As Franklin D. Roosevelt once claimed, "We cannot always build the future for our youth, but we can build our youth for the future." An optimistic quote from a realistic man. But when does optimism turn into fear? Today's generation is full of youths which depend so heavily on technology to perform the simplest of tasks. Technology, in such a short period of time, has become the keystone of modern society--a keystone with unknown strength.
It may be scary to think that our future generation would be extremely incompetent without the help of advanced technology; but there's no denying that technology has bettered many aspects of life. For example, go back 30 years: a student needs to write a research paper, so it's off to the library to dig deep into the encyclopedia set. But today, a student can simply search their query online and voilà! Instead of spending hours flipping through pages, you could spend just minutes staring at a screen.
But regardless of how great technology is, we must still admit that we are absolutely addicted; and two things that make tons of money are technology, and addictions. Put them together and you have some very lucrative investment ideas. The following tech companies, in one way or another, are as essential as water to many, and are interesting ways to benefit from our tech addiction.
Facebook, Inc. (FB)
Why we're addicted: People have the urge to obsessively see what others are doing. Facebook is an effective way of connecting with friends, family, colleagues; and if there's one thing people want to be, it's connected.
The $68 billion social networking giant has felt Wall Street's heat since going public on May 18th. It's currently down 17% from its controversial $38 per share IPO price; and with 9.6% of floating shares borrowed short, investor sentiment still seems negative. So why invest in such a company? One word: Potential. There is so much untapped potential waiting to be unlocked. Some of the user statistics are truly unfathomable; and if Zuckerberg and company capitalize on this unprecedented exposure, then there will be no limits to what Facebook can achieve. Be aware that there are significantly more risks with investing in Facebook than many other companies. Things that could spell trouble for the social network are: CEO Mark Zuckerberg's lack of experience; inability to effectively monetize Facebook mobile; slowing user growth; and countless others. But if you bring yourself to get over the multitudes of things that could go wrong and bet on the things that could go right, you may be rewarded handsomely.
Google Inc. (GOOG)
Why we're addicted: Who wants to look stuff up in an encyclopedia? Google makes information (or any other search you desire) easily available at your fingertips.
This $191 billion internet kingpin is known mainly for its search engine, which holds an astonishing 81.32% of the market share. Microsoft's (MSFT) Bing and Yahoo (YHOO) are the next two highest market share holders; and with 8.5% and 7.35%, respectively, Google has secured a wide margin of safety. In addition, Google offers several other widely used web services including Google Docs, Google Maps, YouTube, and more. Google has also entered the extremely competitive smart phone market with its Android OS, and very successfully. One thing to keep in mind before buying any shares of Google is that co-founders Larry Page and Sergey Brin will be strengthening their voting power through a 2-for-1 stock split in which Page and Brin will have the power to overrule all other shareholders on any vote. If you trust the leadership of Page and Brin, Google is an interesting play to consider.
Apple Inc. (AAPL)
Why we're addicted: Sleek, sexy, smart products have built a fanatical following for any and all things Apple. What's an iPhone without the matching iPad, iMac, Macbook Pro, and iTunes account?
The $567 billion dollar computer company, many years after its birth inside of Steve Jobs's garage, is now the company to own. Investors only dream of finding the next Apple; but why search for the next Apple when you could just invest in... Apple? One might wonder how much more the company can grow since it's already so large. But with a seemingly endless pipeline of products which consumers pay top dollar for, it doesn't seem like a ceiling is anywhere in sight. Looking at a trailing P/E of 14.76 and a PEG of 0.60 also suggest that the company is extremely undervalued. And let's not forget about Apple's coveted balance sheet, with enough cash to make strategic acquisitions if necessary. And there's also that modest 1.75% dividend to look forward to. People may argue that Apple's innovation will soon expire; and while there's no solid evidence to support or refute this, looking to the past can help provide insight to the future. And if Apple's future is even half as bright as its past, then investors have much to look forward to.
Our extreme dependence on technology may be scary to some; but it doesn't seem like people are ever going to suddenly give up such an integral part of everyday living. The only thing that could tear us away from our addiction would be an occurrence like in the War of the Worlds. As long as aliens don't attack our planet, these companies should continue to benefit from our addiction.
Disclosure: I am long AAPL.