On Tuesday, I showed you why a strong U.S economy should give you confidence about tech investing.
While others get distracted by the noise on Wall Street, we’re staying focused on our long-term objective of building wealth through tech investing.
I also said I’d bring you three stocks that can beat this whipsawed market. And in a moment I’m going to do just that…
But first, let’s me address something no one else in the mainstream media is covering – tech is still performing better than the overall market.
So far this year, the Dow Jones Industrial Average is down nearly 8%, and the Standard & Poor’s 500 Index is off about 5%. By contrast, the Nasdaq Composite is just above breakeven.
Getting Revved Up
You can be sure that Wall Street is keeping all eyes on Sept. 16-17, when the Federal Reserve holds its next policy meeting.
Fed Chair Janet Yellen is scheduled to meet with reporters on the Sept. 16 to explain the central bank’s policy stance. The Wall Street Journal says 82% of forecasters polled expect a rate increase at the September meeting.
I mention that to make sure you know I’ve factored a possible Fed-driven market retreat into my investment thesis.
Now that that’s out of the way, let’s take a look at why these three stocks are the ones you should add if whenever Wall Street goes on sale:
Whipsawed Markets Tech Pick No. 1: Gilead Sciences Inc.
There’s never been anything like the success Gilead (Nasdaq: GILD) has had with Sovaldi. This highly effective treatment for the blood-borne disease hepatitis C racked up $10.3 billion in sales last year — its first full year on the market.
But there’s more to the story. Gilead launched a second hepatitis C drug, Harvoni, at the end of 2014 that did $2.1 billion in sales. That combined $12.4 billion is just slightly less than $12.5 that AbbVie Inc. (NYSE: ABBV) brought in last year for Humira, an anti-inflammatory that is the best-selling drug ever.
Some investors are worried about Gilead’s stock because the company is facing competition for hepatitis C drugs.
But Harvoni ranks as the most effective drug in its class and is targeting a large market. The Centers for Disease Control and Prevention recommends that all 76.5 million U.S. baby boomers get tested for hepatitis C.
Moreover, the company has at least 36 new drugs in its clinical pipeline, including three that are close to getting approval from the U.S. Food and Drug Administration.
The stock trades at $102, giving it a $158 billion market cap – and it offers sterling financials. It reported triple-digit earnings gains in four of the past six quarters. Over the past three years it has grown per-share earnings by an average 91% and boasts a 99% return on stockholders’ equity.
Whipsawed Markets Tech Pick No. 2: Apple Inc.
Mention “wearable tech,” and most investors immediately think of Fitbit Inc. (NYSE: FIT) and its health-focused wristbands. In the second quarter, Fitbit led the world in “wearables” shipments with 4.4 million units.
But there is a global tech leader that is quickly caching up. Apple (Nasdaq: AAPL) only entered the wearable-tech market in April with the release of its smart watch and is already in second place.
New data compiled by IDC says the iDevice King shipped 3.6 million Apple Watches in the period, just 18% behind Fitbit. Considering that Fitbit was founded in 2007, Apple is clearly the fast mover in this market.
And this is a lucrative move for Apple. IDC says the wearables sector saw a 223% increase in second-quarter shipments to 18.1.
Of course, that’s far from the only market the Silicon Valley legend dominates. It remains the world’s most profitable maker of smartphones, registering sales of 47.5 million units in the June period, a 35% gain.
It’s set to launch an updated version of the iPhone, the iPhone 6S, on Sept. 9. The phone is already getting rave reviews from the tech trades for having double the amount of memory, a faster processing chip and a video camera that can film in the new ultra-high-def formant known as 4K.
The stock has some under pressure in the last several weeks as Wall Street discounts the price based on what I believe are exaggerated concerns about iPhone sales in China.
Trading at $110, Apple has a market cap of $646 billion. It has 30% operating margins and a 41% return on equity.
Whipsawed Markets Tech Pick No. 3: Google Inc.
Until early July, Google (Nasdaq: GOOGL) had been lagging the broader market over the past year simply because Wall Street didn’t understand the company’s long-term approach.
After all, this is a company that signed a 60-year lease at a NASA facility in Silicon Valley where it’s pursuing such cutting-edge areas as robotics, space exploration and driverless cars.
Google also is investing up to $1.5 billion in drug research for anti-aging. It has logged 2 million miles for its fleet of driverless cars and has purchased at least six robotics firms in recent years.
None of these seemed directly related to its perceived core missions of Web search and the Android operating system for mobile devices.
But when it recently announced a broad realignment into Alphabet, Google got the support of Wall Street for its bold new vision – to build the tech conglomerate of the 21st century.
Under the Alphabet plan, Google intends to prove it can pursue futuristic tech while remaining focused on the bottom line.
Alphabet, will hold the firm’s cutting-edge research via such holdings as Boston Robotics, California Life Sciences (Calico) and Google X. Google itself will retain its Web and mobile businesses.
From a financial standpoint, the company is on a roll. In the second quarter, Sales rose 11% to $17.7 billion as earnings per share climbed nearly 32%. Trading at $637, the company has a $452 billion market cap – in addition to 25% operating margins and a 14% return on equity.
Each of these tech leaders is poised to outgrow the economy for years to come.
And that makes them great foundational plays. You can count on them to keep you on the road to wealth no matter what the markets throw our way.
[Editor’s Note: If you haven’t already, you should definitely start following Michael’s Twitter feed today. He just finished up “live tweeting” Microsoft Corp.’s Windows 10 announcements – and he plans to do the same during Apple’s big event on Wednesday, Sept. 9. To “follow” Michael on Twitter, just click here.]
- Strategic Tech Investor: Last Week’s Top News Had Nothing to Do With the Stock Market.