Whipsaw the Market Right Back With These Three Tech Plays

8 | By Michael A. Robinson

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.

Tech will continue to outperform this choppy market.

And these three tech stocks will lead the pack…

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.

Savvy long-term investors can turn this to their advantage. Apple trades at just 10.8 times forward earnings, or 40% less than that of the S&P 500 and 45% less than the Nasdaq 100.

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.]

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8 Responses to Whipsaw the Market Right Back With These Three Tech Plays

  1. Gwynne Benner says:

    Thank you for the 3 stock recommendations. I am a true novice. What other info should I have if I want to buy these stocks? How will I know when to sell, or how long I should hold onto them? Should I put a stop in place? I don’t know what to do. Can someone please guide me? Is there any special info I will need when I open a brokerage account? I am 70 years old and I’ve never done this before. I’m very worried about the super crash slated for the middle of Oct., and I’d like to take a chance on making a little money rather than losing it all by doing nothing! Thank you for any advice you might offer to me. Most sincerely, Gwynne B

    • John M says:

      I agree that the 3 stocks mentioned are great buys. However, if you believe a major drop in the market is nigh…wait to invest, hold your powder. Remember sell high, buy low.

      As well, you may wish to consider good dividend paying investments such as REITs’ and consumer staples with good dividends.

      Also, the maximum $ amount for any one stock is between 5 and 10% of your investment $$.
      Make sure you diversify, do not put all your eggs in one basket.

      Good time investing. John

    • Tom says:

      If you believe a crash is due, say Oct 19th. Then set your account up to start buying October 23rd but be prepared to buy! You want to know that anything paying high dividends will most likely go back up dividends are usually based on sales or profit sharing so if a stock drops say 30% the cost of the dividend is 30 % less would it not be a glaring BARGIN? and the price be pulled right back to it’s previous level. Obviously, if the company’s income will be affected but many are immune from that depending who their customers are. If no crash occurs in November use this sites recommendations but never put all your eggs in one basket

  2. Stephen Alinikoff says:

    Once again, I believe you are our eyes to the future, your explanations of the future breakthroughs in the fields of science and their applications to change our world as we know it, are incisive and brilliant.
    Thank You

  3. Cared Carrasco says:

    Your advice is grate and trustworthy but my question is: any cash we may have is to be invested right now before the crash? or after when stock pries will be lower? I’ll appreciate an answer. Thank you

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