2 Tech Stocks to Buy in April

Here are excellent opportunities for investors with new cash to invest. Here's why.

Daniel Sparks
Daniel Sparks
Apr 5, 2014 at 11:05AM
Technology and Telecom

Have new cash to invest? Here are two ideas: Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Not only are both stocks trading conservatively, but both companies look poised to benefit from top- and bottom-line growth in the coming years.

Microsoft and its new strategy
While in previous years Apple's success has always seemed to come at Microsoft's expense, an important shift in Microsoft's strategy has turned the tides.

The story used to go like this: While Apple built a mobile operating system empire with an onslaught of iProducts, Microsoft attempted to guard its Windows OS, as if it would someday magically rebound despite a declining PC market, declining Windows OS share among PCs, and a negligible share of the mobile OS market. Microsoft's refusal to accept the realities of the market forced investors to view the software giant's future with a dubious eye.

But the plot has changed. With Microsoft's recently appointed CEO bringing its Office productivity suite to the iPad for the first time, it's clear that the company will be emphasizing a multiplatform approach going forward. Finally accepting reality, Microsoft can now focus on the important task of bringing cloud services and software to customers no matter what device they're using.

Sure, shares are up about 30% since Microsoft announced former CEO Steve Ballmer was stepping down, but Microsoft stock still trades at just 15 times earnings -- not bad for a cash cow with gross profit margins that exceed 70%.

Apple and its new categories
Very rarely does Apple enter new product categories. The last two major new product categories were the iPhone in 2007 and the iPad in 2010. Both were obviously a wild success.

But now Apple CEO Tim Cook is saying the company has plans to launch new products in new categories in 2014. Even so, with the new products still unannounced and very few concrete hints in the rumor mill, there's still not much for investors to get excited about. Sure, there are rumors of an alleged iWatch, but details are scant.

However, given Apple's historical performance of entering new categories, it's safe to bet that a new-category launch for the Cupertino-based tech giant will be a success. That said, investors can take advantage of the potential upside in these new categories today before they are announced by buying Apple stock while it is trading at just 13.5 earnings -- a significant discount to the S&P 500's price-to-earnings ratio of 18. 

And limiting downside risk to Apple's stock is its massive cash hoard that is poised to continue sending dividend checks to investors and aid management in repurchasing more shares.

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The irrational discount to the market at which Microsoft and Apple trade make these market-leading cash cows a buy for long-term investors.