Recent volatility has spooked individual and institutional investors alike, but as the dust settles, it is likely that money will find refuge in strong, consistent companies with businesses that can withstand near-term headwinds.
This might mean that the world’s tech leaders, which have dominated Wall Street over the past several years, are now on sale. Tech has been at the helm of our historic bull market, and it seems likely to remain that way, so long as the bull regains its footing.
Of course, this year’s volatility has made some investors hesitant, with bearish traders quick to draw similarities between this latest tech rally and the infamous dot-com bubble of the late 90s and early 2000s.
However, unlike the dot-com bubble, there is real earnings and revenue growth fueling this tech rally. In fact, the average P/E ratio of our “Computer and Technology” sector currently sits at 18.4, which compares favorably to the dot-com era’s average that soared into the 100s for a few weeks.
Another interesting trend in today’s tech rally is that, rather than obsessing over the next big thing, investors seem to rewarding tried-and-true brands for their respectable growth. This means that some of the strongest tech stocks are the household names that consumers already know and love.
With that said, check out these three blue chip tech stocks to buy now:
1. Alphabet Inc. (GOOGL - Free Report)
Google parent Alphabet has found itself with a Zacks Rank #1 (Strong Buy) rating after several months of down trading. The position comes after the internet giant witnessed positive revisions to its earnings estimates. Analysts, on average, now expect Alphabet to record $47.45 in earnings per share in 2019, up from $47.33 a month ago. This would represent EPS growth of 13% from Alphabet’s projected 2018 earnings.
Alphabet shares are down about 18% from their all-time highs and looking cheap compared to recent history. The stock now has a P/E of 24.9, which is a discount to the industry’s average of 26.1. GOOGL also has a PEG ratio of 1.4, so its earnings growth outlook is coming at a decent price as well. Alphabet sports a beta of 0.99, meaning that it is a solid low-volatility option if recent unpredictability picks back up again.
2. Qualcomm Incorporated (QCOM - Free Report)
Qualcomm is one of the world’s largest telecommunications equipment and semiconductor manufacturing companies. QCOM currently sports a Zacks Rank #1 (Strong Buy). One feature of the stock that tech investors looking for stability might like is its dividend. QCOM yields about 4.4% annualized right now, and management has a great track record of adding to the payout every year since 2009.
Chip stocks have been widely battered recently, but QCOM likely holds up better because it offers exposure to different business, including large swaths of untapped growth in 5G. This is one thing that could help the company reach its long-term projected annualized EPS growth rate of 10.9%. Continued earnings growth will, in turn, help Qualcomm improve its balance sheet and offer investors more dividends and buybacks going forward.
3. Sony Corporation (SNE - Free Report)
This Japanese electronics giant has a dominant position with many key products, including audio and video equipment, televisions, displays, semiconductors, game consoles, computers and computer peripherals, and telecommunication equipment. Even with recent selling, Sony shares have managed to stay in the green over the past year, and the stock is still reasonably valued. SNE is trading at about 10.7x earnings and has a PEG ratio of 1.1, both of which present discounts to their industry averages.
Meanwhile, management is generating $5.94 in cash per share, which should strengthen the company’s ability to invest in new technologies. Earnings growth is expected to reach nearly 38% this fiscal year, and that should be inspired by revenue growth, as marginal expansion is expected to continue on the top line going forward.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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