3 Tech Stocks That Just Got a Big Cash Payday

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Tech stocks - 3 Tech Stocks That Just Got a Big Cash Payday

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It’s still not clear how the victory of Donald Trump will impact tech stocks. But given that the GOP will have control of both houses of Congress, there should be little doubt that we will see some major changes.

3 Tech Stocks That Just Got a Big Cash Payday

For example, there could be more friction and difficulties with trade. Let’s face it, companies like Apple Inc. (NASDAQ:AAPL) have global ecosystems for logistics and manufacturing.

Oh, and then there is the issue of antitrust. Already Donald Trump has indicated his displeasure with AT&T Inc.’s (NYSE:T) proposed acquisition of Time Warner Inc (NYSE:TWX). Might this mean he’ll be more of an activist? If so, there could certainly be a dampening in tech, which has already seen lots of dealmaking.

Yet there is one area where the impact of Donald Trump on tech stocks could be the most impactful: taxes. Over the years, tech companies have stashed substantial amounts overseas to take advantage of low-cost tax havens. But as for Donald Trump, he wants to bring back the capital — such as by levying only a 10% rate.

While it’s unclear the amounts that are overseas, it does look like it is over $2 trillion. It’s also important to note that studies have shown that repatriation programs often result in mostly dividend payouts and share buybacks.

Again, all this is not to somehow imply that change will be immediate. When it comes to tax law, the process can be grinding. But in light of the fact that Donald has shown a penchant for savvy tax planning with his own businesses, it would not be surprising that he’d give priority to repatriation.

OK then, what are some of the tech stocks that could benefit? Well, here’s a look at three:

Tech Stocks to Buy: Apple (AAPL)

Of course, AAPL has the biggest hoard of overseas cash, with a whopping $238 billion. This represents 40% of the overall market cap.

So if Apple could bring back the cash, a good first move would be to boost the dividend, which is at a paltry 2.1%. There would also be lots of firepower left for aggressive share buybacks.

And what about M&A? The company has a history of avoiding dealmaking. But going forward, this may change. AAPL could use its cash hoard to move aggressively into categories like social media, streaming video, machine learning and perhaps even cloud computing for the enterprise.

Yet even if the company does not do such things, it may not matter anyway. The fact is that the iPhone franchise still remains an extremely powerful business. It should continue to provide lush cash flows for some time to come, as AAPL stock has significant competitive advantages, such as a premium global brand, a network of retail stores and a robust ecosystem of suppliers and developers.

Of course, the blunders of Samsung Electronic (OTCMKTS:SSNLF) with its own Galaxy Note smartphone should also be a spur of demand for Apple products. The timing is also especially propitious, since it comes during the all-important holiday season.

Tech Stocks to Buy: Microsoft (MSFT)

Tech Stocks to Buy: Microsoft (MSFT)

Microsoft Corporation (NASDAQ:MSFT) has been on a roll lately, with the stock up over 20% since late June. For the most part, CEO Satya Nadella has been savvy with his big bet on cloud computing. He has also made tough decisions, such as to write off the disastrous Nokia Corp (ADR) (NYSE:NOK) acquisition.

But hey, if there is repatriation, MSFT could get another nice boost. Keep in mind that the company has about $110 billion in overseas accounts. So yes, Microsoft may want to boost the dividend, which is currently yielding about 2.7%.

But M&A is also likely to be critical. Already, MSFT has been making bold deals, as seen with the $26.2 billion acquisition of LinkedIn Corp (NYSE:LNKD). But at the same time, the company will likely need to continue to make substantial capital investments for its cloud infrastructure.

And the market opportunity is massive. According to research from Morgan Stanley, the global spending in this category is expected to jump from $70 billion last year to $141 billion by 2019.

Something else: MSFT is already the No. 2 player in the market and will continue to benefit from the synergies with franchise assets like Windows, Office and server platforms.

Tech Stocks to Buy: Cisco (CSCO)

Tech Stocks to Buy: Cisco (CSCO)

Cisco Systems, Inc. (NASDAQ:CSCO) has roughly $62 billion in cash in offshore accounts. This comes to about 40% of the market cap.

Interestingly enough, CSCO already sports an attractive dividend yield of 3.3%. But hey, why not make it more?

No doubt, M&A is something that is part of the DNA of the company. So having billions more to play with will definitely be a big advantage. CSCO has been targeting growth categories like cloud computing, mobile and security.

But for investors, the real attraction for the stock is that the core networking business is likely to see long-term growth. According to the company’s research, the amount of mobile traffic is forecast to surge by 8X from 2015 to 2020, representing a 53% compound annual growth rate. Just some of the drivers include mega-trends like streaming video, artificial intelligence, virtual reality and the Internet of Things.

Yet this does not mean that CSCO will get wild with its cash. For the most part, the company has remained disciplined with its costs, as seen with the recent 7% workforce reduction. CSCO has also been shedding various non-core businesses, which has helped to streamline operations and bring better focus to the growth opportunities.

Tom Taulli runs the InvestorPlace blog IPO Playbook and also has his own tax preparation firm. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/tech-stocks-donald-trump-aapl-csco-msft/.

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