The value opportunities that still exist in US tech

In 2013, US stock prices ascended faster than underlying earnings. With corporate earnings growth ranging in the low to mid-single digits and most broad-based stock indices up over 30%, the bulk of the year's gains came from an expansion in the price multiple rather than from growth in economic values.

Market appreciation has moderated thus far in 2014, but valuations have not materially changed since the start of the year. Most stocks are trading in a range of fair to full value now. As value investors, we are looking for companies that are cheaply valued – not fairly valued – so finding stocks trading at a distinct discount to underlying worth has become more challenging. Though the long-term return potential has fallen, we still think there are select opportunities in US stocks, particularly in the tech sector. When people think about technology, what often comes to mind is the b...