Home Stock list You can always find refuge in tech stocks: these 20 provide the safety net of very stable earnings

You can always find refuge in tech stocks: these 20 provide the safety net of very stable earnings

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Even though it is a recurring pattern, the daily routine of a stock market correction can surprise investors after a bull market.

This headline from The Wall Street Journal sums up the action so far in 2022, as investors flee some of the most speculative stocks: With rate hikes looming, investors dump stocks of companies that are losing money .

The Journal’s analysts concluded that “stocks of unprofitable companies in the Nasdaq Composite Index slipped while their profitable counterparts traded nearly flat.”

Below is a screen of technology companies in the S&P 500 SPX Index,
-2.03%
showing those who have had the highest average operating margins over the past five years. Such consistent profit generators could be seen as safer games when investors fear rising interest rates.

During the early stages of the coronavirus pandemic, federal stimulus and other efforts to help businesses stay afloat, and the Federal Reserve’s simultaneous decision to lower interest rates and raise the money supply, led to a huge flow of liquidity from the debt markets to the United States. shares.

And all that new money has fueled a frenzy of initial public offerings, including those bypassing the usual IPO process with quick offers through special purpose acquisition companies, or SPACs.

These stocks are included in the Nasdaq Composite Index COMP,
-2.93%,
which, as of 10:10 a.m. ET on Jan. 25, was down 2.9%, down 17% from its intraday high on Nov. 22. The S&P 500 index fell 2.6% for the session, down 11% from its peak on Jan. 4 and the Dow Jones Industrial Average DJIA,
-1.17%
was down 2.1% for the day and down 9% from its high reached on January 5.

Screen for Big Tech Profits

The Nasdaq is heavily loaded with tech stocks, and many of these companies are trading at high earnings as they are in their early stages. Many others are not yet profitable.

So the next screen starts with the 76 companies in the information technology sector of the S&P 500, then adds several technology players from the communication services sector, such as Netflix Inc. NFLX,
-4.82%,
Meta Platforms Inc. FB,
-2.72%,
Alphabet Inc. GOOGL,
-3.04%
and Activision Blizzard Inc. ATVI,
-0.63%,
which agreed to be acquired by Microsoft Corp. for $69 in cash, in a deal that is subject to antitrust review.

From the consumer discretionary sector, Tesla Inc. TSLA,
-2.35%
and Amazon.com Inc. AMZN,
-4.07%
were also added to the list, bringing the initial selection to 85 companies.

We looked at company operating margins for the last 20 reported quarters, using data provided by FactSet. A company’s operating margin is its profit per dollar of revenue after paying the cost of production, including labor and materials, but before interest, taxes, and certain one-time items that can distort the results.

Here are the 20 companies from our initial selection of 85 S&P 500 technology companies that have had the highest average operating margins over the past 20 years. The list also includes the minimum and maximum margins over this five-year period:

Society Teleprinter Average operating margin – 20 quarters Maximum operating margin Minimum operating margin

Visa Inc. Class A

V,
-0.82%

68.99%

73.10%

65.59%

VeriSign Inc.

VRSN,
-3.58%

67.57%

70.38%

63.84%

Netflix Inc.

NFLX,
-4.82%

60.83%

65.82%

54.97%

Mastercard Inc. Class A

MY,
-2.49%

58.35%

62.70%

51.85%

Fleetcor Technologies Inc.

FLT,
-0.67%

54.08%

58.01%

39.98%

Micron Technology Inc.

MU,
-3.00%

51.44%

66.99%

35.21%

Meta Platforms Inc. Class A

fb,
-2.72%

50.69%

63.25%

41.03%

Texas Instruments Inc.

TXN,
-2.60%

48.50%

56.11%

43.68%

Broadcom Inc.

AVGO,
-1.46%

46.47%

55.73%

40.40%

Intel Corp.

INTC,
-2.25%

44.49%

51.69%

38.29%

Microsoft Corp.

MSFT,
-2.93%

44.24%

51.75%

38.59%

Oracle Corp.

ORCL,
-1.86%

43.74%

49.02%

39.33%

paychex inc.

PAYX,
-1.95%

41.89%

46.81%

36.33%

Analog Devices Inc.

ADI,
-3.52%

41.13%

46.31%

27.66%

Skyworks Solutions Inc.

SWKS,
-3.18%

40.15%

43.52%

33.02%

Jack Henry & Associates Inc.

JKHY,
-2.56%

39.47%

43.77%

34.73%

Activision Blizzard Inc.

ATVI,
-0.63%

38.95%

47.78%

26.82%

KLA Corp.

KLAC,
-5.14%

38.81%

43.36%

31.72%

Fidelity National Information Services Inc.

SIF,
-1.92%

38.78%

45.21%

29.86%

Microchip Technology Inc.

MCHP

38.10%

42.67%

31.88%

Source: FactSet

A screen on a data item can only be a starting point for further research. You can click on the tickers to learn more about each company. Click here for Tomi Kilgore’s in-depth guide to the wealth of information available for free on the MarketWatch quotes page.

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