The market has seen increased volatility in recent weeks. Investors are still nervous about COVID and inflation, as well as new issues, including the debt ceiling debate and the possibility of an Evergrande default in China. At times like these, investors may be looking to reduce their risk profile.
One way to do this is to invest in low risk stocks, but another option is to reduce the risk by diversifying your portfolio in general. A great way to do this is to invest in stocks outside of the United States. Although there is some overlap in performance between national and international actions, they are not fully correlated.
For example, I measured the correlation between the ETF SPDR S&P 500 (TO SPY) and the iShares MSCI EAFE ETF (AGE), which measures the international stock market. EFA is 85% correlated to SPY. But if you choose individual stocks, this correlation decreases even more.
If we go further, international technology stocks offer even more diversification. So I ran a screen in our POWR odds system to find international technology stocks listed for purchase. Nokia (NOK), Silicon Motion Technology (SIMO) and SAP SE (SAP) are the three main titles to consider.
Finnish company NOK is one of the leading suppliers to the telecommunications equipment industry. The Company’s network business derives its revenues from the sale of hardware, software, and wireless and fixed services. In addition, its technology segment licenses its patent portfolio to cell phone manufacturers and collects royalties on Nokia branded cell phones.
The company is poised to benefit from the increased demand for next-generation connectivity. NOK has so far progressed in its three-phase value creation journey. This includes “Reset”, which is the goal for this year, as well as “Accelerate” and “Scale up” for next year and beyond. He is now focusing on capital allocation and technology leadership, as these factors will contribute to growth this year. Things are going well as management raised its outlook for the full year 2021.
NOK is also looking to accelerate its product roadmaps and cost competitiveness by increasing investments in 5G. The company currently has 180 5G commercial agreements with communications service providers around the world, as well as more than 240 5G engagements with carriers (including paid trials).
Its 5G portfolio is gaining ground among businesses, accounting for over 12% of total 5G transactions. In addition, NOK is seeing momentum in software and business, which bodes well for its licensing business. The company has an overall “B” rating, which translates to a “Buy” rating in my POWR rating system. NOK has a value rating of ‘B’ which certainly makes sense given its forward P / E of 13.59.
The company also has an “A” sentiment rating, which means it is popular with analysts. Seven in ten analysts give the stock a “Buy” with an average price target of $ 7.30. At its current price, this represents an upside potential of 33.7%. We also provide ratings for growth, dynamics, stability, and quality, which you can find here.
NOK is ranked # 14 in the B-ranked Communication / Network Technology Industry. For more top stocks in this highly rated industry, Click here.
Silicon motion technology (SIMO)
Based in Taiwan, SIMO is a leading developer of microcontroller integrated circuits for NAND flash storage devices. The company is focused on the design, development and marketing of controllers for the management of NAND flash memory used in on-board storage applications, such as eMMC on-board memory. SIMO products are used in personal computing, smartphones, tablets, USB sticks, and data and corporate centers.
The company has enjoyed strong demand for its solid-state drive (SSD) controllers and eMMC and UFS controllers. This resulted in an increase in revenue and year-over-year sales in the last quarter. The company is one of the leading merchant suppliers of customer SSD controllers for module manufacturers. Management believes the market will soon be dominated by SSDs using TLC flash.
This should strengthen their use in PCs, displacing mechanical hard drives. SSD offers superior performance and a competitive advantage over hard drives, which is why PCs are adopting them more and more. Additionally, the company believes its SSD controller will be used to handle 3D flash in the future, and its eMMC controllers are showing signs of a rebound.
The company has an overall “A” rating and a “Strong Buy” rating in our POWR rating system. SIMO has a growth rating of “B” as its revenues have increased by 26.3% in the past year. In addition, its EBITDA is expected to increase by 30% over the next year. Analysts expect profits to soar 110.5% year-over-year in the current quarter. SIMO also has a quality rating of “B”, indicating a strong balance sheet.
At the end of the last quarter, the company had a cash balance of $ 357 million. This is an increase from the previous quarter and compares favorably to its current liabilities. For the rest of the SIMO ratings (Value, Momentum, Stability and Sentiment), Click here.
SIMO is ranked # 9 in the B-ranked wireless semiconductor and chip industry. For more top-ranked stocks in this industry, Click here.
Click here to view our Semiconductor Industry Report for 2021
Note that SIMO is one of the few stocks handpicked by our chief value strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
SAP SE (SAP)
Founded in 1972 by former IBM employees, the German company SAP is one of the largest independent software companies in the world. It provides database technology and enterprise resource planning software to businesses around the world. The company offers advanced machine learning, Internet of Things and analytics technologies that help customers gain insight and make decisions.
The company benefits from the strength of its cloud business, in particular its latest Rise with SAP solution. Management focused on expanding its cloud business to become a leading player in the space. Its current cloud backlog grew 17% in the second quarter. This is important, because an order book is a clear indicator of market success in the cloud space.
SAP has already established its dominance in three critical areas of customer demand: effective customer engagement, human experience management, and an interconnected business network. It helps support growth. The company is also seeing strong adoption of its S / 4HANA and strong momentum in the Ariba and Fieldglass offerings.
In addition, the strong demand for e-commerce and the digital supply chain bodes well for the long term. SAP has an overall “B” rating, which translates to a “Buy” rating in our POWR rating system. The company has a value rating of “B”, which is not surprising with a price / sales ratio of 5. This compares favorably to the industry average of 9.9. Its price at reservation is also well below the industry average.
SAP also has a “B” grade rating as its liquidity position appears healthy. In the last quarter, the company had $ 10.1 billion in cash compared to no short-term debt. In addition, its debt ratio of 0.5 is low. To access all SAP notes (Growth, Momentum, Stability and Sentiment), Click here.
SAP is ranked # 6 in the Software – Applications industry. For more top ranked stocks in this industry, Click here.
Click here to view our Software Industry Report for 2021
NOK shares were trading at $ 5.53 per share on Monday morning, up $ 0.07 (+ 1.28%). Since the start of the year, NOK has gained 41.43%, compared to a 17.05% increase in the benchmark S&P 500 during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the chief value strategist for StockNews.com and the publisher of the POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services firms, hedge funds and online publications. David enjoys researching and writing about stocks and markets. It takes a fundamental quantitative approach in evaluating stocks for readers. Following…