You can, umm.., not quite wear them. But almost! The heat is on for the next big thing that will replace your computer, your smart phone, your tablet, your watch, and even your glasses. Saturday Night Live’s skepticism about Google Glass not withstanding, some form of wearable technology will replace your favorite device. And it’ll happen sooner rather than later.
It’s possible that a teenager yet to get a driving permit is conjuring up ‘the’ prototype of the 21st century in his parents’ basement. Independent companies like Pebble (smartwatch) have used Kickstarter to raise over $10 million in funds and are runners in the race for wearable tech as well. But the form factor that will save our thumbs might just as easily come from one of the giants out there already investing its R&D in chips and sensors. Google Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT) are all in the race. A company’s balance sheet and income statements can still tell us if it’s putting its money where its mouth is, so to speak. And we can learn what the market thinks of all the hype by checking out a company’s relative earnings growth trend compared to the market’s expectations for long term growth.
Odey's Brook Absolute Return Fund was up 10.25% for the third quarter, smashing the MSCI World's total return of 2.47% in sterling. In his third-quarter letter to investors, which was reviewed by ValueWalk, James Hanbury said the quarter's macro environment was not ideal for Brook Asset Management. Despite that, they saw positive contributions and alpha Read More
Download the full Fundamental Analysis for Google Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ: MSFT) below:
Capital Investment Strategy
Of our 3 hot tech stocks we think that Google may be over-investing while Apple has levels of capital investment appropriate given its growth. Microsoft however seems to be under-investing in a business with above median returns. Why?
Google Inc. (NASDAQ:GOOG)
Wearable Technology: Google Glass (Would you wear it? Tell us)
Google’s annualized rate of change in capital of 29.0% over the past three years is greater than the peermedian of 23.3%. However, this investment level has only generated a peer median return on capital of 17.6% averaged over the same three years. This median return on an above median capital investment suggests the company is either over-investing or betting on the future without any immediate returns.
Apple Inc. (NASDAQ:AAPL)
Wearable Technology: Smartwatch, Smartshoes (Have you tried one? How did it go?)
Apple’s annualized rate of change in capital of 61.9% over the past three years is higher than its peer median of 23.3%. This investment has generated an above peer median return on capital of 40.5% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.
Microsoft Corp. (NASDAQ: MSFT)
Wearable Technology: Surface Watch (Will its translucent aluminum design win over the iWatch?)
Microsoft’s annualized rate of change in capital of 20.0% over the past three years is around the same as its peer median of 23.3%. This investment has generated a better than peer median return on capital of 33.3% averaged over the same three years. The greater than peer median rate of return suggests that the company may be under investing in growth. Should the R&D labs of Microsoft get a little more love considering what they are delivering for the company?
It turns out the market sees superior growth prospects for Google but has questions about Apple’s long-term strategy. The market also sees superior growth for Microsoft. Surprised?
Find out Why!
And the hot tech stock winner is?
Probably that child in the basement! And the first trillion dollar IPO? It is likely that wearable technology will compete closely with devices that deliver augmented reality by other means. Projectors and tablets with 3D super sized screens as well as embedded chips and sensors. We’re planning on taking a look at some of those stocks in the future. Sign up for our blog updates if you want to read future articles!