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Technology: America’s Shining Sector

27 October 2009 No Comment

With an economy full of a lot of ugliness (see financials, autos, housing, etc.), technology is hitting on all cylindars.  Technology and innovation is still a huge advantage that America has.  Hopefully, it continues.

Recent earnings announcements from the big hitters such as Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Google (GOOG) and more show that these companies are earning cash hand over fist even in a terrible economy.  Let’s take  a look at a few of these companies:

Apple (AAPL)

One of my favorite companies as a consumer and an investor, I absolutely love Apple.  I own many of their products and probably won’t go back to a PC for some time, if ever.  Their recent quarter was nuts.  Their profit grew 46% with a weak consumer.  Amazing.  Their strength lies in their superior product mix and fantastic margins.  I look for this company to continue to dominate through 2010 and into 2011 as we can expect some new products like Apple’s version of the tablet / netbook probably in 2010.  The stock is currently over $200.  I wouldn’t be a buyer here but would look to get in on a serious pull back.

Amazon (AMZN)

Another amazing company that is revolutionizing retail.  Their profit went up 62% this past quarter as more and more people are shopping online.  Even with a weak consumer, online retail is growing rapidly; thus, the quarter they just had.  I’m not sold on how well the Kindle will do for a couple reasons.  One, competition is going to be fierce with Barnes and Noble and others releasing their own e-readers; and two, unfortunately, most young people don’t read much!  It’s a sad fact but with the internet, video games, music and other distractions, most young people don’t read.  How often do you see Kindles in public?  Amazon is at an all time high right now.  Too high for me.

Microsoft (MSFT)

The big news about Microsoft in addition to the great quarter is that Windows 7 just came out.  The reviews are in and it looks like it’s a quality product.  While Microsoft might benefit from a corporate upgrade cycle, they are already at 90% penetration.  Where does their growth come from?  They have had a tough time diversifying away from their two cash cows: Windows & Office.  I like the dividend here though.

Google (GOOG)

Google is an interesting story.  They dominate the online advertising space due to their domination in search.  However, I’m not sure where Google goes to get other revenue.  They’ve struggled to monetize YouTube.  Online advertising will grow and as such, Google will continue to earn massive dollars from it.  I guess I don’t understand enough about their overall business besides advertising to warrant investing in the company.  Fascinating to watch though.

Investing in Tech

All of these stocks are at insane levels.  Therefore, I’m not buying any at current levels.  If you’ve never read my post entitled How To Invest In Tech, I strongly encourage you to do so especially right now, because it will explain how the only way to make money in non-dividend paying technology stocks is to buy low and sell higher.  I sure would be selling at least some of my positions at current levels.

These four companies I listed above are all really amazing companies that will continue to do well.  They all are generating massive money and have huge cash reserves!  However, the stock prices are too high for me to justify getting in at current levels.  I will definitely be watching though!

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  • Daniel said:

    It probably can't be stressed enough that since they're doing so well now, investors should shy away from buying. Buy low, sell high, right? This isn't buying low..

    I just upgraded to WIndows 7, and I have to say, I'm now proud to be a PC user! I've never been a fan of Macs (or their insanely jealous commercials) and for someone with such a small share of the market, they should focus on themselves for a little bit. Did you know that Snow Leopard came out about a month ago? Don't you think they should have been advertising their own products instead of trying to bash Microsoft?