Savvy technology investors believe if there is any bright spot in tech stocks, which got hammered in 2008 along with the rest of the stock market, it is the Internet security sector — the outfits that provide software and related services that protect computer networks against viruses and other types of cyber attacks.
“Shares of tech companies in the security sector outperformed most other tech sectors in 2008,” says Richard Parrower, managing director at J&W Seligman, who heads its Global Technology Fund. This group tops the list of tech industries that Parrower favors. Specifically, he’s bullish on Symantec, which provides software that protects computer network infrastructure; McAfee, a leading developer of virus protection and encryption software; and Check Point Software, which makes protective firewall systems.
The 2009 outlook for the broader tech sector isn’t looking any better than last year’s unspectacular showing. One reason: The moribund corporate spending in 2008 on information technology is expected to spill into 2009. According to a survey conducted by Morgan Stanley among 150 corporate info tech executives, spending will slow, from 4.9 percent in 2008 to 2.3 percent in 2009. That has prompted Morgan Stanley tech analyst Adam Holt to cut his earnings forecasts on tech companies he follows. Holt expects 2009 earnings by tech companies to decline some 20 percent in 2009.
Nonetheless, analysts expect the security software companies to outperform the tech pack again this year.
Shares of Symantec, McAfee, and Check Point are still way undervalued, says Seligman’s Parower. He sees their stock prices climbing at least 20 percent over the next 12 months.
Symantec’s Unseen Strengths
In spite of the market’s turbulence, stocks of the three firms have managed to demonstrate staying power. Symantec has risen to 13.50 a share on Jan. 15, from a 52-week low of 10.50 on Nov. 20, 2008. But that is…