Investors in technology stocks have earned fortunes over the past decade. The combined stock values ??in the tech-heavy have risen by more than $ 7 trillion since 2009, with last year proving to be the best since the decade-long bull run began.
After this remarkable rally, investors start the new year and wonder if the foundations still justify buying in the colossi of the technology sector that powered the most.
Apple (NASDAQ 🙂 almost doubled in value in 2019 alone. Microsoft (NASDAQ 🙂 rose nearly 60% and the social media giant Facebook (NASDAQ 🙂 jumped around 50%, allowing the Nasdaq to achieve its largest annual increase since 2009.
Nasdaq 100 monthly price chart
But after this giant leap, investors are worried that technology stocks have become vulnerable to a sharp decline and that this business cycle is nearing its peak. The uncertain situation can make stocks more volatile, even more so if earnings growth does not justify rich valuations. The Nasdaq is trading at 34 times the annual profit, suggesting that technical stocks will not be cheap for investors who are planning to enter the market now.
That said, there are still many opportunities for investors who have time on their side and who can continue to invest in the long term. For investors who can hold positions in the next five to ten years, adding a number of solid technical stocks to their portfolios would not be a bad idea in 2020.
Ancient pillars of the technical world
Under the old pillars of the technical world, we love Microsoft, despite trading stocks at a record high after the close of the best year in a decade. This year, investors should focus on how Microsoft is performing in the growing cloud computing market where it competes with Google's (NASDAQ 🙂 and Alphabet (NASDAQ :), Google's mother.
Microsoft Monthly Price Chart
In our opinion, the acceptance of cloud services will be an important driver for Microsoft in the future and the company should be able to expand its margins as this company grows. In the past, Microsoft scored the Joint Enterprise Defense Infrastructure, or JEDI, to deliver its Azure cloud services to the Department of Defense, a deal that could be worth up to $ 10 billion.
The appeal of Microsoft as an attractive investment during an uncertain economy is further enhanced by the rock-solid dividend and excellent track record in terms of payouts. Since 2004, when the tech giant first started paying a dividend, the payout has become more than four times as high. Microsoft's current annual dividend yield is 1.29% with a quarterly dividend of $ 0.51 per share.
Similarly, the Apple share remains in a solid position to reward its long-term investors after surpassing all other shares in megacap technology in 2019 with a gain of 86%, the best year in a decade.
Apple Monthly Price Chart
That momentum can get under way if the maker of iPhones benefits from the release of the next generation of iPhones that can work on 5G networks. That is planned for the fall.
The company is also expected to release a new cheap phone in the first half of the year.
In addition to Apple's great innovation and design capabilities in the mobile phone segment, nearly 1.5 billion users and support products such as the Apple Watch and AirPods are available to generate recurring revenues. In our opinion, this powerful combination is what sets this company apart from other technical stocks.
Bottom Line
It is almost impossible to predict what a new year will bring for equity investors. However, most analysts agree on one point: it will not be a repeat of 2019 when almost every major investment category generates a return once every ten years. For investors in fast-growing or risky stocks, sticking to solid megacaps that generate strong recurring income and are in a good position to withstand any economic shock, especially when the upside limit is limited.
