Three Stocks that Look Attractive in Today's Market Environment

Apple Inc. (AAPL)

With its vast ecosystem of products and services, Apple exemplifies the blend of innovation and consistency that appeals to both consumers and investors. Its stock resilience is attributed to several core strengths:

Apple's sustained investment in R&D has enabled it to stay at the forefront of technology, consistently unveiling products that captivate consumers and establish new revenue streams, like the Apple Watch and AirPods.

The burgeoning services sector, which includes the App Store, Apple Music, and iCloud, provides recurring revenue that complements its device sales. This segment has steadily increased its contribution to Apple's total revenue, signifying a lucrative diversification from the tech giant's traditional income sources.

Brand Loyalty and Global Reach

Apple's strong brand and customer loyalty make a competitive moat difficult for competitors to breach. With a global presence, Apple is well-positioned to weather localized economic downturns and capitalize on emerging market opportunities.

Apple's robust balance sheet, featuring a significant cash reserve, enables it to navigate economic trepidations with room for investments, share buybacks, and consistent dividend payouts. The stock price has declined about 15% since hitting its all-time high in December 2023 (see chart). The market appears to have priced in the most recent lawsuits facing Apple.

Millions of iPhone users whose older devices experienced slowdowns after software updates are set to receive a settlement payout from Apple. The tech giant will pay between Five hundred million to approximately 3 million users of pre-2018 model iPhones as part of a settlement related to the "batterygate" issue. This settlement allows immediate cash payments to affected customers who filed claims against Apple in 2020.

In addition to the batterygate settlement, Apple is facing legal challenges in the form of an antitrust lawsuit filed by the U.S. Justice Department and several states. The lawsuit alleges that Apple has created an illegal monopoly in the smartphone market by employing restrictive hardware and apps that lock customers into its ecosystem. The lawsuit claims that Apple's practices harm competition in the industry.

The technical shows that the RSI (relative strength index) moved into oversold territory in March 2024, making this bellwether stock oversold. (see chart) You can trade Apple on many brokers' forex trading app.

The Relative Strength Index (RSI) is a technical indicator that analyzes financial markets like stocks, forex, and cryptocurrencies. The RSI measures the magnitude of recent price changes to evaluate overbought or oversold conditions in an asset. The RSI is typically calculated using a formula that considers the average gains and losses over a specified period, usually 14 days. The RSI is plotted on a scale of 0 to 100, with readings above 70 suggesting an asset may be overbought and due for a price correction. In contrast, readings below 30 indicate an asset may be oversold and due for a potential price increase. Traders and investors use the RSI to help identify potential buy or sell signals based on the current market conditions.

Microsoft Corporation (MSFT)

As a diversified tech behemoth, Microsoft has firmly entrenched itself into the fabric of enterprise computing, cloud services, and personal computing software. It offers a compelling case for outperformance based on:

Microsoft's Azure has emerged as a formidable force in cloud services, second only to Amazon's AWS. As businesses migrate to the cloud, Azure's growth trajectory appears promising.

From its Office Suite to LinkedIn, Microsoft has a broad and diversified product portfolio that caters to various aspects of business and personal productivity, ensuring multiple revenue channels.

Microsoft's prudent acquisition strategy, underscored by purchases like LinkedIn and GitHub, has strengthened its competitive position and added high-growth potential segments to its core operations.

Microsoft is heavily investing in AI, a rapidly expanding sector, and its gaming division, including the Xbox ecosystem and game development studios, which position it firmly in the growing gaming market and further diversify its revenue. Microsoft announced its intention to acquire Activision Blizzard on January 18, 2022.

Activision Blizzard is a video game company that develops and publishes popular gaming franchises like Call of Duty, World of Warcraft, Overwatch, and Diablo. The company was formed in 2008 through the merger of Activision and Vivendi Games, and it has since become one of the world's largest and most successful video game publishers.

Microsoft's acquisition of Activision Blizzard significantly expanded its gaming domain, making it its third-largest revenue stream. In the third quarter (Q3), the net impact from Activision Blizzard contributed to a massive 51% increase in Microsoft's gaming revenue year over year. The gaming division saw profits reach a record $5.45 billion, an increase of $1.8 billion compared to the previous fiscal period. However, it's important to note that most of this revenue boost came directly from the Activision Blizzard acquisition. All other Xbox content and services netted a 4% loss during the same period11.

This acquisition has been a significant driver for Microsoft's gaming earnings, and analysts have attributed 61 points of the overall 62% increase in earnings for Xbox content and services to Activision Blizzard. While hardware revenue was down by 31% due to fewer consoles sold, the impact of Activision Blizzard remains crucial for Microsoft's quarterly earnings.

Prices are diverging with momentum, which is a positive sign. (see chart) MACD divergence is a concept in technical analysis that occurs when there is a disagreement between the direction of the Moving Average Convergence Divergence (MACD) line and the direction of the price of an asset.

There are two types of MACD divergences. An upward divergence occurs when the price of a stock or forex pair continues to move downward, but the MACD line forms higher lows. This trend indicates that selling pressure is weakening, suggesting a potential uptrend reversal.

A downward divergence happens when the price of a stock or forex pair continues to move higher, but the MACD line forms lower highs. This indicates weakening buying momentum, potentially leading to a reversal towards a downtrend.

Traders and investors commonly utilize MACD divergence to predict possible trend changes in the market. It is important to remember that these divergences are just one tool and should complement other technical indicators and analysis methods for enhanced decision-making accuracy.

Alphabet Inc. (GOOGL)

Alphabet Inc., the parent company of Google, commands an unrivaled position in online search and advertising. Its diverse portfolio of high-growth potential ventures places it among the most attractive large-cap tech stocks.

With Google Search, Google Ads, and YouTube, Alphabet has unparalleled influence over the online advertising market, creating a steady flow of revenue reinforced by its advertisement technology and analytics services.

Alphabet is more than just its flagship search engine; it owns many subsidiary companies under its other bets category, including Waymo in autonomous driving and Verily in healthcare, which promise future growth markets.

Alphabet boasts impressive financial health and is dedicating significant resources to expand its Google Cloud platform, directly competing with Microsoft's Azure and Amazon's AWS in the lucrative cloud computing market.

Positioning for Future Technologies: Alphabet is always at the pioneering edge of technological advancements, from artificial intelligence to quantum computing. This situation ensures it's thriving today and well-equipped to lead tomorrow's tech landscape.

Alphabet Inc. (parent company of Google) reported its first-quarter earnings on April 25, 2024, with a few notable surprises. Revenue Exceeded Expectations. Alphabet's Q1 revenue reached $80.5 billion, a 15% increase year-over-year. This surpassed the estimated revenue of $78.59 billion. Net Income Significantly Higher. Alphabet achieved a net income of $23.66 billion, significantly higher than the expected $19.1 billion. Earnings Per Share (EPS). The company delivered an EPS of $1.89, comfortably above the estimated $1.51.

A dividend program was initiated. Alphabet announced a new dividend program by declaring a quarterly cash dividend of $0.20 per share, payable on June 17, 2024. A stock repurchase authorization occurred. The company authorized an additional $70 billion in Class A and Class C share repurchases, highlighting confidence in financial stability and future growth.

The Bottom Line

While the dynamism of the market environment means that no investment comes without risk, large-cap tech stocks like Apple, Microsoft, and Alphabet offer a persuasive combination of stability, growth, and innovation. They have proven adept at evolving with changing consumer demands and technological developments. Given their strategic market positioning, financial robustness, and history of weathering market fluctuations, these three tech giants are well-placed to outperform in today's market, rewarding patient and forward-thinking investors.