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5 Value Tech Picks to Buy on the Dip

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Markets ended lower on Sep 25, as chip stocks took a hit once again, dragging down the S&P 500. Tech stocks, particularly chipmakers experienced rough trading after the Trump administration stuck to its hard-line stance on trade. Trade war fears have been rattling markets for a while with tech stocks taking a hit. The fears were once again escalated on Tuesday, resulting in chipmaker stocks to plummet.

Trade war fears definitely have kept tech stocks under pressure but this might just be a passing phase, with strong U.S. economic fundamentals. Given the aggressive stance adopted by the United States, trade disputes are likely to continue for a while. However, given the impressive performance of the tech sector, there is ample room for stocks to rebound, a reason valid enough for investors to opt for value stocks on the dip.

Trade War Fears Hit Tech Stocks

The S&P 500 declined 0.1% on Sep 25, extending its losses for the third consecutive session. The selloff was led by tech stocks, particularly chipmakers. Shares of Intel Corporation (INTC - Free Report) fell 2.1%. Shares of Micron Technology, Inc. (MU - Free Report) declined 1.2%, while Texas Instruments Incorporated (TXN - Free Report) slumped 2.2%. The PHLX Semiconductor index (SOX) declined 1.7%. The broader technology sector witnessed a decline of 0.1%.

Chipmaker stocks, in particular, were dealt with a blow after the Trump administration stuck to its hard-line stance on trade. President Donald Trump at the United Nations General Assembly said that the United States “will no longer tolerate abuse” on trade. Trump said, “We will not allow our workers to be victimized, our companies to be cheated and our wealth to be plundered and transferred.”

Trump’s comments came after U.S. Trade Representative Robert Lighthizer said that the United States is ready to move ahead with a trade deal with Mexico but excluded Canada. Understandably, trade war fears have kept tech stocks, particularly chipmakers, under pressure, which has been taking a toll on markets.

Tech Stock to Dive Markets

Trade war fears coupled with fears of regulatory clampdown have seen tech stocks suffer in recent times. However, tech stocks have been driving markets for a while now and are expected to do so in the days to come.  While the S&P 500 index has increased 9.6%, year to date, the Technology Select Sector SPDR has grown 17.1%.

Also, increasing investment in technological R&D is bolstering the sector’s growth. Another reason behind tech stocks outperforming the industry is possibly the emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, virtual reality and artificial intelligence.

Moreover, despite the recent beating, the Semiconductor Industry Association on Sep 4 said that global semiconductor sales reached $39.5 billion in July, up 17.4% year over year. On Sep 5, the World Semiconductor Trade Statistics (WSTS) raised its forecast for the global chip market in 2018 for the second time in two months. The WSTS now expects the worldwide semiconductor market to rise 15.7% in 2018 to $477 billion.

Our Choices

The immense prospects of tech stocks will without doubt help the markets bounce back in the near term. The Trump administration’s tough stance on trade may have been making investors jittery but trade war fears might just be overblown.

Moreover, tech stocks have been driving markets this year too and have so far been the second-best performer on the S&P 500 index. So, it makes good sense to buy value stocks at a bargain that could prove to be valuable finds once the rally resumes. Our selection is also supported by a good Zacks Value Score and a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

We narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value-investing space.

j2 Global, Inc.(JCOM - Free Report)  provides cloud-based communications and storage messaging services. The company offers online fax, virtual voice, hosted email, email marketing, online backup and unified communications services.

The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.15, lower than the industry average of 70.86. It has a PEG ratio of 1.64, lower than the industry average of 4.08.

CACI International Inc (CACI - Free Report) provides IT and network solutions needed to prevail in today's new era of defense, intelligence and e-government. 

The forward P/E for the current financial year (F1) is 19.85, lower than the industry average of 22.29. It has a PEG ratio of 1.99, lower than the industry average of 2.18.

Teradyne, Inc. (TER - Free Report) is a leading supplier of automation equipment for test and industrial applications. 

The forward P/E for the current financial year is 18.41, lower than the industry average of 25.11. It has a PEG ratio of 1.40, lower than the industry average of 2.09.

DXC Technology Company (DXC - Free Report) is an IT services company. It services include Analytics, Application, Business Process, Cloud, Consulting, Enterprise and Cloud Applications, Security, Workplace and Mobility and Industries. 

The forward P/E for the current financial year is 11.57, lower than the industry average of 20.09. It has a PEG ratio of 1.60, lower than the industry average of 1.91.

Perspecta Inc. (PRSP - Free Report) delivers IT services and business solutions to all levels of government in the United States. 

The forward P/E for the current financial year is 13.36, lower than the industry average of 20.09. It has a PEG ratio of 1.67, lower than the industry average of 1.91.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

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