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The World's Best Businesses Are Still Dirt-Cheap

By Brett Eversole
Thursday, October 24, 2013

Investors have a rare opportunity – one that should never exist – right now.
 
Today, we can buy some of the best, most cash-rich companies for ridiculously low prices. In fact, we can buy a basket of these businesses for a crazy 34% discount to the overall stock market.
 
Longtime readers understand that some of the biggest stocks on the planet are the best investment value today. Yet somehow, the stock market hasn't figured this out.
 
Let me show you what I mean...
 
Recently, it was widely reported that technology giant Apple's cash hoard was equal to roughly 10% of all the cash held by non-financial U.S. companies.
 
That's crazy to think about, but it's just scratching the surface. The truth is, all the major technology giants are sitting on billions of excess dollars. Take a look:
 
 
Market Cap
(Billions)
Net Cash
​(Billions)
Cisco
$121.4
$50.4
Microsoft
$288.1
$91.4
Apple
$472.3
$146.3
IBM
$190.7
$22.6
Oracle
$149.9
$19.4
Qualcomm
$118.2
$32.7
Google
$336.0
$60.3
Average
$239.5
$60.4
 
As you can see, Apple isn't the only company holding a ton of cash. Aside from adding a layer of safety to these businesses, that makes all of the companies cheap...
 
Take Cisco, for example. It holds around 40% of its market cap in cash. It's like buying a house for $100,000 and finding $40,000 in a kitchen cabinet...
 
For every share you buy, the company holds $9.40 in cash. With the stock at $22.50 per share, you're really only paying $13.10 per share for the business. And this number is less than six times what the company is expected to earn next year. It's dirt-cheap. And it's not the only one...
 
Take a look:
 
 
Fwd P/E
Fwd P/E
Net Cash
Cisco
10.0
5.9
Microsoft
11.6
7.9
Apple
12.0
8.3
IBM
9.7
8.5
Oracle
10.4
9.0
Qualcomm
13.9
10.1
Google
19.3
15.9
Average
12.4
9.4
 
The S&P 500 trades for 14.3 times next year's earnings estimates. On average, these stocks trade well below that figure, at just 12.4 times next year's estimates. And once you account for their ridiculous amounts of cash, that number falls to just 9.4 times earnings estimates.
 
Said another way, these technology behemoths trade for a 34% discount to U.S. stocks.
 
Deals like this don't come around often. So it'd be foolish not to take advantage. These technology giants could rise by 50% as a whole and they still wouldn't be expensive.
 
I expect stocks in general to do very well over the next two years, and this group should easily outperform. Don't miss it.
 
Good investing,
 
Brett Eversole




Further Reading:

"My readers made 60%-80% on one of the world's safest, cheapest businesses," Brian Hunt writes. "You can start using it to generate similar returns." Get all the details here.
 
Brett recently showed readers the world's cheapest stocks – in the world's cheapest sector. "As you dig into the value of large-cap stocks," he writes, "one sector jumps out..." Learn what he found right here.

In The Daily Crux
Market Notes
"Offense" sector keeps soaring as Northrop Grumman and Lockheed Martin surge to new all-time highs.
 
For-profit education stocks break out of a long downtrend... Apollo Group, DeVry, and ITT hit 52-week highs.
 
Big "emerging markets" fund EEM is down 3% this year while the U.S.-focused S&P 500 is up 22%.
 
Medical-device makers are booming... new highs for Medtronic, Stryker, and Zimmer Holdings.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1746.38 -0.5% +23.6%
Oil (USO) 34.95 -1.3% +9.3%
Gold (GLD) 128.69 -0.5% -22.2%
Silver (SLV) 21.75 -0.6% -29.1%
U.S. Dollar 79.28 +0.1% -0.8%
Euro 1.38 +0.1% +6.3%
Volatility (^VIX) 13.42 +0.7% -28.7%
Gold Stocks (^HUI) 234.57 -3.0% -52.0%
10-Year Yield 2.49 -0.8% +41.5%

World ETFs
Symbol Price
Change
52-Wk
Japan (EWJ) 11.90 -2.0% +33.0%
Israel (ISL) 16.24 +0.3% +30.1%
USA (SPY) 174.57 -0.5% +26.1%
Taiwan (EWT) 14.37 -2.1% +16.0%
S. Korea (EWY) 64.47 -1.8% +14.5%
S. Africa (EZA) 67.10 -2.4% +7.8%
Singapore (EWS) 13.73 -1.3% +5.7%
Canada (EWC) 29.19 -0.8% +5.2%
Russia (TRF) 15.38 -1.2% +3.7%
China (FXI) 36.90 -3.3% +2.7%
India (IFN) 20.64 -2.1% +1.6%
Lat.America (ILF) 39.88 -2.0% -2.8%

Sector ETFs
Symbol Price
Change
52-Wk
Alt. Energy (PBW) 6.74 -1.8% +74.6%
Biotech (PBE) 35.47 +1.3% +54.9%
Media (PBS) 24.32 -0.6% +47.8%
Defense (PPA) 28.50 +0.9% +46.2%
Retail (PMR) 34.58 +0.1% +41.5%
Transportation (IYT) 124.31 +0.7% +38.9%
Industrials (IYJ) 93.81 -0.2% +35.8%
Consumer Svcs (IYC) 113.50 -0.4% +34.7%
Health Care (IYH) 111.09 -0.1% +34.1%
Financials (IYF) 76.59 -0.7% +31.7%
Semis (PSI) 17.28 -2.8% +30.3%
Construction (PKB) 21.00 -0.3% +30.2%
Water (PHO) 24.28 0.0% +27.5%
Big Tech (QQQQ) 81.95 -0.6% +27.1%
Software (PSJ) 33.60 -0.4% +24.6%
Telecom (IYZ) 29.03 -0.4% +22.3%
Nanotech (PXN) 6.94 -0.7% +18.5%
Basic Mat (IYM) 77.67 -0.4% +18.4%
Insurance (PIC) 19.01 +0.1% +18.3%
Utilities (XLU) 38.87 +0.1% +10.3%
Real Estate (IYR) 67.57 +0.2% +10.0%

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