The market is finally coming around to what we have known for months, that the euro bailout was a failure before it began. Just look at how the euro has sunk against the Dollar since Greece forced bondholders to take a haircut back on March 9th.

We’re probably due for some kind of a Euro bounce that commentators who’ve never traded anything in their life other than business cards will ascribe to the problem being fixed.  But don’t be fooled.  The conversation has now rightly shifted to Spain.  There ain’t no German bailout fund large enough to actually take care of what needs taking care of in Spain, which is why their borrowing costs have spiked above 6%.  Greece’s GDP is around $300 B, while a single state in Spain is ~$240 billion. So instead of any solution, bet on the bankers siphoning more public money i.e.  the $24 billion recapitalization of Bankia.

Things are bad and about to get worse.  I have a killer business plan for someone with guts. Set  up a retail shop in London called “We Pay Pounds”. Wait for the euro to collapse and for all eurozone nations to go back to their national currencies.  British citizens will sell your their Spanish vacation houses for 1/10th of today’s prices (which are already 1/3rd of peak prices) because they are personally overleveraged with credit card debt and can’t even rent the house out because they’d be getting payments in some weird Spanish currency that didn’t even exist three months ago but all their liabilities are still in pounds or euros.  Oh, and they’ll all be heading for the exits at the same time, depressing prices even further.  You’ll have a line out the door.

Enough with the macro talk for now, let’s chat about the Revolution Portfolio.  Today I’m adding one name and letting an old one go.  Let’s start with Riverbed, which I’m selling.  It’s been an ugly year for Riverbed, but as I said five years ago when I first bought the name , RVBD’s story is about the next ten years not any ten month period.  And I hope that you were trimming exposure in the $40s when I said the valuation was getting stretched.  Plus I trust you read what I republished from TradingWithCody.com about how to trade Riverbed’s calls last July, so you’re up even more in the name.   Letting this one go about 50% higher than where we bought the common, and will revisit if it gets cheap again.

We’re replacing Riverbed with Juniper, a tech name that has  been beat up by every analyst out there and is down more than 50% in the last year. JNPR has a market cap of ~$9.2 billion and earned a little more than $300M last year on $4.38 B in revenue.  Their liquidity is great even if the Europe collapses. They have a ton of  net cash on hand at about $2.5 billion.  I like Juniper right now for two reasons: Wall Street hates the name and there is a build out of video delivery capacity underway unlike anything we’ve ever seen.

Contrarianism itself isn’t enough to get long a stock but the hate around Juniper is so visceral that it just begs you to take a look.  There have been seven analysts downgrades since April of last year and the only upgrade was the RBC Capital Markets analyst taking his rating back up to where it was from his downgrade four months prior to that.  When I survey my hedge fund friends I get the same kind of responses every time: “stock’s a dog”, “dead money”, “don’t know the name but nothing positive on bloomberg, hey what’s up with land in NM”.   But what I hear from the customers and servicers of Juniper products is a totally different story. You can read some of this for yourself in Juniper’s latest earnings call.  Here’s EVP Stefan Dyckerhoff,  General Manager of the Infrastructure Products Group on April 24th:

We are pleased to have the first full fabric deployments running in live production. Those deployments include Qihoo 360 in China and Australia-based Oracle. In Q1, we also had a QFabric win in Europe at Jan Yperman hospital in Belgium. Customer feedback overall is good, and we are encouraged with the pipeline we are building.

So overall in switching and fabric, we are pleased with the progress. We are seeing success in data center and campus, and our architectural innovation is gaining customer traction.

Juniper’s infrastructure group enables companies to deliver content, and I expect huge revenue growth of the next few years as companies race for consumer’s mobile consumption dollars.  We’re seeing a huge boom in data centers and network buildout from the likes of Apple who are willing to spend billions of dollars to make sure anyone with an iDevice has iAccess to the iCloud at anytime.  Check out this headline about the power plant Apple is building to service their North Carolina data farm:

Apple plans nation’s biggest private fuel cell energy project at N.C. data center

North Carolina will be home to the nation’s largest private fuel cell energy project, a nonpolluting, silent power plant that will generate electricity from hydrogen.

Fuel cells generate electricity through an electro-chemical process and are compared to batteries that give out power as long as they have a source of hydrogen.

They are exorbitantly expensive and in the past have been used only in experimental realms, such as NASA moon launches. But in the past decade the price has been coming down, and commercial projects have been proliferating in California, a state that offers an incentive program to cover roughly half the cost of the cells, said Shane Stephens, manager of research development at the National Fuel Cell Research Center at the University of California in Irvine.

Apple’s capex on just keeping the lightbulbs on is a canary in the coal mine of just how much they are going to spend to keep the content flowing.  And Juniper is going to be a big, direct beneficiary of that spending.