If you are a regular reader of my column, you’ll know that I’m generally bearish on the stock market and the economy. But there is one sector of the market I would still invest in today. And that’s technology stocks.
Why Technology Stocks?
Yes, I know that the stocks of popular tech companies have experienced a run-up in price and are considered to be expensive, but I think that tech is all that America still has to offer. Our manufacturing base is history. Oil will soon be history, too, as the onset of electric cars is upon us. Retail is dead, courtesy of the Internet. And we don’t know the future of the health/drug industry yet, with Obamacare going out and Trumpcare coming in.
Unlike those of 1999, today’s tech companies are cash cows, often courtesy of our millennials.
Take Facebook Inc (NASDAQ:FB), for example. It has a simple model: it provides a platform for individuals to stay connected to their friends and family, and it lets businesses advertise to the site’s huge user base.
In the first quarter of 2017, Facebook’s advertising revenue was $7.85 billion. That’s 51% higher than the same period a year ago. Also in the first quarter of 2017, the company’s net income amounted to $3.06 billion, which is an increase of 76% compared to the same period a year ago. (Source: “Facebook Reports First Quarter 2017 Results,” Facebook Inc, May 3, 2017.)
Facebook has ample amounts of cash and is not leveraged. At the end of the first quarter of 2017, it had current assets (including cash and short-term investments) of $36.93 billion. Total assets amounted to $68.41 billion. The company’s total liabilities (including short-term and long-term debt) were just $6.52 billion.
If Facebook were to shut down its operations right now, the company would still have about $30.0 billion in equity.
Technology Stocks & Their Assets
Looking at other tech giants, like Alphabet Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT), we see that they are generating enormous amounts of cash, too.
The table below shows the current assets at major tech companies as of the end of their most recent quarter.
|Company and Stock Ticker||Current Assets in US$ (Billion)|
|Facebook Inc (NASDAQ:FB)||$36.93|
|Microsoft Corporation (NASDAQ:MSFT)||$146.31|
|Alphabet Inc (NASDAQ:GOOG)||$90.14|
|Amazon.com, Inc. (NASDAQ:AMZN)||$45.78|
|Cisco Systems, Inc. (NASDAQ:CSCO)||$83.39|
(Source: The companies’ most recent financial statements, last accessed May 16, 2017.)
Combined, these five companies have $400.0 billion in cash and short-term investments.
All America Has Left to Offer?
Dear reader; yes, the stock market is due for a big correction. But if I had to be invested in stocks, like many mutual funds need to be, I’d be looking at the well-known, cash-rich tech companies. They’re all that America has left.