Financial markets were rocked last week by the collapse of Silicon Valley Bank, sparking fresh concerns that a US recession is closer than expected. And in these times of economic uncertainty and market volatility, investors should look to buy the stocks of companies with the highest quality balance sheets. The club’s big tech holdings — Google Alphabet ( GOOGL ), Meta Platforms ( META ), Apple ( AAPL ), Microsoft ( MSFT ) and Amazon ( AMZN ) — check that box. Amid Wall Street’s flight to safety during Wednesday’s choppy session, all five companies outperformed the S&P 500, which lost 0.7 percent. Alphabet was the biggest gainer of the group on Wednesday, climbing 2.3%, followed by Meta and Microsoft, which rose 1.9% and 1.8% respectively. Amazon added 1.4%, while Apple rose 1.3%. Zoom out this week, which has been colored by questions about the health of the U.S. financial system, and these five megacap tech stocks have been positive in every trading session — including so far Thursday. Indeed, the four best performing Club stocks for the week so far were Meta, Amazon, Alphabet and Microsoft. Apple is in ninth place. META 5D mountain Meta Platforms (META) five-day presentation. In some cases, company-specific headlines contributed to this strong performance. On Tuesday, Meta announced it was laying off an additional 10,000 employees, sending a message to investors that the social media giant is serious about its “performance year.” The stock, which has jumped 66% since the start of the year, closed up 7.3% on the day. But in general, due to the lack of a clear direction on the state of the economy and the banking sector, investors tend to park their money in safe assets such as US government bonds. Classic defensive sectors of the capital markets, such as utilities and consumer staples, also stand out as investors expect these companies’ top earnings to hold up relatively well in a slower economy. GOOGL 5D Mountain Alphabet (GOOGL) five-day performance. Investors targeting large tech companies, however, may find comfort in these stocks because of their financial health. Solid balance sheets matter to investors because a solid financial position allows companies to withstand whatever economic situation looms on the horizon. A strong balance sheet essentially indicates that a company has an impressive mix of assets – including cash on hand – and liabilities. The benefits of a strong balance sheet are numerous, especially when it comes to the piles of cash amassed by big tech companies. In addition to allowing companies to keep the lights on, it also allows them to invest in their business without needing to sell stock or raise debt. In times of economic upheaval, cash-rich companies can continue to invest in new products, technologies and innovations, while more debt-ridden firms may struggle to cope. After all, the Club’s mega-cap technology holdings have compelling reasons to own them for the long term. But in times of uncertainty like last week, they also have the kind of balance sheets investors want. MSFT 5D Mountain Microsoft (MSFT) five-day performance. (Jim Cramer’s charitable trust is long AAPL, GOOGL, META, MSFT and AMZN. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC, he waits 72 hours after a trade warning is issued before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH INVESTING CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
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Financial markets were rocked last week by the collapse of Silicon Valley Bank, sparking fresh concerns that a US recession is closer than expected. And in these times of economic uncertainty and market volatility, investors should look to buy the stocks of companies with the highest quality balance sheets.