One of the biggest worries with the Nasdaq at new highs is that tech stocks are fully (or over-) valued and it’s time to sell.
But this is not the dot-com era.
Many of the tech stocks that are driving the market higher right now aren’t fly-by-night operations that are operating at huge losses as they seek out growth.
Instead, there are a number of tech stocks that are filthy rich in cash and in no danger of falling apart anytime soon.
Of course, you can’t just sit on cash altogether. A study by Convergex reveals investors want Wall Street to stop hoarding and start spending. BlackRock strategists, too, recently pointed out a positive correlation between capex-focused companies and strong market performance.
Tech companies are valued by their ability to innovate and expand, so if you’re looking for some tech stocks that can hold up even at these lofty levels, you want to look for cash-rich companies that can weather a storm, but also spend plenty to keep up the growth ramp.
Here are four such tech stocks:
Cash-Rich Tech Stocks: Apple Inc. (AAPL)
Apple Inc. (NASDAQ:AAPL) saw about 22% of its $182 billion in revenues fall down to the bottom line last year, and its war chest continued to grow. As of the most recent quarter, AAPL was sitting on some $32 billion in cash and short-term investments, with another $145 billion in long-term investments.
Apple is a bit more secretive about its ventures than other tech companies, but a quick look at its financials tells us a lot. For instance, Apple spent nearly $10 billion on capital expenditures last year, and already spent about $2 billion on R&D this year alone — a 40% year-over-year jump.
A few ideas of where that’s going: You’ve heard the rumors about the iCar, but Apple also is investing in new data centers in Europe — $2 billion worth of new data centers to be exact. And of course, you can expect continued R&D spending for more advancements in the iPhone, iPad, Mac and new Apple Watch lines.
Cash-Rich Tech Stocks: Qualcomm, Inc. (QCOM)
Qualcomm, Inc. (NASDAQ:QCOM) earned roughly $7.5 billion from its $26 billion in revenues in the most recent fiscal year, and the company now sits on some $18 billion in cash and short-term investments, with another $13.8 billion socked away in longer-term investments.
QCOM put that money to work, spending $5,5 billion in R&D and another $1.2 billion on capital expenditures. It finished off 2014 by doling out $40 million on Chinese tech companies 7Invensun, Chukong Technologies, inPlug, and Unisound.
Not content to rest on its laurels, QCOM also plans a venture into computer management in the health sector through partnerships with Walgreen Boots Alliance Inc (NYSE:WAG) and Novartis AG (ADR) (NYSE:NVS).
This may seem like a gamble, but Qualcomm knows how to penetrate the market, as its foresight led QCOM to become an essential chipmaker for Apple, Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT) and more.
Cash-Rich Tech Stocks: Facebook Inc (FB)
If Facebook Inc (NASDAQ:FB) is good at anything, it’s spending to grow.
Facebook’s once-criticized $1 billion Instagram purchase is now valued at $33 billion, and we’re all wondering what the recent FB acquisitions of WhatsApp Inc. and Oculus VR Inc., will do next. If Zuckerberg’s instincts are correct (aren’t they always?), these investments should begin to pay off big time for the social giant.
FB spent upwards of $2 billion on R&D over its last fiscal year, and the social network is poised to spend big in 2015. Zuckerberg said Facebook’s spending will increase in a range of 55% to 70% this year on, among other things, “advertising across the Web, hiring and new technologies such as artificial intelligence,” according to Bloomberg.
Cash-Rich Tech Stocks: Amazon.com, Inc. (AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) brought in $89 billion in revenues last year, and more than $9 billion of that went into R&D spending — up about $2.7 billion year-over-year.
Amazon has been notoriously poor about turning a profit, though it did impress the Street in its most recent quarter. Still, that’s in part because Amazon operates in a number of lower-margin businesses, but also because AMZN throws cash at new opportunities.
So, what has Amazon been spending its money on?
Money Morning compiled a nice little list of Amazon’s “build out” expenses, including the Fire Phone launched in July 2014, Amazon’s mobile payment business, nearly $1 billion spent on Twitch Interactive Inc. (fourth largest source of US web traffic), a new drone service (Amazon Prime Air) and even plans for Amazon Studios to produce original content.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
