Heidi Richardson highlights why mature U.S. technology companies deserve a fresh look.
It’s amazing how tech- and Internet-dependent we’ve become. I remember when cell phones were actually used to make phone calls and sending someone a birthday card required a stamp. And I’m not that old!
For the record, I love the wonderful things my cell phone can do—I can deposit checks without going to the bank, order a ride that will appear in minutes, and am shamed if I slack off on my running schedule.
Market Realist – Mature tech stocks have run up considerably
Apple (AAPL) is the leading performer of the lot, with a whopping CAGRs of 48.7% over the last six years. NASDAQ (QQQ), Google (GOOGL), the S&P 500 Index, and Microsoft (MSFT) have produced respective CAGR of 27.1%, 25.9%, 20.8%, and 19.0%, which are all fantastic returns. In general, tech stocks have done much better than the broader market. If you invested all your wealth in Apple six years ago, you would now have ten times that wealth.
Market Realist – Tech stocks look relatively cheap
Despite the fact that technology stocks have rallied in the last six years, they still look cheap compared to some of the defensive sector stocks, as the above graph shows. In fact, it’s one of the least expensive sectors. What makes this look more attractive is that tech company earnings–particularly the mature ones–consistently report robust earnings. So, it’s not multiple expansion that has driven these stocks up, but robust earnings.