3 Cash-Rich Tech Stocks That Should Continue To Outperform This Turbulent Market

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 |  Includes: AAPL, CSCO, MSFT
by: Bret Jensen
It has been a brutal three months in the market. It also looks like things will get worse before they get better due to the situation in Europe and slowing economic growth. One part of the market that has held up well and vastly outperformed the market is large cap tech, specifically those equities with large cash balances, low valuations and growing revenues. Here are three of the largest that will likely continue to do much better than the market overall.
Apple (NASDAQ:AAPL) – “Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide”.
(Business Description from Yahoo Finance)
Click to enlarge
4 reasons to buy AAPL at $377 a share:
  1. Apple has over $70B in cash on its balance sheet or about 20% of its market cap.
  2. Apple has beat earnings estimates the last six straight quarters by an average of over 25% higher than estimates.
  3. Its P/E is less than 10 times next year’s expected earnings after you strip off net cash. Its projected five year PEG is .62 which is an over 50% discount to its five year average.
  4. It is significantly under analysts’ estimates. S&P has a price target of $455 on Apple, Credit Suisse is at $500 and the median analyst price target is $600.
Cisco Systems (NASDAQ:CSCO) – “Cisco Systems, Inc. designs, manufactures, and sells Internet protocol-based networking and other products related to the communications and information technology industry worldwide. It offers routers that interconnect public and private IP networks for mobile, data, voice, and video applications; switching products, which offer connectivity to end users, workstations, IP phones, access points, and servers; application networking services; and home networking products, such as adapters, gateways, modems, and home network management software products.
(Business Description from Yahoo Finance)
Click to enlarge
4 reasons to buy CSCO at $15 a share:
  1. Cisco has approximately $5 a share in net cash on its balance sheet which provides a significant floor under the stock price.
  2. CSCO has beat earnings estimates the last six straight quarters by an average of 7% higher than estimates.
  3. Its five year projected PEG is under 1 which is a 20% discount to its five year average.
  4. The median analysts’ price target on CSCO is just under $22 a share. S&P has a $24 price target on Cisco.
Microsoft (NASDAQ:MSFT) – “Microsoft Corporation develops, licenses, and supports a range of software products and services for various computing devices worldwide. The company's Windows & Windows Live Division segment offers PC operating system that primarily includes Windows 7 and Windows Vista operating systems; Windows live suite of applications and Web services; and Microsoft PC hardware products. Its Microsoft’s Server and Tools segment provides Windows Server operating systems, Windows Azure, Microsoft SQL Server, SQL Azure, Windows Intune, Windows Embedded, Visual Studio, Silverlight, system center products, Microsoft consulting services, and product support services”.
(Business Description from Yahoo Finance)
Click to enlarge
4 reasons to buy MSFT at under $26 a share:
  1. Microsoft has over $40B in cash in its coffers and also pays a dividend yield of 2.4% on an AAA rated balance sheet
  2. MSFT has beat earnings estimates the last six straight quarters by an average of over 10% higher than estimates.
  3. Its P/E is just over 6 times next year’s earnings after you strip off net cash. Its projected five year PEG is .93 which is an over 20% discount to its five year average.
  4. It is significantly under analysts’ estimates. The median analyst price target on MSFT is $32. S&P has a price target of $35 on Microsoft and Credit Suisse is at $36.


Disclosure: I am long AAPL, MSFT, CSCO.