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2 Undervalued Tech Stocks To Buy Now

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2 Undervalued Tech Stocks To Buy Now

The technology industry is a vast landscape of fluctuations and innovations that make it hard to keep up.

Read on for details and why Cisco and Intel should be your prime target right now.

We will start out with the criteria for how we judged it, and show you how these two stocks fared better than the rest.  

The criteria

For judging which stock is a safe bet and undervalued, there are several thresholds applied to the industry to determine which make the cut in our analysis.

  • Firstly, the business must be generating at least $40 billion in annual sales on a 12-month trailing basis: might seem like a lot, but to the tech giants of today this is the bare minimum to be called one of the big boys
  • The net income of the company needs to be at least $10 billion, again on a 12-month basis
  • Debt must be less than 20% of its market value
  • The stock needs a price-to-earnings growth ratio lower than 1.5

These are integral, but there are three more criteria that make up our 7-point basis for which stocks are currently undervalued:

  • Return on assets is above 5%, and the return on equity is above or equal to 15%
  • The three-year average cash flow of the company is $10 billion or higher
  • Lastly, the yield must be about 50% while the payout ratio should be less than this figure

The contenders and winners

tech-stocks-1

The above graph shows Cisco’s price levels over the last three-quarters.

With a strong cash flow, a great balance sheet, and positive earnings prospects, Cisco and Intel are both very safe bets.

One can expect to see market-beating steady growth from both.

See below for Intel’s positioning:

tech-stocks-2

From each industry, we will go through the possible contenders, and then apply the rules to show how we concluded with our two winners.

From the tech hardware behemoths, Apple and IBM are possible winners, taking into account the first two rules regarding sales and net income.

In computer networking, the only company that comes close is Cisco Systems.

The internet services and social media group sees only Google (though its parent company Alphabet) make the cut.

Facebook is out as it doesn’t have the $40 billion in sales, while Amazon has more than adequate sales (a whopping $110 billion) but its net income figures aren’t high enough to meet the second criteria of $10 billion.

Last but far from least, the semiconductor industry provides us with only the one name, Intel, while programming sees the king stay the king, with Microsoft being the only contender.

So we start with six possible contenders for the prize, and what follows is how the two mentioned previously came out on top.

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Now, let’s apply send in the lions (rule 3) and see who is still alive in the Colosseum

The third rule was regarding debt-to-market capitalization, stating that debt could not be equal to more than 20% of the company’s market value.

tech-stocks-3

Apple makes the cut, but IBM does not.

This is because IBM has over $45 million worth of debt, while its market value is around $153 billion.

–    153 divided by 45 is about 0.29, meaning its debt represents around 30% of the market share

Let’s see the debt to enterprise values of the remaining companies:

–    Google (Alphabet): 1%

–    Microsoft: 12%

–    Cisco: 13%

–    Intel: 13%

–    Apple: 9%

The fourth rule, if you remember correctly, was that the PEG, the price-earnings-growth ratio had to be less than 1.5.

The following numbers are the five-year predicted ratios, which helps us to determine the trade-off between the stock price, the earnings per share and the company’s forecasted 5-year growth.

–    Cisco Systems: 1.23

–    Google (Alphabet): 1.3

–    Apple: 1.3

–    Intel: 1.46 (just, that was a close one)

–    Microsoft: 2.3

As you can see Microsoft’s price-earnings-growth ratio is a little too high for our list, and thus the industry leader falls out of the running.

We are now left with Cisco, Google, Apple, and Intel.

tech-stocks-4

Now on to returns and cash flow

So we move on to the 5th rule, which was regarding return on assets and return on equity.

The two had to be above 5% and 15% respectively.

Google (Alphabet) is out of the running because it has figures of 8.9% and 15% for ROA and ROE respectively.

It made the cut for the return on assets figure but was just below that needed for a return on equity.

Sorry Google.

The three remaining tech stock candidates are Apple, Cisco, and Intel.

The sixth rule for the prize was that the company had to have a three-year average cash flow of more than $10 billion.

So all three passed the sixth test with flying colors.

Dividends, lovely dividends, and the final word

The final rule is about dividends.

The 3% figure is chosen because the investor will receive a steady return even if the stock sees a weak performance at this number.

Similarly, the payout ratio being less than 50% means the dividends are safe.

Apple passes the test for the latter figure, but its yield is only 2.28%.

Meanwhile Cisco and Intel have 3.39% and 2.96% returns respectively.

We’ll let those four percentage points slide for Intel.

These two also have payout ratios below 50%, making them the only stocks to match all seven criteria introduced in the beginning.

tech-stocks-5

So to conclude, Cisco and Intel remain our stocks to buy, being undervalued currently and representing double-digit earnings growth while also maintaining very safe dividends for investors.

We are left with a networking giant and the king of semiconductor chips.

Not bad.

Get in on the action before the rest of the rabble catch on.

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Economy

The Next Generation of Sin Stocks to Ride Out a Bear Market

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The Next Generation of Sin Stocks to Ride Out a Bear Market

While the recent stock market rally has technically pushed the Dow Jones Industrial Average out of a bear market, many investors aren’t convinced it will last.

They expect that once the euphoria surrounding the $2 trillion stimulus plan wears off, the market will resume its slide downward as the economic impact of the coronavirus takes hold in the next few quarters.

Sin stocks, so named because they are things that we should go without but can’t seem to part ways with, are historically a great investment during downturns.

The added stress and uncertainty means an uptick in business for the companies producing these sinful indulgences.

Things like alcohol, cigarettes, weapons and gambling all fall under the umbrella of sin stocks, so companies like Altria (NYSE:MO), Diageo (NYSE:DEO), Sturm Ruger (NYSE:RGR) and MGM Resorts (NYSE:MGM) are all widely considered to be sin stocks.

And while they can make great investments during times of uncertainty, there’s a new breed of sin stocks that could generate even larger returns over the coming months as Americans turn to their (new) favorite vices.

Here’s a short list of “next gen” sin stocks that we expect to do very well.

Marijuana stocks

While this is by no means a “new” vice, it is only in the last few years that it’s been possible to directly invest in companies that produce and sell marijuana. That wasn’t possible during the 2008 financial crisis, so it will be interesting to see how the major players do during their first economic downturn.

Just like smoking, we expect demand to hold up very well, if not increase, during times of turmoil.

Consider the larger companies like Canopy Growth (NYSE:CGC), GW Pharmaceuticals (Nasdaq:GWPH) and Cronos Group (Nasdaq:CRON).

Video Games

Being a “gamer” is a lifestyle now, with livestreaming on YouTube and Twitch and professional Esports leagues formed around the most popular titles like Call of Duty and Overwatch.

Video games are big money now, and the larger production studios will continue to generate massive revenues as the culture grows in the years ahead.

Look at the big studios with strong franchises like Activision Blizzard (Nasdaq:ATVI) which has the Call of Duty and Overwatch franchises and Electronic Arts (Nasdaq:EA) which has the Madden, Battlefield and FIFA franchises.

Social Media Platforms

If you have a child or grandchild under the age of 30, you are probably very aware of the effort it takes to get their attention away from their phones and all the social media apps or platforms that they are using.

Tik-Tok, Twitter, Facebook, and Instagram are all designed to keep users engaged and spending as much time as possible on their platforms. The publicly traded ones are Twitter (NYSE:TWTR) and Facebook, which also owns Instagram (Nasdaq:FB)

While there are no guarantees when it comes to investing, as the coronavirus causes more people to spend time at home, they’ll be spending more time using the products and services of these next generation sin stocks, and that should translate to more revenues and higher profits for the companies.

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Investing

Bitcoin Collapse Should End Discussion About it Being ‘Digital Gold’

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Bitcoin Collapse Should End Discussion About it Being ‘Digital Gold’

For as long as Bitcoin and other crypto currencies have been in existence, a constant drum beat from its evangelists was the belief that it was “digital gold.”

The claim of course was an effort to throw a halo around cryptocurrencies as a “safe haven” and a “store of value” during times of crisis or economic uncertainty.

Per the Coinbase blog (emphasis theirs):

“Gold, and bitcoin, are safe havens from fiat currency devaluation, which historically tends to be incited by surging government debt. Armed with a myriad of technological advantages, accelerating development, and maturing global market, Bitcoin is a store of value to rival gold in the digital age.”

Not only that, but the same article says that Bitcoin is in fact better than gold (emphasis mine):

“Bitcoin development is accelerating and has already proven a myriad of advantages over precious metal…”

Those advantages are essentially listed as portability, scarcity, divisibility, privacy, low transfer fees and “auditability.” 

Yesterday’s market rout, with the Dow Jones Industrial Average collapsing 2,352 points to have its worst trading day since “Black Monday” in 1987, should have been the day where Bitcoin could finally live up to its promise.

All it had to do was not drop as much as the broad market and perform similar to gold, Bitcoin would have a landmark day.

Instead, it got decimated, plunging 12% to close at $5,700. 

In the past five days alone it has lost more than one-third of its value.

Gold, in case you are wondering, has lost a mere 6% in the last 5 days, and during yesterday’s market rout it only lost 0.74%.

One of those two “rivals” proved to be a safe haven and a store of value during these scary times.

The other proved to be nothing more than a speculative investment, providing absolutely no store of value.

Yesterday alone, the cryptocurrency market lost $62 billion in market cap, according to CoinMarketCap. 

In the past month, roughly 50% of the value of the entire cryptocurrency market has been erased.

Store of value?

Safe haven like gold?

Not even close if you ask Andrew Button at Motley Fool.

“While Bitcoin fans were caught off guard by BTC’s dramatic slide, the truth is that it wasn’t surprising at all. Put simply, apart from the scarcity, Bitcoin has nothing in common with gold. Gold is a physical asset you could trade if global financial institutions shut down; Bitcoin can’t be used without access to a computer. Gold is as old as human civilization; Bitcoin is younger than social media. Gold is used in manufacturing and jewelry; Bitcoin hasn’t seen any practical use case outside of black markets. The two assets simply have nothing in common whatsoever.”

While the siren song of “digital gold” is alluring, it’s time we stop pretending that Bitcoin has what it takes to become a real asset class. In times of uncertainty, it failed to perform as promised.

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drugs

7 Blockbuster Drugs Expected To Be Launched In 2020

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Pills falling out of bottle. (Image via Shutterstock)
By Shanthi Rexaline

Biotech stocks had a fairly decent run in 2019, thanks to record deal flow, several path-breaking innovation in drug research & development and the positive broader market sentiment. New molecular entity approvals totaled 48 in 2019, less than the 59 NME approvals in 2018.

The new year is expected to be risk fraught, as lawmakers are expected to step up their rhetoric on drug pricing. Even as the outlook for drug companies remains not-so-promising, some key drug approvals could still impart some momentum to the sector.

The FDA could expedite the review of some drugs, Evaluate Pharma said, citing some approvals in 2019 that came about well ahead of the scheduled PDUFA date such as Vertex Pharmaceuticals Incorporated’s (NASDAQ: VRTX) Trikafta. Trikafta, a treatment option for cystic fibrosis, was approved five months ahead of the PDUFA date.

The following are the drugs with blockbuster potential that could make their way from lab to the shelves, according to Evaluate Pharma.

Trastuzumab deruxtecan

  • Sponsor: Daiichi Sankyo Company, Limited (OTC: DSNKY) & AstraZeneca plc (NYSE: AZN)
  • Indication: Her2 positive breast cancer
  • Status: BLA accepted with priority review status in October and the PDUFA date has been fixed for second quarter of 2020

Palforzia

  • Sponsor: Aimmune Therapeutics Inc (NASDAQ: AIMT)
  • Indication: Peanut allergy
  • Status: PDUFA date of January; A FDA panel, which met in September, voted 7 to 2 that the efficacy data and 8 to 1 that the safety data in conjunction with additional safeguards are adequate to support the use of Palforzia

Ozanimod

  • Sponsor: Bristol-Myers Squibb Co (NYSE: BMY) (came into the company’s stable through its Celgene buy)
  • Indication: relapsing form of multiple sclerosis
  • Status: The FDA accepted for review the BLA in June and has set a PDUFA date of March 25

Inclisiran

  • Sponsor: Novartis AG (NYSE: NVS)(came into the company’s stable through its Medicines Company buy)
  • Indication: LDL-cholesterol lowering therapy
  • Status: NDA submitted in December for use in secondary prevention patients with atherosclerotic cardiovascular disease and familial hypercholesterolemia

Roxadustat

  • Sponsor: AstraZeneca/FibroGen Inc (NASDAQ: FGEN)
  • Indication: treating anemia associated with chronic kidney disease
  • Status: FibroGen, AstraZeneca’s partner in developing roxadustat, said it has submitted the NDA to the FDA in late December

Sacituzumab Govitecan

  • Sponsor: Immunomedics, Inc. (NASDAQ: IMMU)
  • Indication: treating metastatic triple-negative breast cancer
  • Status: After an initial snub, the company resubmitted the BLA and the FDA accepted the application for review Dec. 26, 2019, fixing a PDUFA action date of June 2

Filgotinib

  • Sponsor: Gilead Sciences, Inc. (NASDAQ: GILD) and GALAPAGOS NV/S ADR (NASDAQ: GLPG)
  • Indication: rheumatoid arthritis
  • Status: The NDA was submitted Dec. 16, 2019, with the review period expected to be expedited due to a priority review voucher submitted along with the application

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