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Amid the sell-off in growth technology stocks in early 2016, Morgan Stanley still likes tech names with plenty of free cash, dividends, improving profit margins and rising market share. In a research report Wednesday, Morgan Stanley said its top tech picks include Comcast ( CMCSA ), T-Mobile US, Microsoft ( MSFT ), Amazon.com, Qualcomm ( QCOM ) and IBM. Morgan Stanley, though, is underweight on the technology sector overall, preferring utilities, financials and health care. “Relative to the broader market, we’ve seen more technology growth stocks with contracting multiples than any time in the last 10 years,” said analyst Adam Parker in the report. He also noted: “Since the (2008) financial crisis, technology stocks with improving margins have strongly outperformed those with high sales growth but no margin expansion.” Here’s what Morgan Stanley likes in some tech stocks: — T-Mobile ( TMUS ). “Competition in the wireless industry is intense,” but T-Mobile continues gain share with its Uncarrier-branded promotions vs. rivals. — Comcast. The cable TV firm has pricing power and invests wisely in broadband infrastructure and NBCUniversal, says Parker. — Amazon ( AMZN ). Its “retail and cloud businesses are both inflecting … which we see leading to higher than expected profitability,” wrote Parker. — Microsoft. It’s getting a boost from “real top-line drivers,” says Parker, citing its Azure public cloud computing business, data center share gains and Office 365 subscriber growth and pricing. — IBM ( IBM ). While IBM is the only large cap U.S. tech stock with institutional ownership at five-year lows, Parker says investors under-appreciate “an accelerating transformation to a more analytics- and cloud-friendly business.” — Qualcomm. “We are overweight as we think recent concerns regarding the royalty and chip businesses are overblown,” said Parker, who expects improving licensing fees in China. Scalper1 News
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