Several tech stocks have been dragged down by the recent crisis in Japan, and many investors are looking for ways to protect themselves against the fallout.
The country is one of the biggest consumers of semiconductors and is home to many electronic device makers. IDC estimates that Japan has accounted for just over 4% of worldwide PC unit demand in recent quarters.
"Given recent concerns over sluggish PC demand and excess hard drive inventory, even slight weakness from Japan could be problematic for both industries over the near term," writes Morningstar's Grady Burkett. "More important for the PC manufacturers, however, is that we are likely to see price increases and possibly shortages in some components required for PC production."
"In short, we expect most technology firms with global exposure to be affected in some way by this unfortunate disaster."
So how can you find tech stocks that won't be dragged down by the crisis? Look for financially strong tech firms that have solid competitive positions and generate solid cash flow throughout the business cycle.
All of the stocks mentioned below have significant cash holdings relative to their average quarterly operating expenses. In addition, all of these stocks have seen significant institutional buying over the last three months (data sourced from Reuters).
Smart money investors appear confident that these tech stocks have what it takes to get through supply chain disruptions -- do you agree? (Access free, interactive tools to analyze these ideas by clicking here.)
1. Sycamore Networks (Nasdaq: SCMR ) : Sycamore Networks develops and markets intelligent optical switches, multiservice cross-connects, integrated access platforms, advanced software, and mobile broadband optimization solutions. Most recent quarter cash and short-term investments at $432.88M vs. average quarterly operating expenses at $19.22M (i.e., Cash / Avg. OpEx ratio at 22.53, which means the company can pay its operating expenses for approximately 22.53 quarters without generating any revenue. Institutional investors currently own 17,780,999 shares vs. 17,541,706 shares held three months ago (+1.36% change).
2. Actions Semiconductor (Nasdaq: ACTS ) : Actions Semiconductor is one of China's leading fabless semiconductor companies. Most recent quarter cash and short-term investments at $207.78M vs. average quarterly operating expenses at $12.15M (i.e. Cash / Avg. OpEx ratio at 17.1, which means the company can pay its operating expenses for approximately 17.1 quarters without generating any revenue. Institutional investors currently own 5,540,405 shares vs. 4,126,797 shares held three months ago (+34.25% change).
3. Vital Images (Nasdaq: VTAL ) : The company's imaging technology is designed to help clinicians non-invasively visualize anatomy or pathology, assist in pre-procedural planning and facilitate post-surgical follow-up. Most recent quarter cash and short-term investments at $134.22M vs. average quarterly operating expenses at $15.27M (i.e. Cash / Avg. OpEx ratio at 8.79, which means the company can pay its operating expenses for approximately 8.79 quarters without generating any revenue. Institutional investors currently own 12,000,636 shares vs. 11,612,417 shares held three months ago (+3.34% change).
4. InfoSpace (Nasdaq: INSP ) : The company is a leading developer of metasearch products, focused on bringing the best of the Web to Internet users. Most recent quarter cash and short-term investments at $253.74M vs. average quarterly operating expenses at $56.43M (i.e. Cash / Avg. OpEx ratio at 4.5, which means the company can pay its operating expenses for approximately 4.5 quarters without generating any revenue. Institutional investors currently own 26,528,162 shares vs. 25,226,238 shares held three months ago (+5.16% change).
5. RealNetworks (Nasdaq: RNWK ) : RealNetworks creates products and services that make it easier for people to access and enjoy digital media on the devices and platforms they choose to use. Most recent quarter cash and short-term investments at $334.32M vs. average quarterly operating expenses at $106.33M (i.e. Cash / Avg. OpEx ratio at 3.14, which means the company can pay its operating expenses for approximately 3.14 quarters without generating any revenue. Institutional investors currently own 57,576,185 shares vs. 53,622,035 shares held three months ago (+7.37% change).
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
RSS Headlines
Fool UK