran over the Strait of Hormuz, which is considered the world s most important oil choke-point.? It is estimated that 17 million barrels of oil pass through the strait on a daily basis.? On Tuesday, Iran’s army chief warned the U.S. Navy not to return an aircraft carrier back to the Persian Gulf after it was removed due to Iran’s naval exercises in the area.

In addition to uncertainty in Iran, gold continued to edge higher in late Tuesday trading after the most recent Federal Reserve announcement.? The central bank announced it will begin to publish policymakers  projections for its benchmark interest rate on overnight loans, and when officials expect the first rise to occur.? Such projections will be published for the first time when the Fed releases its quarterly economic forecasts following its January 24-25 meeting.?  Accommodating monetary policies throughout the developed world cause a renewed migration to hard assets by individual investors and sovereign-wealth funds,  Byron Wien of Blackstone explained.

Minutes from the last Federal Open Market Committee meet! ing show that a number of Fed officials believed economic conditions could  well  warrant a further easing of monetary policy, though a few others believed further stimulus would be a bad idea, and that an enhanced communications framework could make any policy shift more effective.? As we have warned our Premium Newsletter subscribers several times, interest rates are likely to remain near zero percent beyond mid-2013, which is very bullish for gold.? The latest Fed announcement will give the central bank another channel of communicating additional easing.? Although the Fed is seeking to provide more clarity in the markets, many investors have already realized that the Fed will be unable to raise interest rates due to massive debt levels.

If you would like to receive more professional analysis on equity miners and other precious metal investments,?we invite you to try our premium service free for 14 days.

Private Equity Firms Shovel Millions to Congress: MapLight Analysis

Political Action Committees and individuals connected to private equity and investment firms have given more than $17 million to lawmakers that have been serving since the 109th Congress adjourned in 2006, a report released last week by the nonpartisan political research firm MapLight shows.

From Jan. 1, 2007, to June 30, 2011, Democrats have taken in $10,871,919, while their Republican counterparts received $6,553,793, the report says. Of the Democrats’ total, President Barack Obama accounts for $1,921,490 while his 2008 Republican opponent for the White House, Sen. John McCain, R-Ariz., has accepted $1,246,575.

Mitt Romney, the current GOP presidential candidate front-runner, has been criticized by his rivals for his career in private business. Texas Gov. Rick Perry, Newt Gingrich and Jon Huntsman, who left the race on Monday, laid into Romney on Jan. 9 for his years at Bain Capital, the private-equity firm he ran until the mid-1990s. Both Perry and Gingrich accused Romney of having “looted” companies and firing workers for his own gain.

The accompanying chart reflects analysis conducted by MapLight, which shows contributions from private equity and investment firms to members of Congress. Contribution industry classification provided by OpenSecrets.

7 Marvelous Media Stocks to Watch in 2012

There’s no question the time is right to buy media stocks. Despite last year’s volatility and summer stock slam, media stocks have risen quite considerably. A lot of factors play into this, but one thing that is without a doubt is the race for the White House will prove to be a huge cash cow for media companies. With an estimated $8 billion worth of political ads to be played throughout the country, you can see why.
Now it’s time to choose which media stocks are the best for you. I watch more than 5,000 publicly traded companies with my Portfolio Grader tool, ranking companies by a number of fundamental and quantitative measures. And this week, I’ve got seven media companies making positive headway over the past 12 months.
Here they are, in alphabetical order. Each one of these stocks gets an “A” or “B” according to my research.
7 Marvelous Media Stocks to Watch in 2012- CBS (NYSE:CBS) is a mass-media company, known best for its television stations. In the past year, CBS stock has jumped 47%. CBS stock gets an “A” for operating margin growth, a “B” for its ability to exceed the consensus earnings estimates on Wall Street, a “B” for the magnitude in which earnings projections have increased over the past month, a “B” for cash flow and a “B” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of CBS stock.
Comcast (NASDAQ:CMCSA) is a provider of video, high-speed Internet and phone services to residences and businesses. CMCSA is up 16% in the past year, compared to a gain of almost 7% for the Dow Jones in the same time. CMCSA stock gets an “A” for sales growth, a “B” for earnings momentum and a “B” for cash flow in my Portfolio Grader tool. For more information, view my complete analysis of CMCSA stock.
7 Marvelous Media Stocks to Watch in 2012-Discovery Communications (NASDAQ:DISCA) is a nonfiction media and entertainment company that provides programming across the world. In the last 12 months, DISCA has climbed nearly 11%. DISCA stock gets a “B” for sales growth, an “A” for operating margin growth, a “B” for earnings growth, a “B” for earnings momentum,  a “B” for its ability to exceed the consensus earnings estimates on Wall Street, a “B” for the magnitude in which earnings projections have increased over the past month, an “A” for cash flow and a “B” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of DISCA stock.
DISH Network (NASDAQ:DISH) is a satellite television provider with more than 14 million subscribers. In the past year, DISH stock is up more than 32%, compared to smaller gains by the broader markets. DISH stock gets an “A” for operating margin growth, a “B” for earnings growth, an “A” for cash flow and an “A” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of DISH stock.
7 Marvelous Media Stocks to Watch in 2012-News Corp. (NASDAQ:NWS) is a diversified global media company, known best for its controversial owner, Robert Murdoch, as well as for many popular prime time shows such as “American Idol” and “Family Guy”. NWS is up 16% in the past year, despite the controversy surrounding Murdoch. NWS stock gets a “B” for its ability to exceed the consensus earnings estimates on Wall Street, a “B” for the magnitude in which earnings projections have increased over the past month and a “B” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of NWS stock.
Sirius XM Radio (NASDAQ:SIRI) is a satellite radio provider that offers music, sports, news, talk, entertainment, traffic and weather channels. In the past year, SIRI stock has posted a significant gain of 28%. SIRI stock gets an “A” for operating margin growth, a “B” for earnings growth, an “A” for earnings momentum, an “A” for its ability to exceed the consensus earnings estimates on Wall Street, an “A” for the magnitude in which earnings projections have increased over the past month, a “B” for cash flow and an “A” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of SIRI stock.
7 Marvelous Media Stocks to Watch in 2012-Time Warner Cable (NYSE:TWC) is a cable operator that has customers in several markets across the U.S. TWC is up about 10% since last February. TWC stock gets a “B” for operating margin growth, a “B” for earnings momentum, an “A” for its ability to exceed the consensus earnings estimates on Wall Street, a “B” for the magnitude in which earnings projections have increased over the past month, a “B” for cash flow and an “A” for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of TWC stock.

Cedar Fair, L.P made New 52 Week High Price - NYSE:FUN

Cedar Fair, L.P (NYSE:FUN) achieved its new price of $22.78 where it was opened at $22.20 UP 0.12 points or +0.54% by closing at $22.21. FUN transacted shares during the day were over 589,568 shares however it has an average volume of 131,160 shares.
FUN has a market capitalization $1.23 billion and an enterprise value at $2.73 billion. Trailing twelve months price to sales ratio of the stock was 1.21 while price to book ratio in most recent quarter was 6.21. In profitability ratios, net profit margin in past twelve months appeared at 0.94% whereas operating profit margin for the same period at 23.10%.
The company made a return on asset of 6.71% in past twelve months and return on equity of 4.83% for similar period. In the period of trailing 12 months it generated revenue amounted to $1.01 billion gaining $18.31 revenue per share. Its year over year, quarterly growth of revenue was 5.00% holding 101.60% quarterly earnings growth.
According to preceding quarter balance sheet results, the company had $96.31 million cash in hand making cash per share at 1.74. The total of $1.59 billion debt was there putting a total debt to equity ratio 805.85. Moreover its current ratio according to same quarter results was 0.77 and book value per share was 3.58.
Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated -0.86% where the stock current price exhibited up beat from its 50 day moving average price $20.22 and remained above from its 200 Day Moving Average price $19.76.
FUN holds 55.34 million outstanding shares with 43.74 million floating shares where insider possessed 21.66% and institutions kept 34.00%.

Why Tech Stocks Look Better—Even for the Risk Averse

The technology sector is known for two things: growth potential and risk.

Apple's trouncing of Wall Street earnings forecasts this past week suggests growth is still abundant. Yet Big Tech is looking less risky than it has in the past.

Here are four reasons conservative investors should consider adding exposure to tech stocks.

An Apple store in New York: Apple holds more than $97 billion in cash and securities.

Valuation. Tech stocks have had more than a decade to work off the bloated share prices from the dot-com stock bubble of the 1990s, says Cliff Hoover, chief investment officer of Dreman Value Management in Jersey City, N.J., which manages $5 billion. Many have become a good home for safety-oriented investors, he says.

The information-technology sector of the Standard & Poor's 500-stock index recently traded at 13 times estimated 2011 earnings, on par with the broad index, according to S&P data. The consumer staples and utilities sectors, typically considered safe and stodgy, fetch 14 times earnings. And Wall Street expects the tech sector to increase its earnings by almost 14% in 2012, versus 8% for consumer staples and 1% for utilities.

! Volatility. Over the past five years, large pockets of the tech sector, including hardware makers, systems software firms and consulting shops, have been no more volatile in terms of share-price changes than the broad S&P 500 index, according to S&P data.

Financial strength. The tech sector of the S&P 500 sits on $380 billion in cash and equivalents, more than any other sector and equal to 15% of its market value, according to Howard Silverblatt, senior index analyst at S&P. That doesn't include holdings in long-term securities. Apple holds a $67 billion portfolio that is "very liquid," Mr. Silverblatt says.

The two largest companies in the sector, Apple and Microsoft, have forward price/earnings ratios in single digits after deducting their cash and investments from their stock-market values. Microsoft and Intel now have fatter "dividend yields," or the percentage of share price paid out as dividends, than the 500 index average.

Mr. Hoover, who considers himself a "deep value" stock picker, likes Microsoft, Intel, Cisco Systems and Applied Materials. "They're big free-cash-flow generators and pretty good dividend payers," he says. Microsoft pays 2.7%, Cisco 1.2%, Intel 3.1% and Applied Materials 2.6%, versus 2% for the broad S&P 500.

Low expectations. With 37% of S&P 500 companies having announced December-quarter earnings results, 68% of the technology companies that have reported have beaten analysts' estimates, versus 59% for the index and 40% for consumer-staples companies, according to a Friday report from Thomson Reuters. (Only three utilities have reported, with one beating estimates.)

Tech outfits are doing well in part because companies that delayed technology purchases during the 2008 financial crisis are starting to spend, says David B. Armstrong, co-founder of Monument Wealth Management in Alexandria, Va., which oversees $200 million.

"Techno! logy has become more of a necessity, and companies can only delay investments for so long," he says. "That helps make the sector more stable."

When hunting for tech stocks, investors should consider not only traditional factors like valuation and income growth, but also the "network effect," says Kishore Rao, a research principal with Sustainable Growth Advisers in Stamford, Conn., which manages $3 billion in pension funds and other assets. The term refers to goods and services becoming more valuable as more people use them. For example, securities exchanges benefit from the network effect because as they attract more traders they become better able to handle additional trading volume.

Mr. Rao cites eBay's marketplace, Google's search advertising and Apple's community of mobile-application developers as examples of the network effect. "There's a high degree of predictability for these companies," he says. His firm, which tends to hold 25 to 30 stocks at a time, invests in all three companies.

Another factor to consider beyond financial results is "switching costs," says Grady Burkett, an analyst at Morningstar. The best companies are ones whose customers would find it a burden to switch to competitors, he says.

That typically means companies with plenty of large business customers, such as Cisco and Oracle, Mr. Burkett says. He calls Apple a rare example of a consumer-focused business with high switching costs because customers are attached to its music, photo and other applications. "They'll find it harder to give up their iPhones than they did their Motorola flip phones years ago," he says.

Of course, the technology sector remains exposed to sharp economic downturns, says David Roda, an investment strategist at Wells Fargo Private Bank. But breakthroughs in areas like mobile computing and Web-based, or "cloud," services are "just beginning," he says, and emerging markets have shown a voracious appetite for technology.

Mutual-fund investors who favor portfolios run by ! stock pi ckers should look for long-tenured management, solid returns and limited volatility, says Flynn Murphy, a mutual-fund analyst at Morningstar. He highlights two examples: Columbia Seligman Communications & Information, which has returned an average of 6.6% a year after expenses over the past 10 years, and Waddell & Reed Advisers Science & Technology, which has returned 7% a year, according to Morningstar data. The category average is 3.3% a year. Returns for both funds are for Class A shares, which carry upfront sales charges of up to 5.75% and yearly expenses of 1.36%.

For investors who chafe at high fees, exchange-traded funds like Vanguard Information Technology and Technology Select Sector SPDR offer broad exposure to technology at yearly expenses of 0.19% and 0.20%, respectively.

Another option is a more broadly focused mutual fund that happens to favor tech. The Oakmark Global fund, one of Morningstar's top picks, has 35% in tech, versus an average for world stock funds of 14%, Mr. Murphy says. It has returned 9.0% a year on average over the past decade, versus an average for world stock funds of 5.2%. There isn't an upfront sales charge, and yearly expenses are 1.16%.