COVID-19 has created a rare opportunity to buy dominant tech companies like Apple on the cheap

You may have heard this one before: Cash is now king. And on that score, tech stocks like Apple are far better positioned than any other sector.

Eric J. Savitz for Barron’s:

For investors looking to jump back into the market, this is a rare opportunity to buy tech’s Big Five — Alphabet, Amazon.com, Apple, Microsoft, and Facebook — on the cheap. The virus issue affects them all, but each company is likely to come through the downturn with its business intact.

All five companies have sparkling balance sheets. Together, they have $587 billion in cash against just $200 billion in long-term debt. Apple has the biggest pile of total cash, with $207 billion at year end, against $108 billion in borrowings.

Steve Milunovich, a Wolfe Research strategist who has covered tech since the 1980s, says he’s still feeling confident about the big-cap tech names… Milunovich thinks governments may take a looser approach to tech regulation coming out of the downturn than has been the case in recent quarters, as the focus shifts toward restoring growth.

The supply chain in China is improving, with contract manufacturer Foxconn’s factories coming back on-line. Apple has reopened all 42 of its stores in China. Granted, the company has now closed the rest of its stores worldwide. The slightly good news is that the March and June quarters are slower times for Apple, and stores could reopen in time for the iPhone 5G launch expected this fall. Meanwhile, Apple has spent the past several years bolstering its services business. Music, streaming, and app purchases could get a boost with consumers stuck at home.

MacDailyNews Take: Of course, the question of where the bottom is in every buyer’s mind, but five or ten years out, after we’re past this pandemic, exactly how well you timed the low won’t matter much at all.

30 Comments

  1. “after we’re past this pandemic…”

    LOL! After the pandemic, the Depression will still be with us. Anybody making stock predictions about the market years out, not knowing anything about how the economy will be restructured after recovering from depression is an idiot.

    1. In difficult times years past, Apple has tended to fare better than its competition because of execution on their products, and also because Apple’s clientele generally have more disposable cash. We’ll see how we all bounce back in time, but if I were a betting man, I’d guess Apple will continue to do just fine.

    2. JC,

      I’m doing macroeconomic analysis on the effects of the virus and whilst being nearly overwhelmed at from all this work I’m not predicting an economic depression, just yet (with the emphasis on the last two words).

      In western countries these are the early days of the pandemic and we just have to see what pans in the next month or two.

      One site that I found useful on the trajectory of the virus can be found here:

      https://www.weforum.org/agenda/2020/03/covid19-coronavirus-countries-infection-trajectory/

      This enables you, the reader to compare the trajectory of the virus in your country in comparison to others and this also allows you cut through the BS from your respective countries’ leaders. And believe me there is more of that than there are supplies of PPE for our health workers.

      So here I am in touch with epidemiologists, senior economists and various state and federal politicians and I’m not prepared to make rash predictions about a depression or the like. However, the fiscal stimulus packages being announced are being made to prevent a depression and to allow for some kind of managed recession. And believe me, governments will throw as much finance as they think is necessary to avoid that outcome.

      The major balancing act is this. You largely close down your economy to protect your citizenry and hospital system and then you loosen the brakes to prevent an economic catastrophe. And then you hold your breath, cross your fingers and see what happens. Does the rate of contagion pick up again or has the lockdown worked? I’m glad I don’t have make those decisions.

      So my advice is to take a step back, and have a think about what you say and what you do through this international crisis. International responses are better than national ones. Backstabbing and making political or economic statements based on fear do not help at all. However, when this all passes political and economic mistakes will be dealt with, and there WILL be hell to pay…but that time is down the track. And that depends on two things, the timing of your elections and the death rates at the time of these elections.

  2. Although P/E-wise, Apple is the cheapest of the bunch, but in Wall Street’s eyes, Apple has the least growth potential and that’s what most big investors are looking for. Apple will continue to be seen as the least attractive of the bunch as it has the least domination of its cash cow market, the smartphone market. All those other stocks are praised to high heaven of crushing rivals and Apple has never been known for that. It’s funny how Amazon is well-known for abusing its warehouse employees, but all people ever talk about is how Apple has turned Chinese workers into slaves and Apple doesn’t even own those factories.

    Anyway, all those above companies are good stock picks with Amazon maybe having the most potential if the Feds don’t stop the company from taking over everything. Microsoft would be the next best bet thanks to its supposedly unstoppable Azure Cloud business. Wall Street definitely loves the cloud. For me, I would only choose Apple or Microsoft because they offer dividends and I’ll get paid even when the market is in the toilet. Apple has a chance of a breakthrough if they can somehow figure out something valuable to do with augmented reality. Apple keeps talking about it, but I don’t see anything being done with it. Let’s see what Apple can do with the iPad Pro’s new LIDAR system. As far as the talked about Apple AR Glasses, I can’t imagine many average people would be interested in something like that, but then again, I have no idea what Apple is planning to do with said AR Glasses. I just too well remember that Google Glassholes weren’t very popular.

    It’s a darn shame Coronavirus took the wind out of the entire stock market’s sails. Apple could have had a spectacular year but with all the downgrades, it surely won’t be spectacular. I’ll settle for an OK year.

    1. I think you’re missing the forest b/c of the trees….talking micro when the macro is being changed like we’ve not seen before. This makes 2008 look like a pool party.

      1. No it’s not gambling if you buy and hold long term. Ten years from now all the solid companies with good businesses will be in good shape. That includes Apple. The real question is whether you’re smart enough to understand which companies have good businesses. You aren’t apparently. Those of us with patience are going to make a lot of money. The short term players are the ones who are gambling. You do understand how a time frame of one year vs ten years changes the equation right? Hmmm, probably you don’t. Oh well that’s more money in my pocket and less in yours. I’m fine with that.

          1. “Hold your breath for the infinity you seem to trust. What I told you are known statistical observations.”

            Ummm, no. In statistics a trend is a real pattern. In gambling there is no real pattern. Any pattern is an illusion. That is why it is gambling. If you knew anything about statistics you would have known that.

            Look, you’re arguing against decades of real data. Good luck with that son.

      2. If it was merely gambling, why is it that some consistently have more repeated success than others?

        Applied to anything, including the markets, education and attentiveness increases effectiveness.

        Because there’s no guarantee, doesn’t mean it’s gambling, unless one says all life is gambling.

          1. Here’s the average closing price of the NASDAQ every five years from 1980 until now. Can you see a pattern? I’ll bet you jump right to the spike in 2000 which will PROVE MY POINT by the way. Buy and hold always works but only if you’re okay with getting rich very slowly. Most people don’t have that kind of patience. I do which is why I have much much much much much more money than you.

            2020: 8,934.73
            2015: 4,945.55
            2010: 2,349.89
            2005: 2,099.32
            2000: 3,783.67
            1995: 925.19
            1990: 409.18
            1985: 290.23
            1980: 168.61

            1. All that matters is when you buy and when you sell. Pandemics and wars and economic hiccups happen. Flip a coin a million times, sure trend will arise. Random meaningless trends.

              Your trend isn’t unbounded.

          2. “Flip a coin a million times, sure trend will arise.”

            You don’t seem to understand that if it were gambling as you say there couldn’t be any kind of pattern or trend. None. At. All. That a trend exists proves I am right and you are wrong. You seriously think a clear trend for decades is equivalent to flipping a coin a million times? Wow.

    2. Your stream-of-consciousness, rambling comments don’t add anything to the conversation. The world has changed, millions of people are out of work, discretionary income is evaporating right now for a lot of Apple customers as they sit at home, and most people cannot telecommute even for a short time. Apple and the economy will recover but this is the biggest and most destructive event of the century so far and you’re flapping your gums as if we’re just looking at an average down quarter, wake up!

      1. It will be bad but losing human life thru murder in the last 7 years (Syria, Burma, Yemen, Ukraine, western China and others parts of the world are far worse), Apple products work very well and are the windows to the world (unless power plants and the phone system close down too), my iPhone, iPad, iMac, along with my work PC will carry the day thru this stupid closing down off everything, unlike humans this virus is here to stay like the Sun or the Earth, hiding away for 2-4 weeks isn’t going to do anything it’s only a matter of when not if you git the Coronavirus during your lifetime ie.. (flu-common cold).

        The big corporations will be fine, the small poor citizens however…..

        1. I do not disagree that most of us will catch Covid-19 eventually. I have been saying that since it became obvious in January. However, it makes a difference when we get it. The longer we can each hold it off, the less chance of overwhelming the medical system and the more chance that there are effective treatments. The difference could amount to millions of lives saved. That isn’t “stupid” for anyone who values human life.

        1. You do not think that protecting public health and safety is an appropriate “agenda.” Others think it is the primary duty of any civilized society. You are free to do as you like, so long as it does not put others at risk.

  3. Small local business’s and the common man and woman are going to take it on the chin, nothing will come out the state or federal government other than God be with you. Note the big companies will git even bigger after this panic.

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