Big Texan set for 15-25% jump

Robo Street – January 19, 2018

Internet of Things (IoT) Chip Stock Set to Soar in 2018

It is no secret that the tech sector is leading the broader stock market rally. The technology category, as measured by the S&P 500 Information Technology (sector) index, is set to outdistance every sector within the entire market for 2018. The tech sector, or IT component, of the S&P 500 is 18.33% of the index and represents the largest weighting. For the Nasdaq Composite, technology’s weighting is 46.17%.

Successful investing involves a high level of focus. The beautiful thing about investing in the tech sector is that it has the least amount of risk associated with geopolitical issues, commodity price swings, sweeping government policy changes, consumer seasonality, political party affiliation, weather and Fed policy.

The tech sector is also where the most attention is paid by the business media, and for good reason. There is transformational change occurring in an array of industries through technological advances that fall into several categories that include cloud computing, big data, mobile e-commerce, digital payments, 5G wireless, Internet of Things (IoT), autonomous vehicles, artificial intelligence (AI), virtual reality (VR), augmented reality (AR), robotics and machine learning.

The numbers being forecast in terms of market size are huge. The capital that will flow into these frontier technologies is in the hundreds of billions of dollars. The opportunities for traders and investors are many-fold and are driving forces as to why the sector constantly leads the bull market higher. Our work at Tradespoon utilizes many elements of these advanced technologies noted above within its proprietary trading and investing platforms to ferret out the best stocks to allocate investment capital to.

Case in point, Wednesday’s Featured Stock for traders was Texas Instruments (TXN), a big-cap tech stock at the forefront of leading technologies with an attractive and growing dividend yield. Texas Instruments is one such company that is posting accelerating earnings and taking full advantage of business investment in IT that is at its highest level since 2011. During the third quarter of 2017, Texas Instruments hiked its quarterly dividend 24%, making it the 14th year of dividend increases. The company also raised its $44.6 billion in share repurchase authority by an additional $6 billion.

In the exploding Internet of Things (IoT) revolution that the company has embraced as a major future driver, I believe that Texas Instruments is the only semiconductor company with all of the building blocks to enable the IoT. Texas Instruments has a connectivity solution for every IoT application — from industrial to consumer to automotive — that gives the company a major advantage of providing the industry’s widest range of wired and wireless connectivity technologies, low-power, always-on optimization and easy-to-implement solutions. Analysts estimate that 20+ billion devices will get connected to the internet by 2020.

From a technical standpoint, my short-term vector figures show a rise incrementally throughout the forecast for the ten days. This is a good signal for not just trading, but investing opportunities, because we use vectors as a primary factor in determining price movements for stocks.

The Vector column calculates the change of the Forecasted Average Price. Just like our trading community, Tradespoon investors are “trend investors” and should invest along the predicted direction of the Vector for featured stocks. The higher the value of the Vector the higher its momentum. Shares of TXN vaulted to $119 this week, ahead of our short-term forecast model and are displaying the kind of bullish upside breakout momentum investors can get truly excited about for the next three-to-six months.

This powerful formula provides for a strong investment theme for investors wondering where to invest for total return. Portfolio managers are as eager as ever to own the crème-de-la-crème blue-chip technology stocks that offer the best total returns that consist of rapid dividend growth and capital appreciation.

Fewer and fewer big cap tech companies are able to double their dividend payouts every five to eight years while committing tens of billions of dollars to stock buybacks. It’s my view TXN is going to be among those coveted high-tech holdings that will enjoy steady institutional accumulation throughout 2018 in what is already shaping up to be a banner year for TXN shareholders.

While lofty numbers being applied to future technological advances such as artificial intelligence, augmented reality and machine learning are all well and good, without seamless Internet of Things (IoT) connectivity solutions that can be broadly applied, rapid adoption and converging these technologies becomes problematic.

As a result of the dividend hike and share buyback news during Q4 2017, shares of TXN took on a steeper upward trajectory that has the stock rising at a 45-degree angle. Driving this up-and-to-the-right momentum for TXN shares is the burgeoning growth in IoT spending on products and services that is being factored into future revenues and earnings. B2B spending on IoT technologies, apps and solutions will reach $267 billion by 2020.

The Tradespoon proprietary forecasting chart below shows a fresh fire of buyer interest under TXN’s shares and it now has look of a stock that can easily trade 15%-25% higher over the intermediate term. This kind of breakout chart is hard to find in the broader tech sector, where it would appear that for many stocks “the easy money has already been made.” Not so for TXN.

Companies the size and quality of TXN that have the ability to gain the full attention of the global financial community are in a special category. It is exactly what long-term pension money is looking for, namely, growth at a reasonable price coupled with robust dividend growth, an aggressive stock repurchase plan and plenty of liquidity. Not all big-cap technology stocks are of equal significance. They must continue to reinvent themselves, identify and adapt to new areas of growth, like IoT where TXN will be a big player in this fledgling technology. It’s quite encouraging to see Texas Instruments take on the role of a major leader in the chip space where the glidepath to top and bottom line growth is long and oh so bright. Best of all though is that it’s the kind of stock that our “always thinking” stock picking machines are flashing Buy, Buy!