Two dinosaur tech names are the only Dow stocks to have held in positive territory since the market peaked in late January. To one market watcher, what Cisco and Intel have in common is what makes them a buy.
“It’s only been 20 years since these names were the new leaders of the technology revolution,” Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors, told CNBC’s “Trading Nation” on Tuesday. “I would consider these tech value stocks.”
Bapis sees reasonable valuations and dividend yields in Cisco and Intel, two factors that make these older tech names more attractive than some of the younger industry leaders. Cisco trades at 15.5 times forward earnings, while Intel is 14.2 times. Both are below the Nasdaq‘s 21.6 times multiple.
Their exposure to the corporate tech world also makes them an attractive pick, says Bapis.
They “have more room to grow because other corporate dollars are going into the products these companies make. So, it’s a corporate spend versus a consumer spend,” said Bapis. “You’re going to see that continue assuming they reinvent themselves every 12 to 18 months to keep up with this ever-changing technology world.”
Matt Maley, equity strategist at MillerTabak, sees particular promise in Intel shares on a technical basis.
“For much of last year, 2017, when the tech group was rallying so strongly, Intel — being the old name that it is — lagged quite a bit,” Maley said on “Trading Nation.” “But it started to pick up quite a bit in the last quarter and that followed through into 2018.”
Intel broke meaningfully above $50 a share, a level of key resistance, on Jan. 26. That was the day the Dow last notched a new record. Since then, the stock has added 2 percent even as the rest of the tech sector has declined. The XLK Technology ETF has fallen 6.6 percent in that period.
Intel’s break above $50 a share is also significant in the longer term, says Maley. Its ascent has put its shares above the trend line dating to 2007, its highs before the financial crisis.
“You got above that line when we rallied earlier this year, and then when the market pulled back in February, it came back down, tested that line, successfully held it, and rallied it again,” said Maley. “We’ve had a breakout both on a short term and an intermediate to long-term basis, so this should be very positive for the stock at least on the technical side.”
Cisco and Intel are still positive since Jan. 26, even after another big sell-off in the technology sector on Tuesday. The XLK ETF plummeted more than 3 percent during the session.