3 Large Cap Value Stocks to Consider Today
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the reality of the impending fiscal cliff grows closer, the market has picked up increasing volatility, resulting in some potentially great values in large cap companies. With this in mind, I will discuss in this article why two of the biggest tech companies - Microsoft and Google - could provide value to their shareholders while these firms also continue to make strides in various product and services offerings.
Microsoft's Potential Comeback
Although investors have for the most part shied away from Microsoft (NASDAQ: MSFT) for the past few years, the shares of this mammoth company may be poised for a gigantic comeback - potentially as much as 25% - due in large part to its newer products' capabilities of synching customers' numerous devices such as computers, tablets, and smart phones.
One such product is SharePoint, a software platform and family of products that Microsoft has developed for the purpose of file sharing, collaboration, and contact management that also allows third party developers to provide customized modifications to help in extending its functionality.
This product alone is expected to add over $2 billion in adjusted annual revenue to Microsoft's balance sheet - while at the same time laying the foundation for even more updates and product enhancements in the future. SharePoint, along with other newly released products such as Windows 8, have been developed with an ever-growing community of multi-device-owning users in mind who are eager for the opportunity to synch up numerous devices for the purpose of convenience and accessibility of information.
In addition to its high priority on synchronization, Microsoft is also increasing its investment in the Chinese market in terms of the services that it offers to Chinese businesses, as well as to the country's government agencies. In this vein, Microsoft has recently hired more than 1,000 employees in China in the areas of marketing and research & development - and it intends to increase its spending on R&D annually by approximately 15%. In keeping pace with the up-and-coming popularity of the cloud computing market, Microsoft has also been involved with building a large cloud computing center in Shanghai. This center is expected to provide an additional 600 jobs.
With a market cap in excess of $238 billion, Microsoft's earnings per share are a tad under 2, with a 15.31 P/E ratio. Investors in Microsoft's shares enjoy a dividend yield of 3.2% annually, and may possibly see their shares rise over the next year by over 25% - giving them a nice win-win situation for both income and growth.
Could Google Shares Also Be on the Up and Up?
Investors have often heard that certain companies are "too big to fail" - and unfortunately, in many cases, they have also found that just the opposite is true. Yet, at least for the present time, Google (NASDAQ: GOOG) truly is considered to be the "king of internet search." As of the end of 2012's third quarter, Google claimed nearly 67% of all search via the Internet, while at the same time producing the most popular mobile operating system.
In addition to that accolade, Google, along with social media icon Facebook, is also deemed as having the richest data sets on the company's users - and this alone may be considered "priceless" in terms of even further targeting online ads and content on a much more focused basis.
In other areas, Android, Google's mobile operating system, currently tops the smart phone market in China - and the firm has also recently launched additional new product offerings to the Chinese market with the intention of further increasing their market share in this demographic area.
Google's market capitalization of a tad over $220 billion closely rivals that of Microsoft's, giving Google a book value per share of over 207. The company has a strong operating cash flow of nearly $16 billion, earnings per share of just below 32, and a somewhat high P/E ratio of approximately 21. Yet, even though Google's third quarter 2012 quarterly earnings growth was in the negative - to the tune of -20.30% - the company's shares are estimated to rise by more than 19% over the next 12 months, meaning that there could be an excellent value to be had by the company's shareholders.
Is Apple Taking A Bite Out of the Competition?
Another of the big tech players is of course Apple (NASDAQ: AAPL). With this company's market capitalization in excess of $505 billion, it seems that Apple has a hand in a number of different pies - including its newest release, the iPhone 5. Apple's third quarter 2012 earnings per share stood at 44, and currently the shares' P/E ratio is a tad over 12 - down from 13 going into 2012's fourth quarter. Here, too, investors may be able to get a great value, as shareholders receive a dividend of $10.60 per share, equating to a 2% annual dividend yield. In addition, thanks in large part to some negative issues with the iPhone 5, Apple's shares have dipped a bit - however, shares are anticipated to rise over the next 12 months by over 40%. I feel that this company would be an excellent value - especially if shares could be purchased at below $550.
Keeping Up the Good Word for Companies
In consumers' quest for information, there are many online options that can allow, with just a few clicks, users to access a myriad of data on just about any topic or company that exists. Regardless of how much traffic a site has, or how large its underlying company is, its reputation can literally make or break its success. And, while all companies may have at least a few negative customer experiences in their arsenal, oftentimes - especially due in large part to the vast and speedy travel of information via the internet - bad news can be enhanced if it is not properly be managed.
Today, companies such as ReviewBoost can help in not just managing the bad, but also promoting the good news about companies throughout the internet with large search engines such as Google by collecting honest customer feedback in the form of company product and/or service reviews. This firm's "Local Reputation Management" offering provides a combination of online marketing, social media, customer loyalty, and SEO in helping companies to manage their online image as well as to enhance their reputation should it currently be negative. ReviewBoost is the first company to do this - although due to its success, it will not likely be holding this position for long - and could even see competitors in the likes of Microsoft and Google in the future.
The Bottom Line
Even with the success of small and focused companies, large caps can offer investors great value in terms of the potential for income and growth. Thanks in large part to the impending fiscal cliff, shares of many companies have fallen in the recent past - regardless of how good their individual numbers look.
This alone can offer investors an enormously large benefit in terms of owning the shares of highly valued companies such as Microsoft and Google that are poised for additional - and in some cases substantial - growth in both the short and long-term.
StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. 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.If you have questions about this post or the Fool’s blog network, click here for information.