Trade Alert – Social add and Bottom-up analysis on our long positions
First, the trade – I’m adding to Zynga and LNKD this morning, double the size of what was a very small position. It’s still just a small position. Remember that LNKD and ZNGA along with the larger position in Facebook is part of a basket of stocks I plan to own for a decade and which I therefore call the “Social Decade Stocks”.
Let’s work through a bunch of our long positions in the portfolio with some updated Revolution Investing analysis. It’s a good exercise to do this with all your stocks every few weeks or so.
Apple – The stock is stuck here at these levels as all those people and fund managers who loaded up on Apple at $500-550 are unloading. I’d predicted such action though I did think it’d get closer to $500 before stalling like this. The markets have also been toppy and pulling back of late and that’s also a factor in Apple’s recent stock price action. At any rate, the only thing that will get AAPL back to its all-time highs is the rollout of some new form factors for iOS 7. That is, wearable computing, watches, more improvement on interacting with your digital data and entertainment. Apple needs to get these new form factors out this year or they’ll start to suffer a Microsoft-like late-to-the-game fate and lose their critical mass in the mobile world to Android and Linux (and/or some other new platform we haven’t realized is about to break out yet).
Amazon – Amazon’s market cap is twice that of Ford’s and four times higher than that of CBS. Then again, CBS has had stagnant revenues of about $15 billion for years now as has Ford in the mid $30 billions. Meanwhile Amazon has doubled sales every couple years for years now and at $15 billion up from $7 billion just two years ago, there’s a reason for that outsized valuation. I think Amazon can still double or triple from here as they take share from Amazon and as their own Kindle platform becomes a de facto standard of its own, especially when they finally roll out their own Kindle smartphone. Amazon’s smart money management and huge market cap mean that they can pay more than any other company but maybe Apple, Microsoft, Google and GE.
Ciena – The telecom spending uptick is here and the carriers are scrambling to get their infrastructure caught up to end user demand as smartphones and tablets create exponentially more demand on the networks’ interior. Ciena’s got AT&T and other carriers locked into their system and I think $1 in earnings is possible for next year, which would blow away the current 83 cent consensus estimate.
Facebook – As Facebook’s HTC Home Phone failed as badly as Microsoft’s old Kin Phone did a few years ago, Facebook’s stock has been punished. There’s also ample evidence that young people are spending less time on Facebook than they did this time last year. But they’re still spending more time on Facebook than any other site on the planet by far. And the key to Facebook really is that they have to figure out how to generate 5 cents per user per day in sales to generate $18 billion in sales in three or four years, up from the $5 billion in sales they reported last year. That would likely generate up to $3 or more in earnings and if Facebook can deliver that in the next few years, we’ll be sitting on a $80-100 stock.
FirstSolar – The great consolidation in solar is upon us. And the yields and per-wattage efficiency of solar technology has never been better and it keeps improving still. My dad just had bought a new RV and had them throw in a 150-watt solar panel as part of the negotiations. That will keep his batteries charged and also will power the heater and TV for part of the night. First Solar is among the living and that makes it a great bet for the long-term. The stock is up huge since we added it but recall that it’s still down more than 80% from its highs a couple years ago when we were rightly short the solar sector at the top of its bubble.
FutureFuel – We are seeing increasing interest and viability in using the huge excesses of verdure and trees here in New Mexico and FutureFuel is a great play on that. The 3.1% yield remains attractive as does the growth prospects for this company.
Juniper – Like Ciena above, Juniper’s starting to see some serious uptick in demand from carriers around the globe who are scrambling to handle the Netflix, Hulu, YouTube, FaceTime, March Madness, and everything else on the Internet.
Intel – Intel’s huge investment in mobile technology R&D and equipment for the last few years is finally starting to pay off. They’ve got a history of leapfrogging their smaller competitors when they finally focus on one thing. Remember a few years ago when AMD was kicking Intel’s butt in server CPUs and taking big share in PC CPUs. Now AMD is trying to avoid bankruptcy. I think ARM CPU standard which is what the vast majority of smartphones and tablets are running on today is here to stay, but Intel’s going to have its place in mobile. The stock has popped since we added it just a few weeks ago to the portfolio but the yield is still nearly 4% and I’m looking to add to some Intel in my personal portfolio.
Nvidia – The stock is in a nice uptrend as the company rolls out their new gaming platform and other new mobile chips. We won’t know for a couple more quarters if the rollouts are successful so I wouldn’t be surprised to see this stock flounder around the $14-15 range for a while now.
Sandisk – The flash drive has now become the de factor standard for local data storage in PCs, smartphones, tablets, and increasingly in servers too. Right on cue, as we’ve been prepared for. Sandisk is at multi-year highs and I wouldn’t chase it here right now at $60 but I wouldn’t see it either. I expect we’ll see them start a dividend policy and they could easily afford a 3% yield or so, which would likely bring in a whole new shareholder base. I plan on holding onto a core Sandisk position for a long time still.
