Even though many investors tend to concentrate on growth, it’s really a company’s balance sheet that may guard against the dangers that might arise from a recession or a market crash. As we saw in March, companies in the leisure and travel industries with high amounts of debt got into serious trouble. Many have since had to suspend their payouts, issue even more debt to stay afloat, and sometimes even worse, sell equity at low prices to prevent on their own from going bankrupt.
So in the event that you’re trying to stick to your long-term investment plan, but are nervous about deficiencies in new stimulus and election-related volatility, putting money toward the after three companies with the cash piles that are deepest around may be your best bet.
A large amount of eyes have been on iPhone giant Apple (NASDAQ:AAPL) this year. The stock has defied objectives amid government lockdowns, posting great results even yet in the June that is pandemic-plagued quarter. That seemed to fuel the case that Apple is more like a customer that is branded stock rather than cyclical hardware manufacturer, as well as its shares have responded in kind, up 47% on the year. Even though many investors tend to concentrate on growth.
Of program, a consumer that is typical conglomerate doesn’t gush cash like Apple does, nor does it sport Apple’s pristine balance sheet. As of last quarter, Apple had $194 billion in cash and marketable securities against just $112.7 billion of term debt and paper that is commercial. That do not only gives Apple ample pillow if a severe recession takes straight down equipment purchases, but in addition gives the company ample fuel to keep stock that is repurchasing. In the past nine months, Apple has bought straight back a whopping $55 billion in stock, that is actually more than the company’s $44.7 billion in net income over that time. Management has stated a goal of dealing with “net cash neutral” in the long run, so shareholders should expect a lot more repurchases than the company is earning, especially if a bear market takes straight down the stock to more appealing levels.
However, I would not expect too many surprises that are negative Apple’s outcomes. The company’s first 5G phones will be coming to market later this fall, and many Apple enthusiasts will likely be upgrading to the business’s first model on the new standard that is wireless.
Another business that is cash-rich a moat as wide as the eye can see is Microsoft (NASDAQ:MSFT). As of final quarter, Microsoft sported a cash hoard of $136.5 billion against just $63.3 billion with debt. That cash pile is fueling lots of good things for Microsoft, including company expansion, share repurchases, and a dividend hike that is present.
Underneath the leadership of CEO Satya Nadella, Microsoft has grown from being the provider that is leading of operating systems and office software to much, a great deal more. The business’s Azure cloud computing division expanded 50% in constant currency last quarter, and has become the second-largest cloud infrastructure provider by a good margin within an enormous and market that is fast-growing. Under Nadella, Microsoft has also made significant acquisitions, including the LinkedIn social community in 2016, GitHub in 2018, and movie game publishers Minecraft in 2014 and Zenimax Media week that is just last.
All of these acquisitions are great fits under either Microsoft’s core enterprise software suite of business applications or its Xbox video game division. These are the business’s Xbox division, the brand new Xbox consoles will be launching this fall — the Xbox that is first console seven years.
Basically, there’s an awful lot of nutrients taking place at Microsoft, including a recent 9.8% dividend hike to $0.56 per quarter, good for a 1.1% yield, being a cherry that is nice top of what should be described as a profitable growth company for decades.
Finally, Bing search parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is also looking mighty fine in the bucks category. At the end of June, Alphabet had $121.1 billion in cash versus just $4 billion in debt. I’d say that’s a cash that is nice to weather any potential market downturns. Even though Alphabet’s revenue ticked down slightly in the quarter that is pandemic-affected advertising revenue declined, the company still generated $7 billion in net income in the quarter ending in June.
This 12 months unlike Microsoft and Apple, Alphabet does not pay a dividend, nonetheless it has been stepping up its game in terms of share repurchases. Through the half that is first of, Alphabet has more than doubled its share repurchases on the very first half of 2019, from $6.6 billion to $15.3 billion.
That’s a thing that is good as Alphabet’s stock plunged with all of those other market in March, and has slowly recovered since. Still, despite its roughly 10% rise on the season, Alphabet has lagged its other FAANG stock peers, and may provide a value that is great tech’s recent pullback.
That’s because Alphabet is both a stock that is coronavirus-resistant a recovery stock all in a single. Although digital advertising came down hard in the very first half of 2020, usage of both search and YouTube skyrocketed, with YouTube advertising actually growing 5.8%, also as Google search as well as other advertising that is digital. What’s more, YouTube premium subscriptions, which are grouped in with Alphabet’s hardware in the “Google other” segment, likely grew as well, since that segment was up 25.6% last quarter. Even though many investors tend to concentrate on growth.
But the true hidden gem in Alphabet’s kingdom is its cloud division, which grew 43.2% to $3 billion last quarter, making it an ascending No. 3 player behind the aforementioned Microsoft in this growth industry that is long-lasting.
Add in Alphabet’s “other bets” portion, which includes futuristic technologies like its Waymo self-driving car unit and Verily life sciences, and Alphabet is multi-faceted and extremely profitable conglomerate that is tech. With a huge pile of cash, it’s really a stock that is defensive can feel good about buying even if we’re headed for another market downturn.