Far more often than not, tech stocks are figured to be trades for young people who have time to weather the inevitable storms they bring … the trade-off for superior growth in a technology-centered world.
Not all tech stocks have to be high-flying gambles on the next evolution within the tech world though. Sometimes, technology names can be stable, reliable, and even income-producing investments grandma could stomach as part of a diversified portfolio.
It’s just a matter of looking beyond the prevailing headlines and finding the right pick.
With that as the backdrop, here’s a closer look at three tech stocks to buy that would be just at home in a long-term retirement portfolio as they would be in a so-called “funny money” trading portfolio. In no particular order.
Tech Stocks to Buy: Microsoft Corporation (MSFT)
Just for the record, software giant Microsoft Corporation (NASDAQ:MSFT) wasn’t always a name that was safe to put in a retirement account.
During its Bill Gates and even its Steve Ballmer years, it was ever-reliant on the next big operating system or office-productivity software to spur the next round of sales growth. The never-ending obsolescence/renewal cycle opens the door to competitors, and those other players did indeed capitalize on Microsoft’s often-needless upgrades and overhauls.
That’s not the MSFT of today though. CEO Satya Nadella is rebuilding the company from the ground up as one designed to drive constant recurring revenue.
Case in point: Rather than reissuing new Office software every other year and hoping you’ll buy it rather than alternatives, Microsoft now rents online access to things like Excel, Word and PowerPoint for a nominal monthly fee. This makes is far easier for Microsoft to keep users in the ecosystem.
The company is thinking along the same lines for its enterprise server customers too. Its new Azure Stack platform allows users to “pay as they go” rather than forcing an organization to pay a large sum upfront. This software-as-a-service model also allows MSFT to ensure the client always has critical updates, leaving them no reason to even look for alternatives … the upgrades happen automatically.
The model is working too. Last quarter’s Office 365 revenue was up 45%, with the number of users growing to 26.2 million. Its “Intelligent Cloud” revenue — a great deal of which is recurring — was up 11% to $6.8 billion, or about a fourth of the company’s revenue for the three-month stretch.
Recurring revenue is ideal for retirement accounts.
Tech Stocks to Buy: Lam Research Corporation (LRCX)
It’s anything but a household name, but that’s just how Lam Research Corporation (NASDAQ:LRCX) likes it.
The gold rush of 1849 drew nearly half a million people to the western part of the United States, all of whom were certain they were going to find fortune by mining precious metals. Some did find their fortune, but most of them found nothing but disappointment.
You know who did reliably well during the gold rush though? The folks who sold shovels and pickaxes to those so-called 49ers.
Enter Lam Research. It doesn’t make semiconductors like Intel Corporation (NASDAQ:INTC) and Qualcomm, Inc. (NASDAQ:QCOM), which is a brutally competitive business to be in. Rather, Lam Research makes wafer fabrication equipment and offers related services to semiconductor manufacturers.
That’s not to say LRCX is immune to the cyclical rise and fall of semiconductors, which are not only subject to economic factors, but technological developments (which are also relatively stop-and-go). Nevertheless, Lam Research is off-the-radar enough that few other players care to enter the same business, but involved enough that it’s able to consistently ride the ever-rising tide of next-generation technology demand.
As Steve Mullane of the boutique BlueFin Research Partners recently observed of Lam and other tech stocks on the support side of the business:
“[younger business development managers] suggest that while Moore’s Law might be slowing, there are many new growth drivers besides PCs and smartphones that could be dampening our typical downturn spending cycles. They note that while Artificial Intelligence (AI), Internet of Things (IoT), and Automated Driver Assistance Systems (ADAS) are still in their infancy development stages, it is clear that all these sectors will be driving the need for more cloud-based servers and Big Data Storage, which requires more memory. Their longer-term view which we concur: expect to see memory fab expansion to continue over several more years.”
That sounds like a recipe for good, long-term growth.
Tech Stocks to Buy: Alphabet Inc (GOOG)
Finally, web-search icon Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) seems like another one of those all-too-obvious (and all-too-volatile) tech stocks to keep in your retirement account, but if you can take a big step back and look at Alphabet — and really, just Google — from a distance you’ll see some compelling factoids.
Here’s the big one: Only once in the past ten years has YOY revenue slumped for GOOG. During that same stretch, operating income growth has been almost as reliable.
The bulk of its revenue is driven by search advertising, and the bulk of that growth is driven by Alphabet constantly finding new ways to generate revenue-bearing searches. The acquisition of the Android operating system in 2005, for instance, ensured the company would be the most popular middleman for where the internet was headed next … to smartphones.
Odds are good GOOG will be able to leverage its size, and deep pockets, to make sure it’s at the forefront of any future tech evolutions too.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.