Mature Tech Stocks for Adult Investors
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Lost in all the media kerfluffle about tech earnings is a very real concept: the market for tech stocks, the buyers, are still treating those companies like they're kids. In turn, this makes the companies behave like they're still in the two-guys-in-a-garage phase. That makes for great mythology, but not so much for great companies. Sure, sometimes the returns are there, but often they're not.
Am I the only one who remembers 1999 and the last tech bubble? I sure hope not.
Apple (NASDAQ: AAPL): Everyone's losing their minds, running in circles and declaring it a terrible investment--that's nonsense. It's as good or better and investment now than it was a year ago. Sure, some people lost a lot of paper money as it dropped, but revenues are still good and so the stock will come back. For Pete's sake, the firm's Earnings-per-Share is still more than $44. Compare that with some more established stocks and you'll find Apple is doing quite well. The firm is still #1 in the smartphone market, too. This isn't a company that needs a 'comeback,' unless it's from its investors. Get it while it's cheap.
Facebook (NASDAQ: FB): Sure, the company had a good quarter, but this is still as lousy an investment as it has ever been. One good quarter doesn't tell any serious investor that the company is ready to overcome a P/E of 2,012.86 or an EPS of 0.01. Heck, even with decent numbers it's down for the week. There are even stories in the media about users' habits of walking away from the service for 'Facebook vacations.' And it doesn't build confidence that COO Sheryl Sandberg just told investors that click-thru rates are a terrible measure of effectiveness. What else is Facebook selling?
Anyway, those are just examples. What I want this column to focus on is tech stocks that have stopped acting like enfant terribles. The ones that are mature companies, with management that doesn't believe their own hype and does its best to provide a decent return for investors. Isn't that what a company is supposed to do? I like seeing it in tech companies because it shows me they're serious about being companies--not rock stars.
Maxim Integrated Products (NASDAQ: MXIM): Maxim is a circuit manufacturer. It's not sexy, but a lot of things most people think are sexy run on their circuits. Think of them like the people supplying food and services to the miners during the Gold Rush of 1849: even is some miners got rich and some went broke, those firms still made money. Maxim's sitting on an P/E of 28.05, which tells me I'm not the only person thinking the company still has some growth in it. It's also almost on a 52-week high right now, only 22 cents off. Toss in a dividend of 3.03% and this is one you should put into your portfolio and forget about.
Intuit (NASDAQ: INTU): Again, not a sexy pick. But I'll bet that a lot of you have purchased either of the firm's signature products, Quicken or TurboTax, in the last little while. Toss in the fact that a godawful number of small businesses have their books done in QuickBooks and it's easy to see that Intuit is a major player in the financial industry. Heck, Microsoft itself has tried to horn in on the game a few times and not really succeeded. That takes talent and a good set of products. The company's P/E is high enough to make me think there value there, and there's even a dividend yielding 1.08%.
Qualcomm (NASDAQ: QCOM): It seems silly to talk about Qualcomm as an adult company. It's not like it's little known, after all. Heck, they have naming rights on a baseball stadium! Still, the firm behaves as if they're here and they plan to stick around. The firm's P/E of 20 or so shows that investors like it without being too carried away (check Facebook's sometime), and a 1.5% dividend yield shows that the company's board thinks so too. I'd like to see EPS above $3.33 but it's not a time to be greedy. There has been some solid action expecting the firm to go higher, too.
Look, I know the tech world is savvy. We've seen entrepreneurs swaggering around like they're the next hottest thing since Mick Jagger. But most of them, the majority of them, end up being Dave Clark. Nice enough, but they don't last or really pay off for anyone except the very earliest of angel investors. So take a hard look at tech stocks--make sure you're skeptical about their claims. If they say they don't NEED to pay a dividend or act like adults, there's a reason. It might be financial insecurity, or it might just be that the team has too great an ego. Either way, you don't want to do business with them if you can avoid it.
Follow Nate on Twitter: @natewooley
More columns by Nate Wooley:
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nwooley has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Intuit. The Motley Fool owns shares of Apple, Facebook, Intuit, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!