Technology changes fast and often. The tech bubble of the early 2000s is one of the greatest examples of this. And with billionaire David Einhorn of Greenlight Capital noting that we might be in the second tech bubble in less than 15 years, it might be a great time to reassess what tech stocks you own. 

#-ad_banner-#Despite the sky-high valuations of some stocks, including Amazon.com (Nasdaq: AMZN) and Facebook (NYSE: FB), there are a few stocks in the sector that are trading at enticing valuations.

One of those stocks is a company that Einhorn owns. Despite being short a basket of tech stocks, Einhorn is still bullish on the tech sector. Apple (Nasdaq: AAPL), Micron Technology (Nasdaq: MU) (which my colleague Erik Epp profiled last week) and Marvell Technology (Nasdaq: MRVL) are three of his hedge fund’s largest positions. 

But one of the cheapest tech stocks Einhorn has owned is Seagate Technology (Nasdaq: STX). 

Einhorn owned Seagate for nearly two years, with a stake of 5.4 million shares at the end of last year. That’s because the stock is still a very cheap dividend play. It trades at a forward price-to-earnings (P/E) ratio of 9.4 based on next year’s earnings estimates, and its forward dividend yield is an impressive 3.4%.

Seagate is one of the key providers of hard disk drives for PCs and enterprise servers.

Last quarter, Seagate shipped out over 55 million drives, which is about 40% of the global hard disk drive market. 

	Flickr/scobleizer
	Last quarter, Seagate shipped out over 55 million drives, which is about 40% of the global hard disk drive market.

But shares are down close to 10% this year. This comes despite the fact that Seagate posted solid first-quarter results. Shares of rival Western Digital (Nasdaq: WDC) are actually flat year to date, and trading at a P/E ratio that’s an 80% premium to Seagate’s. 

When Einhorn bought his stake in Seagate, hard disk drive firms were trying to recover from the flooding in Thailand in late 2011 that crippled manufacturing. Supply has rebounded, but now demand is lagging. That’s because hard disk drives have been losing share to solid-state drives and mobile devices. 

Amid the decline in hard disk drives, Seagate has traded at a relatively cheap valuation for a number of years. However, Seagate has a number of opportunities to keep gaining market share in the storage space. 

By all accounts, the PC market appeared to be stabilizing in this year’s first quarter. That’s a big positive for Seagate. Global PC shipments declined only 1.7% during the quarter, the smallest decline in close to two years. 

There’s also rising demand for enterprise-related storage. This decade could be quite impressive when it comes to how we transmit data, driven by the shift toward increased virtualization and cloud computing. The cloud still needs infrastructure and storage products. The high-capacity hard disk drives that the cloud requires also carry higher margins than PC drives, another positive for Seagate. 

Investors should be encouraged by the company’s aggressive moves on the dividend and share buyback fronts over the past few years. Its dividend yield stands at a robust 3.4%, which is only a 35% payout of earnings. That means there’s plenty of room for the company to continue increasing its dividend payment, as it has done in each of the past three years. 

On the share buyback front, Seagate has reduced its shares outstanding by a third over the past five years. 

STX’s five-year average P/E ratio is around 12. Assuming investors begin to look to old tech names offering safety and income, Seagate shouldn’t have a problem trading more in line with its historical average. 

Risks to Consider: Part of the reason that Seagate is so cheap is the decline in PC sales. Seagate is still heavily tied to the PC desktop hard drive business, which has been losing share to laptops and tablets. A greater than expected decline in this market will keep Seagate trading at depressed multiples. Seagate’s revenue growth could also be hampered if the shift to the cloud and virtualization doesn’t occur as quickly as expected. 

Action to Take –> Buy Seagate for upside to $65, which is back near its 52-week high. That’s 30% upside. This assumes shares should be trading at a P/E of 12 on expected fiscal 2015 earnings of $5.49 a share.

P.S. In the past year, Amy Calistri’s “Daily Paycheck” strategy has earned her $16,233 in dividend checks… an average of $1,353 per month. And ordinary investors have been using this strategy to do the same thing. To see exactly how she’s earning this much in dividends (with the brokerage statement to prove it) — and to learn how to do the same for yourself — follow this link.