Tech stocks can seem like a risky bet. Ever heard of webvan.com? One way to mitigate risk with tech stocks is to go after larger, more established companies, companies that actually have revenue and profits. It's an especially good sign when a tech company has strong cash reserves, because having cash on hand can fuel innovative R & D, strategic investments, or acquisitions. Today we focused on large cap stocks that not only possess proven business models, but that also are carrying quite a load of cash. We think you'll like the list we came up with, but first let us describe our screen in more detail.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for large cap technology stocks. We then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We then looked for businesses that analysts rate as "Buy" (2 < mean recommendation < 3).
Do you think these large-cap stocks hold value that has yet to be priced in? Use our list to help with your own analysis.
1) Cisco Systems, Inc. (CSCO)
| Sector: | Technology |
| Industry: | Networking & Communication Devices |
| Market Cap: | $93.80B |
| Beta: | 1.23 |
Cisco Systems, Inc. has a Current Ratio of 3.57, a Quick Ratio of 3.49, and a Analysts' Rating of 2.30. The short interest was 1.55% as of 06/21/2012. Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. It offers routers that interconnects public and private IP networks for mobile, data, voice, and video applications; switching products, which provide 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. The company also offers security products comprising span firewall, intrusion prevention, remote access, virtual private network, unified client, Web, and email security and network security products; storage area networking products for data center environments that deliver connectivity between servers and storage systems; collaboration products to integrate voice, video, data, and mobile applications on fixed and mobile networks; video connected home products, including digital video distribution systems and digital interactive set-top boxes; and wireless systems.
2) Broadcom Corp. (BRCM)
| Sector: | Technology |
| Industry: | Semiconductor - Integrated Circuits |
| Market Cap: | $19.43B |
| Beta: | 1.28 |
Broadcom Corp. has a Current Ratio of 2.57, a Quick Ratio of 2.17, and a Analysts' Rating of 1.90. The short interest was 1.15% as of 06/21/2012. Broadcom Corporation designs and develops semiconductor solutions for wired and wireless communications. It provides a portfolio of system-on-a-chip (SoC) and software solutions. The company's products deliver voice, video, data, and multimedia connectivity in the home, office, and mobile environment. Its Broadband Communications segment offers cable modem SoCs; femtocell SoCs; MPEG/AVC/VC-1 encoders and transcoders; xDSL, xPON, and cable modem customer premises equipment and central office solutions; powerline networking SoCs; and digital cable, direct broadcast satellite, terrestrial, and Internet protocol set-top box SoCs.
3) Activision Blizzard, Inc. (ATVI)
| Sector: | Technology |
| Industry: | Multimedia & Graphics Software |
| Market Cap: | $12.92B |
| Beta: | 0.59 |
Activision Blizzard, Inc. has a Current Ratio of 2.57, a Quick Ratio of 2.49, and a Analysts' Rating of 1.80. The short interest was 5.92% as of 06/21/2012. Activision Blizzard, Inc. publishes online, personal computer (PC), console, handheld, and mobile interactive entertainment worldwide. It develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net.
*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
