Top 3 stocks on which fund managers are positive: Alphabet Inc (GOOGL), Apple Inc (AAPL), and Facebook (FB)
Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) shares are always liked by the investors for one or the other reasons. The most important factor is that all the three had the capability to come out with disruptive technologies and even more important is that they are able to sustain the pace of it. Even after reaching a strong place in the market, their innovation never dies down, and that makes investors, as well as, fund managers to remain positive. Though some of the big investors like Carl Icahn might have exited iPhone maker shares as its earnings missed the expectations, the fundamentals remain solid only. The situation was faced by the search engine giant too in the past and managed to remain as one of the top picks among the fund managers even now.
Muted Earnings Growth Seen
Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) shares also play a big part in shaping up the sentiments of investments in respect of the technology sector. A recent survey of Big Money suggested that two-thirds of the respondents believed that corporate earnings would grow in the current year but at a muted rate of 1 – 5% only. However, the interesting point here is that over 80% of the respondents, who were investors and fund managers, think that the corporate earnings will be higher next year. In effect, they are predicting doubling of profit next year from the current year period. That is one factor that would silence the critics, who pointed out that the iPhone maker struggled for growth in the March quarter.
While the three companies, Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB), might face a similar situation in the current year, their long-term prospects are still intact only. There was nothing to suggest or warrant pressing a panic button until now. Everyone is aware of the economic uncertainty or the slower growth in China. Also, most of the analysts have taken into consideration while projecting revenue or earnings for these companies. If the issue is raked up time and again, it was because of the short-sellers, who take every negative sentiment to pull down the stock to reap gains.
Investors Not Bothered About Economic Recession
The other factor that would help Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) shares is that the retail investors were not worried about the threat of an economic recession in the near-term. That was quite clear when over 75% of the respondents or fund managers felt that the economy at the international level would get strengthen or continue to grow at the current pace. Also, more than two-thirds expect the American GDP to grow between 2% and 2.5% over the next one-year period while only 12% see the country falling into a recession next year. Significantly, there are 9% of the investors who believe that the economy would grow more than 3%.
In any case, the favorable survey reports bode well for Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB). Both the search engine giant and social media are heavily dependent on digital advertising. Any weakness in the economy bound to impact the spending towards the ad, be it digital or otherwise. Similarly, if there is a lack of consumer spending towards tech products, iPad makers would suffer. There are few favorable points that hold the economy on a brighter spot. The weak oil price ensures that there is enough money at the disposal of the consumers to spend. Similarly, the weak interest rates help the consumers to go for more shopping. On the flip side, increased housing rent dragged down the positives of weak oil and interest rates to some extent. None-the-less, it did not stop the consumers from spending. However, it is a fact that they were not able to enjoy the full benefits.
Solid Return On Equity
Though there is skepticism among some analysts or fund managers about Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) shares, they have delivered a strong return on equity, as well as, assets. One of the contentions against these stocks was that these shares were down on an YTD basis. Fund managers like Schermerhorn of Granite Investment Advisors believe that there was no space for momentum stocks. That is a good sign for these stocks as they have provided value to the investors. Also, Schermerhorn believes that investors have started to pay attention to the value stocks again. However, picking the stock assumes greater importance in the current scenario. He believes that value stocks would get an upper hand than the stocks that face growth-oriented issues.
However, if one takes into consideration that Apple Inc. (NASDAQ:AAPL) shares were trading less than 12 times of the predicted earnings, it was a clear indication that the stock is going cheap. Its return on assets and equity were 17.9% and 39.1% compared to the industry average of 12.1% and 32.0%. In fact, the industry average is higher because of these three firms. Similarly, Alphabet Inc (NASDAQ:GOOGL) PE for the trailing twelve-month period is only 31.6 times compared to the industry average of 61.6 times. In the same way, its price to sales for the TTM was only 6.7 versus industry’s 7.4. Its price to Book is also cheaper. The return on assets and equity were 11.4% and 14.1% compared to the industry average of 5.4% and 7.3%.
As far as Facebook Inc (NASDAQ:FB) is concerned, its return on assets and equity were 8.2% and 9.1% versus industry’s 5.4% and 7.3% respectively. Aside from these, the three firms have a strong product line to be launched. That would make them to be attractive continuously.
It would be tough to leave Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) shares from anyone’s portfolio if the investor preferred a long-term approach. All the three have the capacity to acquire, as well as, unveil innovative tools to disrupt the world time and again. They have proved in the past and continued to prove in the future too.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.
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