How to Benefit From Record Technology Profits
If you've been paying attention to the stock market lately, you've likely noticed two things.
The first half of 2015 hasn't been great. The market's overall performance has raised eyebrows. At times, it has appeared as if the six-year bull market is running out of steam.
Yet the major players in the tech sector certainly aren't to blame.
They've been earning investors serious money.
Google just thrilled shareholders with a 15-percent surge. It was the largest one day increase for Google in seven years. It also came on the heels of a record earnings report. The tech titan's stock is now trading at an all-time high.
Amazon stock seems to be made of helium these days. It's up around 50-percent in 2015. Social giant Facebook has also reached new heights.
Apple, on the other hand, hit a bit of a rough patch recently. The much anticipated Apple Watch debuted to a mixed reaction. Recent stock performance has been sluggish. Yet the company's earnings report is just around the corner. Many observers believe it will beat estimates.
In fact, analysts queried by Thomson Reuters have predicted Apple will set record profits in 2015 -- potentially more than $52 billion. That would be the largest annual profit in history. Not Apple history -- stock market history.
We haven't even mentioned Microsoft -- another tech heavyweight awash in money. So things are clearly looking up for the alpha dogs of the Nasdaq.
Which raises a simple question: What are you doing to benefit from all of this?
The likely answer: not enough.
Big companies, bigger profits. So what's the drawback?
If these huge, pedigreed firms are breaking profit records left and right, what's the catch? Price is one obvious concern. These stocks can hardly be called bargains. Amazon, in particular, has a stratospheric valuation.
Yet "expensive" doesn't always mean "poor value."
Many of us have a surface-level grasp of new technology. Some of us lack even that. As a result, many investors have an innate distrust or skepticism of even the largest technology firms. That goes double for firms whose assets involve fleeting intangibles such as cachet or popularity.
We know what Coca-Cola does. We know what they sell. The same goes for ExxonMobil. Anyone can see the value in extracting oil from the ground. Technology isn't always so easy to process. The markets for these products seem fickle.
It's important to remember many of today's "safe and boring" dinosaur blue chip stocks were once new and novel. As technology and markets matured, the initial skepticism faded. Billions in profits rolled in.
Things happen faster these days. Facebook wanted to connect us with friends. Google wanted to give us more effective search. It didn't take long for both firms to discover their true value lies in advertising. Now they determine what we read, see and listen to -- while funneling our business to advertisers.
Apple was a somewhat niche computer maker. Now it's a company that extends its reach into almost every aspect of our lives. Amazon changed the way people shop. Microsoft changed the way people work.
Do these sound like firms going anywhere soon?
Or do they sound like this generation's version of IBM, Johnson & Johnson or Coca-Cola?
If you're building wealth long-term, you shouldn't invest in these tech heavyweights because of this year's profits. And you shouldn't bail out if next year's profits don't measure up.
You should invest because these companies -- valued as they are -- still have enormous potential for growth. There's absolutely no reason why you shouldn't reap the benefits.