Markets hitting all-time highs again. Many of our stocks are catching momentum again this week too. Steady as she goes though.
I’ve got a few small trades I want to make, just to help balance out the portfolio and to put some money behind the places I think are most likely to move up next.
1. Invensense – This stock, part of our Drone Basket, has been rangebound around $23 or so since we added it. The company’s near-term business is being fueled primarily by their gyroscopic motion sensor technologies that they sell into consumer handheld devices like smartphones and tablets. I think they will be a huge direct beneficiary from the Drone Revolution, which is quietly becoming the most important invest-able trend for Revolution Investors like us. I’m going to add another 1/3 tranche to this position in common stock for my own portfolio today, bringing it up to a full position where I want it to be for now.
2. JDSU – The second part of our early Drone Basket, JDSU has been trying to break out and head above $15 a share and we’ve got some gains in it already. This company’s near-term business is being driven primarily by their fiber-optic-laser components, which they sell into equipment that Ciena, Cisco and Alcatel use to make their optical switches work. The business has long suffered from price wars with their competitors, but over the last couple years, the industry has finally consolidated to a point where margins are back on the rise, just as demand from carriers for optical switches is back and climbing. I’m less convinced that JDSU has a clear path to dominance in supplying Drones with geolocation components in a meaningful manner as I am in Invensense’s own pathway, but I like the risk/reward here and I’m going to buy a little bit more, a slightly smaller tranche than I am in INVN, for my own portfolio.
3. Sandisk – I’m not making any new moves in my long-held Sandisk common stock position. But I want to update you on the company’s fundamental analysis nonetheless. The company’s near-term business is being driven primarily by simple NAND flash memory sales, which are what your smartphones, tablets and many laptops and cable set top boxes use to store data. Sandisk has many patents and receives nice royalties from those patents from Samsung, Micron and others who also sell NAND flash memory components. But, Sandisk has been actively investing in creating ever better, newer ways of applying their NAND flash technologies to make enterprise networking and computing systems work faster and more efficiently. Their upcoming ULLtraDIMM solid state drive “closes the last performance gap in current storage infrastructures by placing flash (memory) as close as possible to the CPU (central processing unit) and applications,” SanDisk says. That is going to be a huge business, likely driving billions in new sales in coming years for Sandisk, and at higher margins than their existing businesses. I’m holding my Sandisk and continuing to receive my dividend payments, which are currently yielding 1% per year. I expect that dividend payments will climb over the next few years and I plan to be there along the way for a long while still, as this Revolution Investment that I used to recommend on my TV show when it was at $10, is still positioned for the trends ahead.
4. IBM – I think this company is facing a perfect storm and that the stock is headed lower, perhaps much lower from here. IBM’s services and consulting businesses are facing pricing pressures and cyclical pressures and their competitors like Accenture are really cutting prices to win new business. IBM should consider hiring their own consultants to figure out how to save their consulting and services businesses. Meanwhile, the move to the cloud has been completely missed by IBM, and Amazon, Google and to a lesser extent Microsoft have already established themselves as the “IBM of the Cloud”, to be clever about it. IBM’s smartphone and tablet strategy has been nonexistent and the company’s entire business model has yet to make any serious moves to get in front of the many important and growing Revolutionary Tech trends they could have worked on. I am going to add another tranche to my IBM short position in my personal portfolio here, and if the stock and/or the markets ever do start to crack lower, I’m likely to buy some long-dated puts in IBM at some point too. I guess I should give management here credit for moving away from punch card technology when it was time to let move on. Ha.