Since March 2009, the S&P 500 has risen significantly, from around 680 points to more than 1,550 points. The general U.S. market has regained all the losses since October 2007. Of course, trees can’t grow to the sky. Many investors have been worried that the market has become more and more expensive and it might correct itself soon.
What should investors do now? Should we cash out all positions? Or should we keep ourselves in the game and invest more? Actually, it all comes down to the attractiveness of each individual business. In this article, I will unveil three tech stocks which could keep investors in the game safely, as these stocks are quite cheaply valued on the market.
Apple Inc. (NASDAQ:AAPL) – It is so cheap now
Many people mention about Apple Inc. (NASDAQ:AAPL) as a fallen angel, after it dropped significantly from $700 per share in September 2012 to under $400 per share. They think that Apple Inc. (NASDAQ:AAPL) could move even lower to $300 or even $200. However, I personally think that Apple Inc. (NASDAQ:AAPL) could be a good pick in this environment at its current trading price because of three main reasons.
Firstly, Apple Inc. (NASDAQ:AAPL) has an extremely strong balance sheet. As of December 2012, it had $127.3 billion in total stockholders’ equity, $137.1 billion in cash, and no debt at all. With a huge cash balance, Apple Inc. (NASDAQ:AAPL) could be quite flexible to invest for its future growth. It could accelerate the spending on R&D or acquire smaller companies to grow in a sustainable manner.
Secondly, Apple Inc. (NASDAQ:AAPL)’s historical growth has been quite superb. In the past five years, its net income has increased from only $4.83 billion in 2008 to as high as $41.73 billion in 2012. Apple also managed to consistently increase its free cash flow, from $8.4 billion to more than $41.4 billion during the same period. It is fair to state that Apple’s high growth was mainly due to its great innovations with the iPod, the iPhone, and the iPad.
Many people might argue that Apple might experience a slowdown in its growth. However, the cheap price gives investors a wide margin of safety for the slow growth. That is the third reason to be bullish about Apple. Cheap price!