By JACK HOUGH
Boring stocks are basking in popularity. The utilities and consumer staples sectors within the S&P 500 index are 12% and 22% more expensive, respectively, than the broader index based on 2011 earnings forecasts.
Such firms tend to grow earnings only slowly, and so usually trade cheaply. But they also tend to hold up well in a recession -- an attribute investors are currently willing to pay up for.
For those investors who prefer to shop away from the herd, technology shares seem worth a look. The tech sector within the S&P 500 sells for about 13 times earnings, on par with the broader index. But tech is projected by Wall Street to produce 14% earnings growth next year, versus 10% for the index and much less for utilities and staples.
Below are a pair of tech firms that have received multiple opinion upgrades from analysts over the past four weeks. Whether analysts rate a particular stock a "buy" or a "hold" at a given time tends not to have much predictive power, studies show. ("Sell" ratings are rarer and, perhaps for that reason, more prescient.) But changes in opinions represent fresh information, and studies show they tend to be more closely linked with future returns.
- No. of upgrades, past four weeks (net of downgrades): 3
- Price-to-earnings ratio: 6
Computer giant Hewlett-Packard (HPQ)
The new chief executive, former eBay (EBAY)
- No. of upgrades, past four weeks (net of downgrades): 2
- Price-to-earnings ratio: 10
At a recent analyst meeting the company outlined plans to invest more in smartphone chips, worldwide demand for which should increase at a compounded yearly rate of 23% through 2015, according to management. It also stands to benefit in coming years from soaring demand for "cellular backhaul" products used to ease congested networks, analysts say. But near-term forecasts call for meager earnings growth, leaving investors unenthused. "We think many have given up on the stock," wrote Jefferies analyst Mark Lipacis in a Thursday research note. He sees Broadcom as "uniquely positioned" to benefit from broad, longer-term growth in communications.