2 Tip-Top Tech Stocks
Many investors look to commodities and industrials to gauge the health of the economy, and thus the markets, but perhaps they should be watching Big Tech instead, posits Elliott Gue of Personal Finance.
The 2000 technology bust and subsequent collapse of the high-flying Nasdaq left many investors with the perception that technology is a high-risk, volatile sector that’s only appropriate for the most aggressive growth investors.
That sentiment is downright anachronistic. The S&P 500 Information Technology Index has a beta of 0.96 over the past five years. (Indexes with betas lower than 1.0 are less volatile than the broader market.) More important, technology stocks have outperformed the broader market by a sizable margin despite their below-average risk.
Technology is the most cash-rich and least indebted sector in the S&P 500. Some of the bigger tech stocks generate so much idle cash, they’re initiating dividends to return value to shareholders. Tech companies now hold 30% of all cash among non-financial balance sheets in the S&P 500 ($360 billion out of $1.1 trillion).
What’s more, the technology sector enjoys significant growth opportunities in the years ahead. Mobile devices such as smartphones and tablet computers have transitioned from niche products into the mainstream. Between 2010 and 2012, total tablet sales are expected to more than quintuple.
Technology ranks alongside energy as the top-weighted sector in the Growth Portfolio. Here’s a look at two more attractive names in the group.
The world’s largest semiconductor company, Intel (INTC) has been at the heart of the PC revolution of the past two decades.
The company’s most important products include microprocessors, the integrated circuits that execute programs and perform all the functions of a computer’s central processing unit (CPU). Intel also produces chipsets that transfer data between the CPU and various devices on a computer system.
Intel’s PC business remains its largest operating unit, accounting for two-thirds of sales last year, down only slightly from just over 71% of sales in 2009.