In this article, we will look at the 5 cash-rich tech stocks to buy now. If you want to explore similar technology companies that have enough cash on hand to weather an economic downturn, you can also read 10 Cash-Rich Tech Stocks to Buy Now.
5. JD.com, Inc. (NASDAQ:JD)
Free Cash Flow: $28.82 Billion
Number of Hedge Fund Holders: 62
On August 23, JD.com, Inc. (NASDAQ:JD) announced earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.59 and outperformed estimates by $0.19. The company generated a revenue of $39.15 billion and beat Wall Street expectations by $571.5 million.
On August 24, Benchmark analyst Fawne Jiang raised his price target on JD.com, Inc. (NASDAQ:JD) to $109 from $106 and reiterated a Buy rating on the shares. Jiang sees JD.com, Inc. (NASDAQ:JD) driving margin expansion better than peers.
As of September 7, JD.com, Inc. (NASDAQ:JD) has free cash flows of $28.82 billion and is therefore ranked among the top 5 cash-rich tech stocks to buy now.
At the close of Q2 2022, 62 hedge funds held stakes in JD.com, Inc. (NASDAQ:JD) worth $5.48 billion. This is compared to 59 positions in Q1 2022, with stakes worth $5.40 billion. The hedge fund sentiment for the stock is positive.
As of June 30, Tiger Global Management LLC owns more than 30.5 million shares of JD.com, Inc. (NASDAQ:JD) and is the largest shareholder in the company.
4. Meta Platforms, Inc. (NASDAQ:META)
Free Cash Flow: $35.83 Billion
Number of Hedge Fund Holders: 184
Meta Platforms, Inc. (NASDAQ:META) is cash-rich enough to weather an economic downturn and is also trading at bargain levels right now. As of September 7, Meta Platforms, Inc. (NASDAQ:META) has a trailing twelve-month PE ratio of 12.50 and has free cash flows of $35.83 billion.
Wall Street is bullish on Meta Platforms, Inc. (NASDAQ:META). On July 28, RBC Capital analyst Brad Erickson revised his price target on Meta Platforms, Inc. (NASDAQ:META) to $190 from $200 and reiterated a buy-side Outperform rating on the shares. On August 10, BofA added Meta Platforms, Inc. (NASDAQ:META) to its U.S. 1 list, which contains Buy-rated companies.
At the end of Q2 2022, 184 hedge funds were long Meta Platforms, Inc. (NASDAQ:META) and held stakes worth $18.19 billion in the company. Of those, Fisher Asset Management was the top shareholder with stakes worth $1.86 billion.
Here is what RGAIA Investment Advisors had to say about Meta Platforms, Inc. (NASDAQ:META) in its second-quarter 2022 investor letter:
“Consequently, many former growth darlings now qualify as “value” stocks to the point where the Russell 1000 Value Index even includes our growth holdings. A great example of this is one of our recent purchases: Meta Platforms (NASDAQ:META), the company formerly known as Facebook). As it stands today, META is the fifth largest holding of all in the Russell 1000 Value Index.
We followed Facebook for years and were often asked “why own Twitter when you can buy Facebook?” Sure enough, Twitter’s return was far better over our holding period and we now deployed a decent portion of our Twitter proceeds into META. META today strikes us as one of the cheapest stocks in the entire market and one of the more interesting setups we have seen. META was hit with a triple-whammy of tough COVID comps, changes in Apple’s privacy policies and emerging competition from TikTok.
Despite all this, the company continues to grow, albeit at slower rates. At its lows this year, META was trading for low teens forward P/E (15x 2022 numbers today) and this is despite investments in the Reality Labs division at around a $10b annualized rate. If we exclude the Reality Labs investments, the core META properties of Facebook, Instagram and WhatsApp would earn somewhere around 23% more in bottom line EPS. This would chop about 2.5 turns off the company’s P/E.
Speaking realistically, there is no sign Mark Zuckerberg would entirely stop these investments; however, we do think Zuckerberg is realistic about his stock price and very well might defer a large portion of the investment until core earnings reaccelerate. Further, we think it is appropriate to value the company on a sum of the parts basis and rather than fully expense the Reality Labs investments against the core properties, we should think about what the actual value of that investment might yield. Either way, even fully expensing Reality Labs, this company is far too cheap to ignore.”
3. Microsoft Corporation (NASDAQ:MSFT)
Free Cash Flow: $65.14 Billion
Number of Hedge Fund Holders: 258
At the end of Q2 2022, 258 hedge funds were long Microsoft Corporation (NASDAQ:MSFT) with stakes worth $56 billion. As of June 30, Fisher Asset Management is the most prominent shareholder in the software giant with stakes worth $7.3 billion. The investment covers 5.21% of Ken Fisher’s 13F portfolio.
Microsoft Corporation (NASDAQ:MSFT) is a dividend-paying tech company that has been growing its dividends for 17 years. As of September 7, Microsoft Corporation (NASDAQ:MSFT) is offering a forward dividend yield of 0.98%, which the company backs with free cash flows of $65 billion.
On August 11, Guggenheim analyst John DiFucci initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a $292 price target and a Neutral rating. DiFucci is bullish on the software giant’s ability to grow revenue and cash flows in the mid-teens percentage range, as the company’s industry-leading Azure and Office Commercial 365 experience strong demand.
Carillon Tower Advisers mentioned Microsoft Corporation (NASDAQ:MSFT) in its first-quarter 2022 investor letter. Here is what the firm had to say:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft Corporation (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
2. Alphabet Inc. (NASDAQ:GOOGL)
Free Cash Flow: $65.18 Billion
Number of Hedge Fund Holders: 191
Alphabet Inc. (NASDAQ:GOOGL) joins Microsoft Corporation (NASDAQ:MSFT) as one of the world’s largest cloud services providers. With accelerating cloud adoption, Alphabet Inc. (NASDAQ:GOOGL) will be able to generate robust free cash flows in the foreseeable future. As of September 7, Alphabet Inc. (NASDAQ:GOOGL) has free cash flows of $65.18 billion and is one of the top cash-rich stocks to buy now.
Wall Street sees material upside to Alphabet Inc. (NASDAQ:GOOG). On August 3, Tigress Financial analyst Ivan Feinseth raised his price target on Alphabet Inc. (NASDAQ:GOOG) to $186 from $183 and reiterated a Strong Buy rating on the shares. Feinseth is bullish on the company’s Cloud and Search business segments and its expansion and position in the artificial intelligence vertical.
At the end of the second quarter of 2022, 191 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOGL) and held stakes worth $22 billion. Of those, TCI Fund Management was the most prominent investor in the company, with stakes worth $5.4 billion.
Arch Capital named several companies, one of which was Alphabet Inc. (NASDAQ:GOOG), in its second-quarter 2022 investor letter. Here is what the firm had to say:
“In May we decided to buy Alphabet Inc. (NASDAQ:GOOG) (parent company of Google, YouTube, and Android). Our thesis was simple. Alphabet has billions of locked-in users around the globe with businesses like Search, Maps, and YouTube that should grow in-line or faster than worldwide GDP. With all the cash these businesses generate, management is able to reinvest in Google Cloud, Other Bets projects like Waymo, and return cash to shareholders via share repurchases. At an enterprise value-to-free cash flow (EV/FCF) of around 20 at the time of our purchase, we believe this sets up shareholders for low risk 15%+ returns over the next five years.”
1. Apple Inc. (NASDAQ:AAPL)
Free Cash Flow: $107.58 Billion
Number of Hedge Fund Holders: 128
On July 28, Apple Inc. (NASDAQ:AAPL) announced market-beating earnings for the fiscal third quarter of 2022. The company reported earnings per share of $1.20 and beat expectations by $0.04. The company’s revenue for the quarter amounted to roughly $83 billion. As of September 7, Apple Inc. (NASDAQ:AAPL) has trailing twelve-month free cash flows of $107.5 billion.
Wall Street is bullish on Apple Inc. (NASDAQ:AAPL). On August 29, Wedbush analyst Daniel Ives reiterated his $220 price target on and an Outperform rating on the stock. On September 6, Credit Suisse analyst Shannon Cross reiterated her buy-side Outperform rating and $201 price target on the stock.
At the end of the second quarter of 2022, 128 hedge funds disclosed ownership of stakes in Apple Inc. (NASDAQ:AAPL). The total value of these stakes amounted to $182 billion. As of June 30, Berkshire Hathaway owns more than 894.8 million shares of Apple Inc. (NASDAQ:AAPL) and is the most prominent shareholder in the company. The investment covers 40.76% of Warren Buffett’s 13F portfolio.
Wedgewood Partners mentioned Apple Inc. (NASDAQ:AAPL) in its second-quarter 2022 investor letter, Here is what the firm said:
“Apple Inc. (NASDAQ:AAPL) grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple Inc. (NASDAQ:AAPL) is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
You can also take a look at 10 Best Growth Stocks to Buy and Hold for Several Years and 10 Best Dividend Growth Stocks to Buy Now.
