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Old Tech Vs. New Tech: Which Will Be Better Investments For 2017?

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Old Tech Vs. New Tech: Which Will Be Better Investments For 2017?

Old tech versus new tech is a debate that saw a breath of new life in 2016 as investors weighed the resurgence of mature companies like International Business Machines Corp. (NYSE: IBM) — up 40 percent over the past 52 weeks — with the market dominance of relative newcomers such as NVIDIA Corporation (NASDAQ: NVDA) — the best performing stock of 2016.

Maturity Vs. Growth

Benzinga spoke with Tigress Financial analyst Ivan Feinseth, who told us the delineation between old and new tech is the focus on "SMAC" — an acronym for social, mobile, big data analytics and cloud.

"Microsoft Corporation (NASDAQ: MSFT) has transitioned to being a bigger player in the cloud," Feinseth said. "IBM has had a hard time, and so has Cisco Systems, Inc. (NASDAQ: CSCO). It's interesting how much some of these companies are struggling."

In essence, investors are often presented with a choice between yield and growth, while still others look for both in order to stay diversified. While IBM and Cisco provide a yield in excess of 3 percent, companies like Nvidia and Skyworks Solutions Inc (NASDAQ: SWKS) have a head start operating in growing sectors like mobile and the self-driving car.

"It's really about the technology trends of the future and those companies that are on the forefront of that, versus the embedded technology," Feinseth commented. Bear in mind, old tech names make the infrastructure, lending their earnings some stability.

But that stability may have come at the price of innovation and creativity. "Those companies that dominate have become big, mature companies," Feinseth continued. "So, their growth has slowed; the cash on their balance sheet has increased. They're not deploying that cash fast enough. For whatever reason, there's a hesitancy to do that. With all of the great emerging technology companies out there that could benefit from being part of a mature company, they're not investing in new tech. Not at a fast pace."

Old Dogs, New Tricks?

With so much cash and accumulated know-how, companies like Microsoft and Intel Corporation (NASDAQ: INTC) have a decent shot at presenting a threat to chip-makers like Nvidia. While these tech titans are buying ever larger quantities of Nvidia-made chips, they're also becoming competitors in both hardware and software. And Intel, at least, may have gotten the memo regarding the benefit of M&A; the company recently bought two A.I. chip startups.

Still, asked for his 2017 favorite in the tech space, Feinseth doesn't hesitate. "It happens to be Skyworks. And Nvidia — I've had a Strong Buy on Nvidia since the stock was at $23." Tuesday, Tigress upgraded Microsoft to Buy and reiterated a Buy rating on Facebook Inc (NASDAQ: FB). Skyworks is a Strong Buy at the firm, but Tigress stays sidelined at Neutral on Intel and IBM.

Shares of Skyworks and Microsoft traded 1.86 percent and 0.27 percent higher, respectively, in late afternoon trading Monday.

Latest Ratings for IBM

DateFirmActionFromTo
Apr 2021Morgan StanleyMaintainsEqual-Weight
Oct 2020BMO CapitalMaintainsMarket Perform
Oct 2020Morgan StanleyMaintainsEqual-Weight

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