Apple Inc. (AAPL), American International Group Inc (AIG): Technology Stocks Versus Financial Stocks

Bet on Microsoft

Microsoft Corporation (NASDAQ:MSFT) has been able to post a solid quarter despite all the hysteria surrounding the PC shipment decline figure. Although the full-effects of declining PC shipments have yet to be felt, Microsoft’s cloud business will continue to generate significant growth, but an even greater contributor to growth is Skype. Skype has been able to increase its call volumes by 56% year-over-year. The growth in call volumes on Skype is highly indicative of the potential Skype has compared to all the other Microsoft segments. Skype web-calling is a far superior cost solution to calling than many other alternatives. This may imply that Microsoft could be the future phone company of the millennium.

On the bright side, Microsoft Corporation (NASDAQ:MSFT) sports a 2.78% dividend yield. Analysts on a consensus basis anticipate 5-year growth to be at 11.68% on average. Stable earnings growth along with decent dividends should keep investors onboard Microsoft. The 16 earnings multiple is well-deserved.

Goldman Sachs is in the zone

Goldman Sachs Group, Inc. (NYSE:GS) has been able to experience some robust growth from its asset management division with year-over-year growth of 12%. The growth in revenues was primarily driven by the rallying stock market which has helped to boost management fee income. The case for growth is further backed by increases in its investment banking which grew revenues by 36% year-over-year. The growth in investment banking activities is driven by the flurry of future IPOs.

Companies have greater incentive to publicly list during a bull-market rather than a bear-market. With the stock market trading at all-time highs, the number of IPO filings will increase. This should result in even larger investment banking revenues going forward. Goldman Sachs Group, Inc. (NYSE:GS) has been able to surprise analyst estimates in a range of 10-52% over the past 4 quarters.

With expectations set so low, Goldman Sachs is extremely cheap when trading at a 9.8 earnings multiple.

JPMorgan Chase has stable value

JPMorgan Chase & Co. (NYSE:JPM) the Wall Street darling has taken some serious hits in terms of reputational damage over the past-year. Fact is, the economy is growing slowly, and mortgage lending may see some upside as household formation may increase. That being the case, loan loss allowances and credit related charges both have declined at JPMorgan Chase. JPMorgan Chase reported 12% revenue growth from its asset management division. The company’s 3.10% dividend yield is an additional bonus. The 8.6 earnings multiple isn’t justified in light of the falling costs, and improving economic environment.

Fee income is likely to supplement future growth with analysts on a consensus basis anticipating earnings growth of 7% per year. The company’s growth is likely to be supplemented with cost-cutting, share buy-backs, organic growth, and cross-selling of financial products. Overall investors should anticipate stable yields and growth from JPMorgan Chase & Co. (NYSE:JPM) over the next 5-years.

Conclusion

Stable tech and financial stocks are a must in this day and age. The best way to counter-balance volatility is by buying the most financially stable/undervalued growth stocks in the space. That way, when winter comes, the investment portfolio isn’t as negatively affected by the volatility.

The article Technology Stocks Versus Financial Stocks originally appeared on Fool.com and is written by Alexander Cho.

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