Tech is leading the way, so it’s important to find some good tech companies with plenty of headroom, writes Louis Navellier of Blue Chip Growth.

Time and time again, it is technology that leads the way in the market. The headlines of late might be Apple (AAPL) and Google (GOOG), but there are plenty of other impressive stories out there.

Innovation in information technology is fueling profit growth for several companies. Some you have heard of, others you have not.

Here are five information technology stocks to buy now:

Gartner (IT)

Proud to be in the business of information technology, Gartner is a $3.75 billion market cap company that touches many sides of the business. In addition to providing services to IT managers, the company also has an investment arm that provides technology research.

Its primary goal is to make companies more efficient through information technology. In doing so, Gartner is profitable—and rapidly growing.

In the current year, Wall Street expects Gartner to make a profit of $1.41 per share. That number jumps 26% to $1.78 in 2012. Shares trade for 27 times current-year estimates.

After peaking in late April and bouncing briefly at the end of June, shares of Gartner have been drifting lower. I would use the recent selling as an opportunity to buy this fast-growing IT firm.

Cardtronics (CATM)

This company is one of the largest owners and operators of automated teller machines in the United States. It has more than 37,000 machines under its umbrella, and is growing rapidly.

Shares of Cardtronics have been a steady performer in the market. Shares have doubled in value during the past 12 months. In that time, the company has met or bested analyst estimates for earnings.

For the current year, Wall Street is looking for a profit of $1.23 per share. In 2012, that profit is expected to grow by 16%, to $1.43 per share.

At current prices, Cardtronics trades for 19 times current-year estimates. That slight premium is justified given the potential of the company to dominate the kiosk ATM market.


No longer just a PC and mainframe business, IBM is a dominant player in information technology and consulting. More importantly, Big Blue is a proven performer. At a time when other companies stagnate or fail to meet expectations, IBM continues to impress.

Most recently, the company’s earnings were better than expected. Excluding items, the company made a profit of $3.09 in the second quarter, surpassing the $3.02-per-share analyst estimate.

The company also increased guidance for the full year—not an easy task for such a large company. Helping to fuel that growth were increased contracts for software and services in the period reported, demonstrating the power of connecting mainframe sales with future consulting.

Add in the potential of cloud computing, and IBM is poised for more growth. With profits expected to grow at a double-digit clip, buying IBM at 14 times current-year estimates is a reasonable speculation.

NEXT: 2 More Picks

DST Systems (DST)

I am a firm believer that owning technology stocks at low earnings multiples is a recipe for portfolio profits. DST Systems is an information-technology company providing information processing and software services to companies across a broad spectrum of the economy, including health care and financial services.

The company has a market capitalization of $2.6 billion, and has gained 26% in share price appreciation so far this year. The company has enjoyed an impressive four-quarter streak of beating analyst estimates, which has spurred the stock gains. And I see no signs of slowing.

Analysts expect the company to make $4.28 per share in 2011. At current prices, DST trades for only 13 times 2011 estimated earnings.

Reflecting the value of the stock, the company has been receiving informal inquiries with respect to possible buyout offers, but thus far, management has declined to pursue. Earlier this month, it was reported that several large investors in the company have met separately to discuss the issue.

The potential of a takeover is just one more reason to own this IT stock.

Virtusa (VRTU)

Another information technology company that is growing and trading for a reasonable price is Virtusa. The company provides information technology and consulting, maintenance and development to companies across the globe.

Shares of this small-cap information technology company have jumped almost 30% this year thanks to impressive operating results.

The company is growing organically and via acquisition, announcing two separate deals this month. Wall Street has the company making 90 cents per share in the current year ending March 31, 2012.

The estimate is for profits to surge 36% in the following year. After a brief hiatus that sent shares lower in late spring, the stock has rebounded impressively to draw near its 52-week high of $21.79 per share.

With Virtusa trading for 24 times earnings, this growth stock offers tremendous value relative to its growth rate. I rate the stock a strong buy.

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