Investing
5 Blue Chip Stocks to Buy Now With Huge Piles of Cash and Very Low Debt
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We finally made it to the second quarter after a March that seemed to last forever, and we pretty much started off the same way it ended, with more selling. The first quarter of 2020 ended with a loss on the S&P 500 of exactly 20%. In the history of the index since 1928, it was just the ninth quarter that has seen a drop of 20%, and it was the first since the fourth quarter of 2008, when the S&P fell 22.56%. Since World War II, it was just the fifth quarterly drop of 20% or more.
As distressing as the numbers are, which the team at BTIG sourced, they also say there is some good news The firm noted that after a 15% or higher drop in the S&P 500 since World War II, the index was higher seven out of the next eight quarters. Over the next two quarters, the S&P 500 was higher every single time, for an average gain of 12.66%.
While there is always the chance that “this time is different,” the data is persuasive, as well as somewhat reassuring for beaten-down investors. BTIG also featured a list of what they call “Sound Sleeper” stocks. These have mountains of cash and very little debt. We picked five that are solid buys for the future and pose little long-term risk.
Air Products
This company has seen some solid insider buying over the past couple of years. Air Products Inc. (NYSE: APD) provides atmospheric gases, process and specialty gases, electronics and performance materials, equipment, and services worldwide.
The company produces atmospheric gases (including oxygen, nitrogen, argon and rare gases) and process gases (such as hydrogen, helium, carbon dioxide, carbon monoxide, syngas and specialty gases). It makes equipment for the production or processing of gases, comprising air separation units and non-cryogenic generators, for customers in various industries, including metals, glass, chemical processing, electronics, energy production and refining, food processing, metallurgical, medical and general manufacturing. It also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction and liquid helium.
The Wall Street consensus price target for the stock is $246.86. The shares closed Wednesday’s trading session at $189.28, down over 5% on the day.
Alphabet
The search giant continues to expand and, while search remains king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Google has outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail).
Advertising remains a huge growth area as well, and the analysts expect the company to be a huge winner as product and service vendors look to reach the biggest possible audience.
The posted consensus price target is at $1540.18. Alphabet stock was last seen trading at $1,102.10 per share.
Gilead Sciences
This company is trading a very reasonable 9.36 times estimated 2020 earnings and may have a coronavirus treatment. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.
The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
The company’s remdesivir may prove to be a promising COVID-19 treatment, and the World Health Organization labeled it as “the most promising” antiviral during the early days of the outbreak. But its effectiveness won’t be known until a slate of clinical trials reads out, with the first expected from China in the coming weeks.
Investors receive a 3.75% dividend. Gilead Sciences stock closed most recently at $72.51, not far from the $74.50 consensus price target.
Intuit
This company hits all the metrics in the technology sector for accounting needs. Intuit Inc. (NASDAQ: INTU) is a provider of business and financial management solutions for small and medium-sized businesses, financial institutions, consumers and accounting professionals.
Products and services include TurboTax, QuickBooks, Quicken, small business financial management and payroll processing, personal finance and tax preparation and filing and online banking services through its Digital Insight acquisition. Intuit also offers products on a software as a service (SaaS) platform across all its business divisions.
Intuit has served small businesses and accountants with QuickBooks for more than 20 years. The company was an early innovator in cloud accounting when it first launched QuickBooks Online in 2001. QuickBooks Online has more than a million paying subscribers, cementing its market leadership as small businesses shift to the cloud.
Over 40% of small businesses are using either Quickbooks Online or Quickbooks Desktops, while 35% are using Excel or manual paper accounting. Top Wall Street analysts remain very positive on the shares, as they think Intuit’s revenue growth could still exceed the firm’s 10% to 11% guidance.
Investors receive a 0.97% dividend. The $285 consensus price objective on Intuit stock compares with the most recent close at $218.12 a share.
24/7 Wall St.Lam Research
This remains one of the top chip equipment picks across Wall Street, and it was up big on the bullish report. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device.
Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment market, driven by a strong focus on technology inflection spending over the next few years.
The dividend yield is 2.00%. The consensus price objective is $305.76, and Lam Research stock closed at $223.33 on Wednesday.
Again, these five top companies have large troves of cash and very little debt. These are metrics that are crucial for investors as we have entered a bear market, as too much debt can be a killer when liquidity shrivels up, which it surely did in early March. While not suitable perhaps for very conservative accounts, they all make sense for long-term growth investors with an eye on recovery down the road.
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