I am slowly building my Yandex YNDX long and my Pandora P short.
And meanwhile, let’s dive in on these stocks, including YNDX and P.
My favorite long-term stock right here, right now at these current levels is Google GOOG and/or GOOGL. Though I’ve been saying that 2015 could be a tough year for Google longs, I think Google’s Android and YouTube properties alone will be worth more than the entire Search and Desktop Ads business. Android’s basically free for developers to use in their wearables, smartphones and other still unthought of devices. With my expectations that the wearables market alone will be moving more than a billion units per year in the next couple years and several billion units a year there after, we’re talking about perhaps the largest market in the history of the planet. Many of your home appliances and car dashboards will be connected to the Internet and will use Android as their operating system to make up that whole Internet of Things marketplace in the future too. Controlling the operating system on billions of devices will be worth hundreds of billions of dollars ten years from now. This is Google’s game to lose and I don’t expect they will, not with the headstart Android has in having fully attained critical mass.
My favorite stock for the rest of 2015 is probably Synaptics SYNA. The second half of the year should be very strong for Synaptics as they have won several component supply contracts for Apple’s iPhones and Samsung’s Galaxy 6. The biggest concern for Synaptics bulls is that margins have been so strong in the last year or two as average selling prices have held up that the bar is very high for the future. That’s probably not a concern for the next two or three quarters at least, as SYNA scrambles to meet demand and keeps prices higher in that kind of environment. With earnings power well upwards of the $6.84 current sellsider analyst estimate — I’m thinking closer to $8 if those latest Apple and Samsung smartphones remain as hot as they have been — I think SYNA could be closer to $120 or so by the end of the year.
My favorite most speculative stock for the rest of 2015 is Yandex, the Russian Internet company, which has been absolutely crushed along with Russia’s broader stock market which has been absolutely crushed along with oil’s collapse from $100 a barrel this time last year to $50 a barrel. Since oil peaked in July 2014, Yandex has been a very high beta version of the moves in oil and the broader Russian stock index, as represented by the RSX Market Vectors Russia ETF Trust SBI below:
Yandex is up 20% since I flagged it as looking like it was finally bottoming around $14 or so in a recent column, and I think it could get right back over $30 if oil stabilizes in the $50s and the Russian economy/ruble stabilize along with it. I’m going to add Yandex to the Revolution Investing model portfolio and nibble on a little bit for myself too this week.
My single favorite short idea right now is Pandora Radio. Pandora’s got all kinds of headwinds including Congress about to take the artists’ side and force Pandora and other “Internet Radio” platforms to pay more to play the songs. Representatives Jerrold Nadler and Marsha Blackburn are working on a new music bill “the fair Play Act”. The act will require radio stations to pay royalties to artists, simplify royalty rate settings procedures for satellite and internet services which will include a single standard to set rates, and the bill proposes royalty payments for recordings prior to 1972 which are currently not covered under federal copyright rules. Then you’ve got Spotify, which like Pandora and Apple Music, has radio but unlike Pandora and Apple Music,it allows you to download and/or stream any song in their library, raising hundreds of millions of dollars at an $8 billion valuation in the private market. That’s more than twice Pandora’s market cap. I’d rather invest in Spotify than Pandora and I think Pandora’s headed back into the single digits in the next year or two. I’m adding a short position in Pandora to the Revolution Investing portfolio and will be shorting a little bit for my own portfolio too this week.