I lost sleep last night over our Dendreon bankruptcy trade. You know that I always tell you guys that if you’re losing sleep over a position or over your portfolio, that you’re probably too long. I don’t know why the GTAT bankruptcy trade we did last time returned us over a 150% in a couple days’ time vs. why this one’s not showing anything but pain so far. Maybe it’s because biotech bankruptcies get priced in differently than other sectors. Maybe it’s because this particular bankruptcy was priced in differently before the filing with the shorts having already mostly moved on. This is by far my tiniest position and it’s just a speculative gamble of a trade, but I don’t like losing sleep over stocks. That’s not the point of what we’re doing at all — in fact, it’s the opposite of what I’m trying to do, which is to build up a nice big return portfolio while minimizing risk and worry. I’ll give this DNDN another day or two but I am putting a stop loss on it at about 18 cents per share, where it closed yesterday. If it drops below that, I’m just going to take the small loss and move on. I’ll let you know if and when I do sell it for either a gain or a loss.
Now onto what butters our bread.
Revolution Investing Quote of the Week comes from @roddog101 over on Scutify who writes: “Sometimes no trade is the best trade, over trading can be your own worst enemy. Took me many years to get that.”
There are times to be aggressive and there are times to be patient. One of the reasons you pay for this subscription is because I’m here to help you remember to be patient. There are trillions of dollars moving around the economy each and every year. Likewise, there are sectors of the economy that are creating trillions of dollars of new value in the economy each and every year. As the App Revolution begins its new Wearables Revolution phase, it’s important to remember that as investors, we want to get our buckets out in front of those new river flows.
I’m quite serious when I write that the Wearables Revolution create a marketplace that’s measured in trillions of dollars. Let’s assume that the Wearables marketplace grows from its current unit sales figures measured in the tens of millions of dollars to there being just one wearable sold for every smartphone sold. That would mean that we’re talking about a billion wearable units sold per year. At an average price tag of just $200 each (which is probably on the low end for now, though by the time Wearable cameras and sensors and smartwatches go mainstream, the average selling price of each unit will come down quickly), we’re talking about a $200*1 billion units = $200 billion dollars in wearable device sales alone. Throw in the 50-75% cost of goods for each of those devices, and we’re talking about another $100 billion plus for the wearables supply chain — annually, just five years from now.
Now, throw in the dozens or hundreds of apps that will run on each of those wearables, and we’re talking about a trillion wearables apps being downloaded annually in just another five years too. There will be new app companies that will create hundreds of billions of dollars in market value for the Wearables Revolution phase, just as there was in the original Smartphone Revolution and then the Tablet Revolution phases of the over-riding App Revolution theme.
As usual, we will want to focus on the highest-quality, best-run, most-dominant companies as we Revolution Invest in the Wearables Revolution. I recently wrote a book called “25 Stocks for the Wearables Revolution,” (as a TradingWithCody.com subscriber, you can download it free at 25StocksfortheWearablesRevolution ) and the highest-rated stock in the book as the single best way to play the Wearables Revolution is….Google:
Price: $591.04 (Market cap $398.13B)
Net cash per share: $135.98
2014 Revenue: $62.29 Billion
Revolution Investing revenue growth rate estimates for next three years (annualized): 10%-15% 2014 Earnings per share (consensus): $6.26
Revolution Investing EPS estimates for the next three years:: $26.83, $31.82, $36.91
There’s a lot to be said for betting on wildly successful companies that are still run by their wildcat founders. Google’s long-term technological investments and willingness to gamble with wide ranging business plans and acquisitions is part of why they’ve maintained their dominance as the world have moved beyond their old core businesses of search and Internet ads. If they can maintain 20% plus topline growth with the wide margins of their businesses, there’s still a lot of upside to the stock as earnings growth and eventually, (yes) dividends for shareholders. Google Glasses are part of that vision, but more importantly for Google is its Android and Chrome platforms. Darn near every app, wearable and drone will be compatible if not outright built upon Google’s Android operating system. I consider the Google Unmanned Car technology to be a Drone Revolution business. It will likely end the low-end cabbie and limo and delivery businesses entirely and make city street grids incredibly more efficient as it reduces gridlock and butterfly effects on the streets. Probably will be at least 10 years before it’ll be mainstream in downtown NYC and downtown Rome, etc. The stock’s not cheap, but rarely has it been since I first bought it the day it came public at $40. When it does get overloved, it can get hit hard near-term, as it can when the markets tank too. Long-term though, this remains a must-own for Revolution Investors.
Revolution Investing Rating: 9/10
Stocks mentioned in the book that I’d give a Wearables Revolution Investing rating of at least 8/10 are, in order from least risky to the riskiest are:
If I may mix metaphors, maybe what we do should be called, “Trade like a Sea Lion” in honor of the star in this video. We want to swim fast enough to jump onboard a few Ambarella and Facebook speed boats to get our big payoff.