In light of declining bond yields, four technology stocks that have high business quality and are trading below the GuruFocus Valuation Line are Check Point Software Technologies (CHKP, Financial), Cognizant Technology Solutions Corp. (CTSH, Financial), Jack Henry & Associates Inc. (JKHY, Financial) and VMWare Inc. (VMW, Financial) according to the All-in-One Screener, a Premium feature of GuruFocus.
On Tuesday, the Nasdaq Composite Index closed at 13,073.82, up 464.44 points or 3.69% from its Monday close of 12,609.16. The tech-heavy index had one of its best single-day gains since November 2020, fueled by Tesla Inc.'s (TSLA, Financial) gain of over 19% and Facebook Inc. (FB, Financial) and Apple Inc.'s (AAPL, Financial) gains of over 4% each.
Technology stocks rebounded on the heels of the 10-year Treasury constant maturity rate dropping to 1.52% from Monday's high of 1.59%, leading investors to "buy the dip" in beaten-down technology stocks.
ARK Invest leader sees optimism in tech despite Monday's selloff
ARK Investment Management CEO and Chief Investment Officer Catherine Wood (Trades, Portfolio) said in a Monday evening CNBC interview that she is unfazed by the tech selloff, adding that the bull market is "broadening out" to include strategies like value. Wood also mentioned that the New York-based firm received "great opportunities" to buy shares in pure-play companies.
As such, investors may find opportunities in high-quality technology companies that are trading at or below the GuruFocus Value Line. Patterned from Peter Lynch's earnings line, GuruFocus' exclusive valuation method considers a company's historical price multiples and internally adjusts for past performance and estimates of future business growth.
The Screener listed four technology companies that meet the following criteria:
- GuruFocus financial strength rank of at least 6.
- GuruFocus profitability rank of at least 7.
- GuruFocus business predictability rank of at least three stars.
- GF Valuation: Modestly undervalued or fairly valued.
- Return on capital greater than 15% each year from 2016 to 2020 according to the Historical Data Screen, a Premium Plus feature of GuruFocus.
Check Point Software
Shares of Check Point Software (CHKP, Financial) traded around $114.59, showing that the stock is modestly undervalued based on Tuesday's price-to-GF Value ratio of 0.87.
GuruFocus ranks the Israeli-based pure-play cybersecurity vendor's financial strength and profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a strong Altman Z-score of 7.61, a five-star business predictability rank and an operating margin that outperforms over 90% of global competitors.
Gurus with large holdings in Check Point include Jim Simons (Trades, Portfolio)' Renaissance Technologies and John Rogers (Trades, Portfolio)' Ariel Investment.
Cognizant Technology
Shares of Cognizant Technology (CTSH, Financial) traded around $74.86, showing that the stock is fairly valued based on Tuesday's price-to-GF Value ratio of 1.01.
GuruFocus ranks the Teaneck, New Jersey-based information technology services provider's profitability 8 out of 10 on several positive investing signs, which include profit margins and returns outperforming over 70% of global competitors.
Gurus with large holdings in Cognizant include Dodge & Cox and Al Gore (Trades, Portfolio)'s Generation Investment Management.
Jack Henry & Associates
Shares of Jack Henry & Associates (JKHY, Financial) traded around $149.89, showing that the stock is fairly valued based on Tuesday's price-to-GF Value ratio of 0.93.
GuruFocus ranks the Monett, Missouri-based payment processing software company's financial strength and profitability 9 out of 10 on several positive investing signs, which include a strong Altman Z-score of 12, triple-digit interest coverage and profit margins and returns that outperform over 85% of global competitors.
VMWare
Shares of VMWare (VMW, Financial) traded around $144.38, showing that the stock is modestly undervalued with a price-to-GF Value ratio of 0.81.
GuruFocus ranks the Palo Alto, California-based software company's profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and profit margins that outperform over 88% of global competitors.
Disclosure: Author is long Apple.
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