Friday, April 26, 2013
If you're trading Big Cheap Tech, you've had an interesting week...
Regular Stansberry & Associates readers are familiar with our "Big Cheap Tech" label. Many of the world's dominant tech companies, like Apple, Microsoft, Cisco, and Intel are trading for cheap valuations right now.
And when you factor in their huge cash hoards, they get even cheaper... Cisco, for example, has a market cap of $110 billion. But it has over $46 billion in net cash (cash on hand minus debt). If you account for that cash, it's selling for an absurd six times earnings.
This week, it seems like the market is finally catching on to the value in Big Cheap Tech.
Software giant Microsoft (NASDAQ: MSFT) popped a total of 7% this week after a respected hedge fund announced a large position.
In all, shares are up 21% since they bottomed last fall. And they're a chip-shot away from a new 52-week high.
Another Big Cheap Tech stock is rallying this week as well.
On Wednesday, semiconductor giant Intel (NASDAQ: INTC) "broke out" to multi-month highs. Shares are up 16% in two months.
A final bit of Big Cheap Tech news comes from Apple (NASDAQ: AAPL).
Over the past seven months, Apple shares have been clobbered. They've fallen 42% from their peak.
But on Tuesday night, Apple provided Wall Street analysts with a decent earnings report... one that included a promise to return more money to shareholders. That promise should allow the beaten-up stock to stage a rebound.
A simple way to go long the Big Cheap Tech idea is with the ProShares Ultra Technology Fund (NYSE: ROM). ROM is an exchange-traded fund designed to return double the performance of the Dow Jones U.S. Tech Index. It holds stakes in more than 100 companies. But about 70% of its weighting is in just 10 stocks... most of which are the Big Cheap Tech "dominators."
Apple makes up about 16% of the fund. Microsoft, Google, and IBM make up another 9%-10% each. And it has 5% chunks in Oracle, Cisco, Qualcomm, and Intel.
The big moves in Microsoft and Intel show investors are warming back up to the sector... Apple's news could be the catalyst to reverse its downtrend.
If Big Cheap Tech heads higher, you'll see the gains in ROM.
– Amber Lee Mason and Brian Hunt
Steve says these Big Cheap Tech companies will be the next sector to benefit from "Mom and Pop America" piling into stocks. Learn more about this phenomenon here: The "Great Migration" Could Lead to a Dot-Com-Style Boom in Stocks.
Doc Eifrig has coined the term "Digital Utilities" for dominant tech companies that provide "the crucial services and infrastructure of telecommunication." Learn how he's using these companies to generate safe and steady income here: You Can Still Use "Digital Utilities" to Help Pay for Your Retirement.
America's "financial backbone" continues its recovery... financial sector fund XLF hits a fresh four-year high.
Warren Buffett's Berkshire Hathaway breaks out to a new all-time high... up 35% in the past 12 months.
Big Australian stock fund EWA touches its highest level in nearly two years.
Semiconductor fund SMH quietly breaks out to an 18-month high.