- Cash rules during periods of risk
- Microsoft will survive and thrive
- Apple could go shopping
During risk-free periods, the phrase “Money is king“You always come out of the closet because you believe money is more valuable than any other form of investment tool in times of crisis. Cash buys food, goods and services, and when the tokens run out, cold cash goes a long way. The value of fiat currencies is a topic for another coin, but these days, many investors want to have money instead of stocks in late February, when the stock market hit its last record high.
The global pandemic has wreaked havoc on the markets of all asset classes. In late February and throughout March, the bullish equity market turned into a roaring bear. Coronavirus infections exceeded the million level last week and, unfortunately, deaths continue to rise. The decade-long bull market was fatal to COVID-19. The trend that lasted from 2009 to February 20, 2019 was stopped by a deflationary spiral that had not been observed in the United States since the 1930s. While bankruptcies will increase in the weeks and months to come, these cash-rich companies with stable sources of income may be able to emerge even more. Microsoft (MSFT) and Apple (AAPL – Get Rating) the two had a lot of money at the end of last week.
Cash rules during periods of risk
The United States and the world are going through the most difficult period since the 1930s. The two-week tally on the first unemployment benefit claims in the United States reached an incredible ten million last week, and the number will increase. People are concerned about their economic future and well-being, and businesses are struggling to survive. Individuals and businesses with large cash reserves are best placed to weather the current economic storm.
Microsoft Corporation (MSFT) with $ 1.17 trillion and Apple (ASPL) with $ 1,056 trillion, are two companies that have kept their status in the trillion-dollar market capitalization club. As of Friday, April 3, the S&P 500 index was 2,488.65, down 26.7% from the record of 3,393.52 reached on February 19.
Microsoft will survive and thrive
Over the period, Microsoft Corp (MSFT) stocks outperformed the benchmark.
MSFT hit a record high of $ 190.70 per share on February 11 and was trading at $ 153.83 on April 3, down 19.3%.
Source: Yahoo Finance
As the graph shows, Microsoft (MSFT) has an excellent track record of exceeding EPS consensus estimates. However, the current projection for Q1 2020 at $ 1.29 per share will be more than a challenge for the company. Microsoft’s software franchise will continue to position the company as a leader in the aftermath of the global pandemic as the world winds its way through financial rubble.
Apple could go shopping
While Microsoft has outperformed the global market since the peak in February, Apple Inc. (AAPL) mirrored the performance of the S&P 500.
The chart shows that Apple stock (AAPL) fell from a high of $ 327.85 on January 29 to $ 241.41 at the end of last week, a drop of 26.4%.
(Source: Yahoo Finance)
Apple also performed very well by beating consensus earnings estimates. However, projections of $ 2.42 per share in the first quarter will also be a target the company is unlikely to achieve. At the same time, the company holds a dominant position in the smartphone and hardware sector, as well as a robust range of other products and services.
Both Microsoft (MSFT) and Apple (AAPL) have significant cash flow to weather the pandemic. In addition, each company may find itself in a position to close more than a few good deals on acquisitions now that appraisals have dropped significantly. Remember that liquidity is king during any period of significant risk that depresses the shares of either company. Both companies are able to rise from the ashes and thrive in the years to come. Falling share prices for MSFT and AAPL should create good business for the future.
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AAPL shares were trading at $ 253.68 per share Monday afternoon, up $ 12.27 (+ 5.08%). Since the start of the year, AAPL has declined by -13.41%, compared with an increase of -18.15% in the S&P 500 benchmark over the same period.
About the author: Andrew Hecht
Andy has spent almost 35 years on Wall Street and is a sought after commodity trader, options expert and analyst. In addition to working with ETFDailyNews, he is a leading author on Seeking Alpha. Learn more about Andy’s background, as well as links to his most recent articles. More…