5 Big Tech Stocks to Buy Instead of Facebook

Is Facebook Inc (FB) Stock a Screaming Buy or a Portfolio Destroyer?

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It’s been a rough two days for investors in social media giant Facebook Inc (NASDAQ:FB). The company’s disappointing second-quarter results caused FB stock to make its way more than 20% lower in after-hours trading on Wednesday, the firm’s largest drop since 2012. The FB disaster has also hit big tech stocks hard, with heavy hitters across the industry all suffering from the fallout. 

For those of us who didn’t expect such a steep fall, the FB loss is a tough pill to swallow. However, it’s important to look on the bright side and follow the advice of investment guru Warren Buffett, “Be fearful when the market is greedy and greedy when the market is fearful.” 

Now a great time to snap up big tech stocks you’ve had your eye on because many of them have seen their share price tick down a few percentage points simply because of FB’s shortcomings. While FB’s poor guidance and uncertain future might cause you to back away from the social media firm, there are plenty of other tech names to scoop up while the sector is struggling.

Here are 5 big tech stocks to start with:

Big Tech Stocks to Buy Instead of Facebook: Micron (MU)

It Is Time to Buy MU Stock on Weakness

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One stock that has come back down to earth recently and should definitely be on your buy list is Micron Technology (NYSE:MU). The memory chip maker has been consistently delivering on quarterly reports and yet investors have kept their cool and remained cautious on the stock because of worries about the overall industry and trade tension with China.

Historically, chipmakers have had to battle against the drawbacks of operating in a cyclical industry. However, with explosive growth in technology, the slow periods that chipmakers used to deal with are shrinking. Tech’s hottest emerging trends like cloud computing, the internet of things, artificial intelligence and self-driving vehicles all require bigger, better, faster memory chips. That means that for the foreseeable future, demand for the chips that Micron produces should be relatively strong.

These worries, which appear to be overdone, have kept MU stock from becoming overly expensive. The stock trades at just 4.5 times its forecasted earnings — a huge discount to the rest of the tech sector. The stock won’t be this cheap for long, so it’s worth putting on your buy list. 

Big Tech Stocks to Buy Instead of Facebook: Intel (INTC)

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Another underestimated tech stock that should be on your watchlist is Intel Corporation(NASDAQ:INTC). While INTC stock didn’t feel much of a burn following FB’s poor results, the company’s share price has been languishing in the mid to low 50’s for the past few months as investors weigh up whether or not the firm has enough momentum to compete in the semiconductor space. 

It’s true that INTC’s shift into becoming a more data-centric firm has put it in direct competition with Advanced Micro Devices (NASDAQ:AMD), but that doesn’t meant there’s not enough room for two semiconductor businesses in the industry. Growth in the tech space over the next decade is likely to produce enough demand to go around, so although it’s worth acknowledging AMD as a threat, Intel looks financially and strategically prepared to cope in a competitive environment. 

INTC has several catalysts coming up that could push its share price higher — one being the firm’s second quarter results, due out on Thursday afternoon. Despite worries about AMD’s advances, Intel looks likely to deliver which will likely send the share price higher. Plus the company has yet to announce it’s new CEO, something that will likely drive the stock higher.

Big Tech Stocks to Buy Instead of Facebook: Alphabet (GOOGL) 

What Ad Revenue Will Tell You About the Future of GOOGL Stock

Facebook’s failure to deliver with its earnings hit FANG stocks hard, which explains why Google parent Alphabet Inc (NASDAQ:GOOGL) lost nearly 2% of its value overnight. Those losses have very little to do with the company’s growth prospects, though.

GOOGL delivered impressive Q2 results earlier, however, with revenue coming in higher than expectations and traffic-acquisition costs significantly lower. The firm was able to grow both its advertising business as well as it’s hardware, cloud-computing and mobile app arm, a good sign for future gains. 

What’s more, the European General Data Protection Regulation, the privacy protection law that weighed on FB’s results, could actually become an ally for Google according to the firm’s management. The law may actually strengthen Google’s position as a market leader, which could help GOOGL continue to grow its business. 

Big Tech Stocks to Buy Instead of Facebook: Garmin (GRMN)

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Wearables are a segment tech investors should be considering and while the obvious choice in this industry might be Apple, Garmin (NASDAQ:GRMN) is worth your attention as well. The firm surprised investors by successfully transitioning from being a navigation systems maker to being a competitive force in the smartwatch space, and the company ranks second to Apple in the wearables market.

Garmin has a loyal following and has kept its offerings focused on what its consumers are interested in- GPS. The company has proven that it can roll with the punches and its devices are classed as some of the most reliable on the market. 

Plus, Garmin offers shareholders something a lot of tech stocks don’t: a respectable dividend. GRMN stock currently pays out a 3.3% dividend yield that investors can rely on for the foreseeable future. Garmin’s payout ratio is just 65%, meaning the firm has plenty of cash to cover its dividend payments even if it goes through a rough patch.

Big Tech Stocks to Buy Instead of Facebook: PayPal (PYPL)

How Paypal Just Upended Square's Growth Plans

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PayPal (NASDAQ:PYPL) has had a bumpy year as investors tried to determine whether the payment processor’s separation from eBay (NASDAQ:EBAY) will have a sizable impact on the firm’s future growth prospects. The stock lost more than 3% overnight, which has brought the stock back below $90 per share.

While the eBay separation is going to hurt PYPL’s business, the damage isn’t going to be as catastrophic as some are predicting and the firm’s other initiatives will more than offset any eBay losses. PayPal has become a force to be reckoned with in the fintech space with 237 million active consumer accounts and 19 million merchant relationships. That huge reach is what makes PYPL so valuable. There’s a compelling case for both merchants and consumers to sign up because everyone is already using the service. 

Plus, there’s a lot of untapped potential in PYPL’s peer-to-peer platform Venmo. Right now the service is still in the early stages and has been eating up a lot of PYPL’s cash, but once it has been fully developed it will allow PayPal to keep a larger percentage of transaction fees and should be a real asset to PYPL stock.

As of this writing, Laura Hoy was long PYPL and FB. 

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2 “Fire Sale” Dividends Up to 10% to Buy Now (with upside)

One of the most reliable income-producing sectors has been hit hard over the past year, handing you a terrific shot at outsized dividend yields running all the way up to 10%.

In a moment, I’ll show you two funds that let you grab these huge income streams at a big discount—and one that looks like a strong buy but is way overpriced and headed for a fall. You’ll want to keep that one as far away from your portfolio as possible.

The sector all three of these picks come from is utilities—one of only two sectors of the S&P 500 that’s down over the past year (the other being consumer staples), with a 2.6% overall decline.

The fact that utilities and consumer staples are down tells us one thing: the market has a bigger appetite for riskier stocks on confidence that the economy is expanding, with GDP growth slated to reach 3% by the end of 2018.

But that confidence has resulted in some folks shifting cash away from so-called “boring” utilities—in effect throwing out the baby with the bathwater, as the old saying goes.

And for dividend investors like us, that adds up to a nice buying opportunity.

Because as you can see in the chart below, all four of America’s biggest utilities are having no trouble making their dividend payouts (the exception, Southern Company [SO], saw its payout ratio spike as it paid for an acquisition, but that’s quickly returning to normal):

Stable Dividends? Check.

And if you want more proof that these dividends are ironclad, take a look at the history:

Dividend Growth Is in Their DNA

That’s why utility stocks are often called “orphan and widow” stocks: they’re reliable payers you can buy, forget about and enjoy your dividend checks.

How to Grab Up to 10% Cash Payouts From Utilities Now

Unfortunately, this is where most people get hung up. Because despite their stable cash flows and rising dividends, utility stocks are far from easy to pick. They’re largely regional and, as a result, are exposed to demographic flows and local economic developments that are tough to track.

That’s why the benchmark ETF, the Utilities Select Sector SPDR ETF (XLU), is so popular.

With a 3.4% dividend yield, XLU’s payouts are nearly double those of the S&P 500. But the great news is that we can do even better, doubling XLU’s payouts again by digging into a high-yield corner of the market few people even know exists: closed-end funds (CEFs).

Right now, there are 9 utility-focused CEFs with dividends ranging from 6.4% to 10%, making them all intriguing options. But there are 2 in particular that should be high on your list.

Utility CEF Pick No. 1: This 8.6% Markdown Won’t Last Long

The first CEF is the Reaves Utility Income Fund (UTG), which is trading at an 8.6% discount to NAV after trading at a premium price for most of 2017. UTG gives investors a generous 7.3% income stream, or more than twice the payout of XLU.

That’s not the only thing UTG has going for it. This fund has crushed the benchmark ETF over the last decade, nearly doubling its total return while also giving investors a much higher payout. Bigger returns and a bigger income stream aren’t easy to find—but UTG offers investors both:

An Index Crusher

CEFs with this kind of outperformance are usually priced at a premium to NAV, and given that this one was priced at a premium itself just a few months ago, the time to make a move is now, before its current markdown bleeds away.

CEF Pick No. 2: More Risk, More Reward

In addition to UTG, there’s another utility CEF that is worth considering—although I’ll tell you upfront that there is more risk involved.

I’m talking about the Duff & Phelps Global Utility Income Fund (DPG), which is trading at a 10.6% discount to NAV.

I’m going to be honest: DPG doesn’t have a great history. It’s underperformed the index since its IPO in 2011, although a lot of that underperformance has shown up since 2014:

This Chart Is Ready to Flip

Why the poorer performance?

Well, remember back in 2014, when oil prices crashed? This was great for American utilities, which are net consumers of energy. But DPG is a global utility fund, and a lot of energy providers outside of America are also energy producers, so they’re much more sensitive to oil prices than their US cousins.

But oil is soaring in 2018. We’ve already seen West Texas Intermediate (WTI) prices jump 12.8% this year, and the strong economy probably means prices will go even higher. That could be a boon for DPG, as it benefits from higher consumption and higher oil prices.

Plus, DPG’s luxurious 10% income stream is nearly triple that of the index fund, so you’ll be well compensated by that hefty dividend while you wait for the fund’s discount to close and its NAV to rise.

Now we have to talk about another utility fund that has outperformed the market but isn’t the screaming buy it appears to be. Far from it.

An Overpriced Utility CEF to Avoid

The DNP Select Income Fund (DNP) is another utility CEF that has beaten XLU over the long term, as you can see here:

Another Outperformer

While DNP’s outperformance deserves to be rewarded, the market is going way too far, currently rewarding it with a 20% premium to NAV. Meanwhile, UTG—the first utility fund I told you about—trades at an 8.6% discount! Not only that, but UTG has beaten DNP for a long time, indicating that it is the superior fund.

The bottom line? DNP’s huge premium—and the downside it implies—alone make this CEF a fund to avoid right now.

Why Wall Street Ignores CEFs

At this point you may be wondering why you’ve never the media (and likely your own financial advisor) talk about the big yields and deep discounts in the CEF space, like the two I’ve showed you today.

The answer? They’d rather just talk about what’s popular—big-cap stocks or overbought ETFs. It saves them a lot of research, and they get paid the same amount anyway!

That’s too bad, because the totally inefficient CEF market is serving up some incredible deals on funds paying hugedividends right now, such as …

My No. 1 CEF Buy Now: 810% Gains and 8.4% Dividends in 1 Click!

My favorite CEF to buy right now has crushed the market since inception, with a monstrous 810% return!

1 Chart That Demolishes Conventional “Wisdom”

This is incredible—the kind of gain you might expect from, say, a small-cap tech stock, not a conservative fund like this one.

To give you a little more context, my No. 1 pick is a pharma fund run by some of the smartest minds in the business—researchers and doctors with “boots on the ground” experience zeroing in on the next billion-dollar-plus blockbuster drug.

That alone is reason enough to put this one on your short list.

There’s more, though. Because this dynamic fund also throws off an incredible 8.4% dividend, too!

You’d think a gain and a payout like that would at least get a few folks in the mainstream media talking.

No way. Not yet, anyway.

Why? For one, this low-key CEF is tiny, with just a $391-million market cap, so it gets even less attention than your typical CEF does.

Yet as I write, this fund trades at a 4% discount to NAV. That may not sound like much, but it’s traded at fat premiums MANY times in the past 5 years.

When it does so again, we’ll be locked in for fast 20%+ upside from here, on top of that massive dividend!

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