Tech Letter Archives - Mad Hedge Fund Trader

Three Rules for Jack Dorsey

I am Jack Dorsey's biggest fan.

If he has an entourage, I would like to be part of it.

Even if he just needs a chauffeur, I would be willing to drive for free just to pick up little pearls of wisdom percolating through his brain.

He is perhaps the biggest name outside the vaunted FANG group that is not Microsoft (MSFT) CEO Satya Nadella.

The special Jack Dorsey issue (click here for the link https://www.madhedgefundtrader.com/a-straight-line-to-profits-with-square/) gloating about his company Square was not a misjudgment.

I am supremely bullish on his other company Twitter (TWTR) too.

Like I said last time about Dorsey, do not bet against Jack Dorsey.

Rule No. 2 don't bet against Jack Dorsey.

If he has a heartbeat, then success will follow him wherever he goes.

Dorsey co-founded Twitter in 2006 and was sacked, later to return in a blaze of glory seven years later ala Steve Jobs.

Evan Williams, the other co-founder of Twitter, got rid of Jack after he found out Jack slipped out of work each day at 6 p.m. for drawing classes, hot yoga sessions, and fashion classes where he learned how to design mini-skirts.

Williams reportedly told Dorsey, "You can either be a dressmaker or the CEO of Twitter, but you can't be both."

Williams replaced Dorsey as the CEO of Twitter in 2007.

Dorsey's dismissal led him to Mark Zuckerberg's doorstep where he was practically hired at the Menlo Park offices but could not find a suitable role at the company.

What a legendary exclusion if there ever was one!

Out of options at the time, Dorsey summoned his inner genius and created a new company named Square (SQ) in 2009. Ironically, he was rehired at Twitter as CEO in 2015 and currently runs both companies at the same time.

Apparently, his dressmaking career died before it could take off.

Dorsey is such a stud, he does not even have an office or a desk at his corporate offices.

He simply roams around the office wielding an iPad solving problems that need solving.

He starts his day at Twitter and walks across the street to Square after lunch.

How convenient!

In 2015, Twitter was having growing pains. User growth stagnated in Q4 2015 at 305 million users, down from the 307 million users in Q3.

Management wrote an investment letter promising it will "fix the broken windows and confusing parts" and boy, did they.

Fast forward to today and Twitter just nailed down its second profitable quarter in a row. Monthly active users (MAU) topped 336 million in Q1 2018, up from 330 million in Q4 2017.

Management projects (MAU) to increase at a nice 6% per year clip.

The lion's share of the growth derives from the mass migration of advertisement dollars to social media platforms, the same reason why Facebook (FB) harvests spectacular profits.

Video content has transformed into a robust growth engine carving out more than half of Twitter's revenue.

This is something that never could have been envisaged in 2015. As the quality of broadband develops, more video will be splashed across its platform.

Twitter considers video as a vital part of the road map moving forward.

Video is a better way for advertisers to engage users. Plain and simple.

Summer projects to be an exciting one with the biggest entertainment every four years, the 2018 FIFA World Cup in Russia, set to invigorate Twitter feeds throughout the world.

America missed out on World Cup qualification on the last day of qualifiers because it could not salvage a draw against a second-string Trinidad and Tobago team.

It doesn't matter.

Eyeballs will be glued to the matches in Russia and the audience will vent, cry for joy, and express their emotions on Twitter feeds.

Live events energize Twitter feeds, and advertisers will be throwing money at Twitter to put themselves in the store window for targeted Twitter followers.

Twitter will stream every goal from the World Cup, which is a nice coup.

In total, Twitter has 30 live partnerships and hopes to expand.

MLB, Major League Soccer, and People TV are other live programming that will integrate with Twitter's live feed.

Twitter's total ad revenue is expected to grow by 6% in 2018, which is a nice feather in its cap compared to 2017 when revenue dipped by 6%.

As the pie for ad revenue grows, it will not be one winner takes all.

Facebook, Google, Amazon, and Twitter are strategically positioned to benefit from this mass migration to digital ad spend.

Twitter is a unique product that cannot be undermined. The platform is the mouthpiece for every notable person in their world to speak their piece.

No other platform gains this type of trust from the elite in the world.

That won't change anytime soon.

What's more, Twitter has morphed into a reliable news feed. Its nimbleness is reflected with breaking news flowing into the Twitter channels first, even before the traditional news media can get a sniff.

The agility of tech companies continues to be a huge competitive advantage versus the stalwarts of antiquity that move at sloth-like speeds.

Dorsey epitomizes this ethos by his systematic efficiency, making him view a corner office as a physical and psychological barrier to preventing him from success.

Financials back up my diagnosis. Total revenue increased last quarter 21% YOY.

Twitter has little exposure to data regulations as the data is posted in the public. It does not sell any individual personal information.

A year and a half of continuous double-digit daily active user (DAU) growth resonates with advertisers.

Twitter continues to enhance the core products and executes in fine fashion. This outperformance feeds back into the quality of products basking in advertisers' satisfaction.

Moving forward, expect video to extract a higher percentage of revenue because of the attractiveness to advertisers.

In addition, expect moderate growth from daily active users and more live events integrated into the Twitter platform.

Video has been a salient reason for the great success in the past year and a half. The Twitter management, led by Dorsey, has a great handle on the steps it must take going forward.

Jack Dorsey is the preeminent CEO of his day. A bigger problem is finding an entry point into Twitter or Square.

Granted, Twitter climbed from a low base after Dorsey was reinstalled in 2015 as the CEO. It took him a few years to figure out how to briskly execute and to harness the potential of Twitter.

Both companies have shot to the moon in 2018. Waiting for macro sell-offs to get into these stocks makes more sense than chasing the fumes.

Dorsey is on record saying Square will be bigger than Twitter because it speaks the language everyone understands - money.

Twitter, Square, and Jack Dorsey are the real deal.

Rule No. 3: Don't bet against Jack.

_________________________________________________________________________________________________

Quote of the Day

"You are the product on Facebook, Facebook is a data company by its very nature of mass surveillance, collective manipulation and hacking the attention economy for profit," - said cofounder of Apple Steve Wozniak when talking about Facebook's business model.

June 13, 2018

Tech Letter

Mad Hedge Technology Letter
June 13, 2018
Fiat Lux

SPECIAL ACRONYM ISSUE

Featured Trade:
(FB), (AMZN), (GOOGL), (NFLX), (BABA), (BIDU), (TWTR), (SNAP), (INTC), (QCOM), (VZ), (T), (S)

Special Acronym Issue

Tech Letter

The tech industry is infatuated with acronyms.

The two-, three- and four-letter acronyms of yore have been spruced up by a new wave of contemporary terms.

There are a lot more of them now and readers will need to absorb the meaning of each term to avoid our content seeming like a Grecian dialect.

The Mad Hedge Technology Letter will break down the relevant terminology that applies to the current tech sector.

This will aid readers in their pursuit of financial satisfaction.

FANG: Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (now Alphabet) (GOOGL)

Jim Cramer, the host of CNBC's Mad Money, coined this term as this quartet became such a force to reckon with, that they deserved their own grouping. Financial commentators and analysts often refer to the FANGs that ultimately represent the developments and destiny of large cap tech. Apple is sometimes grouped in this bundle with analysts adding a second A inside the acronym.

AWS - Amazon Web Services

The cloud arm of Amazon is its cash cow. Amazon invented this business out of thin air in 2006. It offers the ability for Amazon to operate its e-commerce division close to cost by plowing profits from its thriving cloud arm. AWS is the backbone to the whole Amazon operation. Without it, Jeff Bezos would need to rethink another genius business model because current and future success hinges on this one subsidiary. AWS is the market leader in the cloud industry, carving out 33% of the total market. Microsoft is the runner-up and saw its market share surge from 10% to 13% in the latest quarter.

GDPR - General Data Protection Regulation

Europe has been a stickler concerning individual data protection, and the American companies running riot with Europeans personal data has reached its climax. On May 25, 2018, new European regulations were implemented to give the user more control of handing out their personal data. Penalties for non-compliance are steep. Companies risk being fined up to 20 million Euros or 4% of annual worldwide turnover, whichever is larger. Facebook's Mark Zuckerberg now has a reason to behave like an angel. The least regulated industry in the world is finally experiencing the bitter regulation pill most industries have felt for centuries.

SaaS - Software as a Service

A software distribution model licensing software on a subscription basis. Instead of installing many of these software programs, many of them are available through the Internet on the cloud. Most subscriptions work on an annual basis, and this recurring revenue model has carved out additional income from companies that were used to paying a one-off fee for software. This model has been highly successful. Even former legacy companies have deployed this business model to critical acclaim.

AI - Artificial Intelligence

An area of computer science that strives to deploy human intelligence into machine simulation. The four main tasks it carries out are speech recognition, learning, planning, and problem solving. A.I. has been identified as a cutting-edge tool to fuse with technology products boosting the underlying performance creating massive profits for the participants. This phenomenon is controversial with the prophecy that robots might advance rapidly and turn on their inventors. As each day passes, A.I. is starting to infiltrate deeper into our daily lives, and humans are becoming entirely reliant on their positive functions to carry out daily tasks.

IoT - Internet of Things

Internet connectivity with things. This network will connect billions and billions of devices together. Your bathtub, thermostat, and razor will be armed with sensors and processors that reroute the performance data back to the manufacturer. Deploying the data, engineers will be able to enhance products with even more precision and high quality serving the end customer needs. 5G testing is ongoing in select American cities and new hyper-fast Internet speeds will make mass adoption of IoT products a reality.

5G - 5^th generation wireless system

This is the successor to 4G and is poised to increase wireless Internet speeds up to 20 gigabits per second. Some of the traits will be low latency, high mobility, and will be able to accommodate high connection density. This technology is crucial to the development of the next generation of groundbreaking technology such as autonomous cars that need a faster Internet speed to run elaborate software. The war to develop this technology with the Chinese has turned into a heated standoff. China is stubbornly bent on becoming the global leader of technology in the future, and the communist government views 5G as the keys to the Ferrari. U.S. companies Verizon (VZ), AT&T (T) and Sprint (S) plan to roll out 5G in 2019. Other key companies are Huawei, Intel (INTC), Samsung, Nokia, Ericsson and Qualcomm (QCOM).

BAT - Baidu, Alibaba, and Tencent

This trio is the Middle Kingdom's answer to America's FANG. The nine-year domestic bull market has been led by large-cap tech, at the same time China's economy has been fueled by Baidu, Alibaba, and Tencent. Baidu and Alibaba are tradable through American depositary receipts (ADR). Tencent is public on Hong Kong's Hang Seng stock exchange, the third largest stock market in Asia. These companies are all a mix and mash of functionality that covers the same broad spectrum of the FANGs. They are the best companies in China and are on the cusp of every single cutting-edge technology from A.I. to autonomous vehicles. The Mad Hedge Technology Letter does not recommend these stocks to our subscribers because the Chinese government is on a nationalistic mission to delist Alibaba and Baidu from America and bring them back home. Initially, Alibaba wanted to list on the Hang Seng Hong Kong stock exchange, but draconian rules applied to dual-listing made the company flee to America.

NIMBY - Not In My Back Yard

Local opposition to proposed development in local areas. Although not a pure tech term, the epicenter of the NIMBY movement is smack dab in the middle of the San Francisco Bay Area where all the premium tech jobs are located. Local opposition has made it grueling for any developers to build.

What's more, the expensive cost of land has made any new building a tough proposition. This explains the 10-year drought where San Francisco experienced not a single new hotel built. The dearth of housing has caused San Francisco housing prices to skyrocket to a medium price of $1.61 million as of March 2018. Exorbitant housing prices have triggered a mass migration of Californians fleeing the Bay Area in droves. The shocking aftereffects have put highly paid Millennial tech workers spending the bulk of their salary on housing or living in dilapidated shacks. The extreme conditions we are now seeing are forcing schools around the Bay Area to close in unison as young families cannot afford to stay. Tech companies have become public enemy No. 1 in the Bay Area as locals are desperate to maintain their current lifestyle but are finding it more difficult by the day.

MAU - Monthly Active Users

Favored by social media companies to measure growth trajectories. This is how Twitter (TWTR) analyzes the health of its user numbers delivering a narrative to potential investors by hyping up user growth. If investors value this metric, this allows companies to focus on driving growth at the expense of burning cash. Thus, emerging social media companies such as Snapchat (SNAP) run huge loss-making operations for the promise of future profits after scaling.

ARPU - Average Revenue Per User

Favored by maturing social media companies, particularly Facebook, which has already grown global usership to 2.2 billion. Once the emerging hypergrowth phase comes to an end, social media companies focus on extracting more income per user through targeted ads. Facebook and Alphabet have the best ad tech divisions in all of Silicon Valley. The business model has made Facebook an inordinate amount of money as advertiser's flock to this de-facto marketplace paying more for effective ads whose price is set at an auction. It's a vicious cycle that attracts more traditional advertisers because it is the only method of selling to Millennials who are addicted to social media platforms. Cord-cutting is accelerating this trend forcing advertisers to co-exist with the Mark Zuckerberg model.

There are many more acronyms in the tech world that need explaining and that is exactly what I will do. The Mad Hedge Technology Letter will be back with another slew of technical terms to help subscribers understand the tech universe.

_________________________________________________________________________________________________

Quote of the Day

"You can worry about the competition... or you can focus on what's ahead of you and drive fast," said Square and Twitter CEO Jack Dorsey.

June 12, 2018

Tech Letter

Mad Hedge Technology Letter
June 12, 2018
Fiat Lux

Featured Trade:
(THE NEXT INDUSTRY SET FOR DISRUPTION),
(BITCOIN), (DASH), (MONERO), (LITECOIN)

The Next Industry Set for Disruption

Tech Letter

Time after time.

Headlines leak into the public sensationalizing hackers and ruthless breaches of mass data.

It happens time after time.

To where do all these emails, phone numbers, and credit card numbers wash away?

Do they float off to data heaven?

Enter the dark web.

First, the deep web is part of the Internet that is not indexed by search engines.

You won't be able to populate these sites on a regular Google search or Bing.com (Do people still use this?).

The dark web is a small part of the greater deep web.

The way to access this part of the hidden Internet is to use a VPN (virtual private network) to connect to a specific server that facilitates the access to the dark web.

The last step is to download a specific Linux browser as a graphic interface tool to surf these sites.

In a 2017 report based on 2015 data from the Digital Society, eight countries were found with heavy usage of more than 300 Tor users per 100,000 Internet users.

Tor is the aforementioned Linux browser used to access the dark web. These countries and one territory with elevated Tor activity were in no particular order: Moldova, Monaco, Iceland, Liechtenstein, Seychelles, Cayman Islands, Luxembourg and Andorra.

The common link tying seven of these locations is their reputation as a hub for offshore capital.

Small, island countries have the propensity to attract capital by loosening regulation and becoming international financial centers.

Moldova is the only outlier. The high usage of Tor is certainly due to its close proximity, set adjacent to Ukraine, which is still bogged down in an atrocious war against Russian separatists in the southeast of Ukraine.

No doubt, the average person would rather not know what illicit products and services are flowing through the Moldovan conduit leading to the borders and territories of Ukraine and Russia.

These offshore capital hotbeds are using the dark web for targeted reasons.

The main products sold on the dark web are not for the faint of heart.

Illegal drugs of any ilk, hacking services, adult-rated content, and fraudulent documents is on the a la carte menu.

Effectively, this mysterious marketplace offers incentives for hackers to commit heinous crimes in order to sell on the information they desire.

To maintain anonymity, products are mainly transacted in cryptocurrency.

Bitcoin has been the crypto of choice for dark web vendors. However, its exorbitant transaction costs have propelled other cryptocurrencies into the main light, with Litecoin currently being accepted by about 30% of dark web vendors.

Bitcoin is in the process of being undercut by its digital brethren.

The dark web is the economic backbone to the existence of cryptocurrency, and any regulation on the dark web would hammer the price of its main flagship currency bitcoin.

The billions in arms' sales and illicit drugs compromise a meaningful chunk of bitcoin volume, and the ease of use and speed of transaction are important to time-sensitive deals.

Litecoin has grown in popularity - even with its lax security protocols - in Eastern Europe. It could be estimated that Ukraine is a focal point for dark web activity particularly in weapons and other war-related services.

Dash is another cryptocurrency finding favor with cybercriminal inner circles as it is easy to use.

A spike in demand for alternative currencies would hurt the price of Bitcoin that spiked just below the $20,000 threshold in late December 2017, only to reverse back to reality crashing to the $6,700 level.

Bitcoin is ensnared by the speed of processing the transactions.

Cybercriminals cringe because of the sloth-like transactional speeds.

Usually, the processing time is a few hours.

This shift to more exotic digital tender could explain part of the reason of the bitcoin crash.

Bitcoin could turn out to be the victim of its own success.

The overwhelming popularity has alerted enforcement to target bitcoin transactions because of the large volume.

However, it could be game over for bitcoin as alternative currencies offer criminals an added layer of anonymity because law enforcement agencies do not have the expertise or the resources to track every type of cryptocurrency around the world.

As of April 2018, the world played host to 1,565 cryptocurrencies, and the number is growing by the day.

Particularly, Monero has caught fire in Asia where bitcoin volume is highest and is ground zero of the bitcoin movement.

North Korean state-sponsored hacking teams are especially fond of Monero.

Monero does not even crack the top 10 of cryptocurrencies aiding North Korean operations flying under the radar.

No doubt North Koreans have branched out into other undetectable crypto assets that have higher degrees of stealth elements.

Proprietary software created by the North Koreans saw infected code successfully mine Monero on South Korean computers that rerouted the proceeds back to North Korea.

Crypto mining is the process of solving complicated math problems resulting in the creation of new coins.

Developers have praised Monero for being "super anonymous" and is one of the best currencies to avoid capital controls.

Monero has given life to North Korean hackers and its blockchain is intentionally made to be obscure.

It obfuscates the wallet addresses from where people send Monero, rendering it more anonymous.

A Monero transaction only takes 21 minutes to complete, giving cybercriminals a fast way to smash and grab and move onto the next deal.

Japan, hoping to be the unequivocal leader of the fintech and blockchain revolution, officially recognized bitcoin as an official currency in April 2017.

The cryptocurrency tax windfall is predicted to mint the Japanese government coffers by up to $10 billion in the 2017 fiscal year.

If this digital currency revolution has legs, Japan wants to be the leader in the field and has positioned itself to reap the rewards.

And with most businesses in this world, the migration toward technology is forcing anything and everything to become fully or partially digitized.

Currency is no exception.

China has outright banned cryptocurrency on the mainland, but the use case for Chinese citizens is strong.

Each Chinese citizen is allowed to convert a yearly quota of $10,000 into U.S. dollars from Chinese local currency as a way for the government to control the currency price movements.

This is a paltry amount for a country that has seen its elite enriched and a burgeoning middle class that wants to park its assets overseas in safe Western financial systems.

Cryptocurrency proved wildly popular in China by locals circumnavigating capital controls before the ban and proves that many countries rich and poor have a use case for cryptocurrency.

In the future, expect the Asian region to take the lead in cryptocurrencies. The bitcoin crash could get worse as a result of the disruption caused by lesser known cryptocurrencies with better technology and faster transaction speeds.

Bitcoin could be on the verge of going to zero, and its economic pipeline from the dark web could be spread out into thousands of untraceable currencies of which people have never heard.

Let's face it, if law enforcement is setting traps for bitcoin transactions, it is probably better to use one of the other 1,564 currencies at your disposal.

It does not take a genius to figure this out.

As for the Mad Hedge Fund Trader, to go that far out on the risk curve with a highly unpredictable and highly volatile digital currency that is based on no fundamentals is not my cup of tea.

There are so many better things to buy right now.

_________________________________________________________________________________________________

Quote of the Day

"It's probably rat poison squared," - said legendary investor Warren Buffett when asked about bitcoin.

June 11, 2018

Tech Letter

Mad Hedge Technology Letter
June 11, 2018
Fiat Lux

Featured Trade:
(HERE ARE SOME GREAT SECOND-TIER CLOUD PLAYS TO SALT AWAY),
(DOCU), (ZUO), (ZS), (MSFT), (AMZN)

Here are Some Great Second-Tier Cloud Plays to Salt Away

Tech Letter

The year of the cloud has been one of the most successful themes for the Mad Hedge Technology Letter since inception and rightly so.

The heavy hitters are knocking it out of the park with the top gangbuster firms facing no impediment to success.

As these firms crack on, it seems there is not a day that passes by where Amazon (AMZN) or Microsoft (MSFT) do not close up 1% for the day.

If you are feeling nervous and believe the top cloud plays are getting too frothy for your taste, even though they are not, it is time to look at alternative parts of the cloud ecosphere that could tickle your fancy.

The second-tier cloud companies focusing on a particular niche of the market is the perfect place to identify companies that are growing at higher rates than the top cloud companies in terms of revenue expansion.

Amazon, because of its sheer size, will find it harder to double its revenue in the same amount of time as cloud companies with annual revenue of just a few hundred million dollars.

Zscaler (ZS) is a cloud security company that I advised readers to buy on April,16, at $29 and after a blowout quarterly report the stock touched the $42 handle intraday.

This company is a solid buy, especially in light of the General Data Protection Regulation (GDPR) and a newfound, broad-based emphasis on Internet security that will usher in a new injection of cloud security spending.

Zscaler CEO Jay Chaudhry delivered a glorious quarterly performance and the only direction this company is going is up.

All told, Zscaler processes in excess of 45 billion Internet requests per day during peak periods.

It detects and blocks more than 100 million daily threats while performing more than 120,000 unique daily security updates.

The end result is far superior security than traditional outlets. That's the whole point.

The cloud security company was able to inspire business to a 49% YOY pace of growth and calculated billings were up 73% YOY to $54.7 million.

The quarter's success didn't stop there with operating margins gaining 9% YOY helping Zscaler go cash free positive for the quarter.

The type of security products it offers is part of an annual $17.7 billion market and rapidly expanding.

Firms are incentivized to adopt these products because reduced cost on bandwidth and lower network equipment costs benefit the bottom line.

A mobile dominant world is fast approaching, and Zscaler has positioned itself perfectly to take advantage of the new pipeline of business coming its way.

The slew of new signed contracts reinforces this trend.

The most prominent deals were with a Fortune 500 medical equipment company that purchased a bundle including a Cloud Firewall, Sandbox and Data Loss Prevention for 40,000 users.

It followed that up with a deal with a European bank that added the business bundle with SSL inspection and data loss prevention (DLP) for more than 70,000 users driven by the business moving to Office 365.

Zscaler kept going strong with another Fortune 500 tech company joining its lineup, integrating the transformation bundle for 20,000 employees and contractors just six months ago,

They were thrilled with the products, leading them to buy an additional 25,000 seats and now have all 45,000 employees served by Zscaler.

A global 500 IT services and products company in Asia went for the entry level professional bundle covering10,000 users in Q2.

It expanded the next quarter with the same bundle for more than 130,000 users domestically.

Forecasted revenue is expected to be in the range of $184 million to $185 million, substantially larger than the $126 million of revenue in 2017.

Once annual revenues start eclipsing the several billion-dollar mark, growth becomes tougher to grind out.

Zscaler is headed by an old hand and understands the market in detail.

The firm will be in a growth sweet spot for the foreseeable future. Subscribers who do not mind taking on the added risk could expect these investments to pay off many times over.

Another niche cloud company Zuora (ZUO) is performing briskly.

I recommended this stock the same day as Zscaler when it was trading at $20.50. The stock is up big, rocketing to $28.50 at the time of this writing.

Zuora is a company focused on software that helps companies manage their subscriptions business, which has been all the rage for tech companies.

The software as a service (SaaS) model has become the de-facto standard to bill for tech services, and Zuora helps automate and execute.

First quarter revenue surged 60% to $51.7 million.

Zuora's retention rate of 110% increased to 112%, demonstrating that existing customers buy premium add-ons and stick around in its ecosystem.

Zuora increased the numbers of clients with an active contract value greater than $100,000 by 6% to 441, resulting in a net add of 26.

Zscaler and Zuora are around the same size and could experience similar bullish price trajectories in the stock going forward.

DocuSign (DOCU), a digital signature software company, is another niche player whose services have been valuable in the business environment.

Instead of scrawling out your name with a quill and ink, clicking to sign makes the process faster than ever.

The stickiness of its services led Forbes to anoint DocuSign as the fourth best cloud company on the Forbes Cloud 100 list in 2017.

Last year saw DocuSign blow past the half a billion-number bringing in revenue of $518 million, up 36% YOY.

The lion's share of its business comes from its subscription business carving out $484 million in 2017, passing the $348 million in 2016.

DocuSign set an IPO price range between $24 to $26 in April 2018, and the stock has more than doubled to $58 today.

Do not fight against the cloud; embrace it like your lovable pet dog. There is no reason to short these stocks because chances are likely you will get badly burned on these ultimate buy on the dip stocks.

However, DocuSign has seldom even dipped, even in the face of a trade war, crushing dip buyers' dreams.

It has gone up in a straight line.

Only once since its late April IPO has there been a pullback of more than $1.50, and that happened in mid-May when the stock went from $45.50 to $43.

Remember, the trend is your friend.

Zscaler's 37% bump to its share prices after the earnings beat is why you want to get into this stock.

The moves up are legendary.

Zuora's earnings beat earned them a not-too-shabby 20% one-day return as well.

No matter how well Amazon does, there is no 37% up move in one day unless it finds the cure for cancer in a single pill form.

As Amazon and Microsoft grow stronger, so does the appetite for these niche cloud services.

The tide will lift all boats and choosing either a dinghy or a luxury yacht will stand you in good stead.

_________________________________________________________________________________________________

Quote of the Day

"I don't care about revenues," - said Cofounder and Executive Chairman of Alibaba Jack Ma.

June 8, 2018

Tech Letter

Mad Hedge Technology Letter
June 8, 2018
Fiat Lux

Featured Trade:
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
(XLV), (XPH), (XBI), (MON), (IBM), (GOOG), (AAPL), (CSCO)

June 7, 2018

Tech Letter

Mad Hedge Technology Letter
June 7, 2018
Fiat Lux

Featured Trade:
(THE NEW TECHNOLOGY PLAY YOU'VE NEVER HEARD OF),
(GM), (UBER), (WMT), (GOOGL)

The New Technology Play You've Never Heard of

Tech Letter

Welcome to the new cutting-edge high-tech play - General Motors (GM).

The tectonic shifts permeating through the tech landscape seem like there is no end.

Another blockbuster announcement hit the airwaves melding together a brand-new partnership between SoftBank and GM's self-driving unit Cruise.

SoftBank invested an eye-popping $2.25 billion into Cruise for a 19.6% stake, adding to its scintillating arsenal of big data assets focusing on transportation including Uber, India's Ola, China's DiDi, and Southeast Asia's Grab.

GM disclosed it will divvy up a further $1.1 billion into the deal.

The Mad Hedge Technology Letter has been an astute follower of the autonomous driving technology race because the technology will be the next proprietary technology to change the world, creating enormous windfalls for the few involved.

The timeline commences later this year, when Waymo, a subsidiary of Alphabet (GOOGL), rolls out a robo-taxi commercial service.

General Motors is right on Waymo's heels rolling out its own commercial service "sometime in 2019."

This momentous investment by SoftBank solidifies (GM) as the No. 2 industry player going forward.

This is a huge victory.

The historic shift symbolizes the next gap up in the technology movement.

Tech stocks have been on a tear of late leaving other equities in the dust.

Waymo was the first mover and confidently never relinquished the top-dog position while avoiding any big disasters along the way.

The unparalleled success of Waymo's self-driving unit has led analysts to put a valuation figure ranging anywhere from $75 billion to $125 billion.

GM paid a measly $1 billion for Cruise in 2016, which is peanuts in today's thriving tech landscape.

Analysts estimated the valuation of Cruise at $4 billion just before the SoftBank investment. The almost 20% stake for $2.25 billion puts the new valuation number over $11 billion, three times more than analysts initially speculated.

Tech acquisitions have exploded in 2018 and show no signs of slowing down.

The hallmarks of Waymo's operation hinge on safety-first initiatives, which went a long way to upholding its industry leader position.

The safety-second attitude led Uber to attempt to short circuit its way to the top from a position of weakness to ill effect.

Uber's technology failed, and the result of the Phoenix, Arizona, casualty was a suspended operation.

Game over.

To stick the blade cleanly through the back, Uber CEO Dara Khosrowshahi revealed that talks are ongoing between Waymo and Uber to add Waymo's technology to Uber's broker app service.

This revelation is interesting considering Uber infuriated Waymo. It means Uber will effectively recede itself from competing with Waymo in self-driving technology.

The company doesn't need to anymore and it burns too much cash.

The protracted court ruling revealed Uber had stolen trade secrets using poached Waymo engineers.

This time, it really is the nail in the coffin for Uber's self-driving technology.

It will change strategy and refine its core app that made them famous in the first place.

The SoftBank investment into Cruise has clear synergies with Uber.

If Waymo refuses to go into bed with Uber, the natural logical step would be for the GM Cruise technology to be integrated with the Uber platform since they are both SoftBank investments.

SoftBank's management will clearly push for this arrangement. It makes no sense to use the Lyft platform with the GM Cruise division.

The tie up with GM Cruise was the catalyst for Uber seeking "talks" with Waymo, knowing very well if talks failed, a backup plan was hatched and would be able to partner up with Cruise's technology.

This is the luxury Uber has now since it is part of the SoftBank umbrella along with the GM Cruise division.

This nullifies the existential threat Uber was anxious about as it is guaranteed a certain slice of the pie leading to material future revenue stream post IPO.

The SoftBank investment is a stamp of approval for the quality of GM self-driving technology.

SoftBank only invests in the most innovative firms.

The conundrum with legacy car companies is that the bulk of revenue is reliant on selling combustion-engine cars that will soon become obsolete.

Any large commitment to R&D, unfocused on its main profits levers, hurt margins. Investors do not buy American car manufacturers that operate at a loss.

Therefore, legacy companies are penalized for spending on new businesses that could be hit or miss.

They stick with their bread and butter through thick and thin because that is what investors expect them to do. This was why Walmart (WMT) sold off when it acquired a stake in Flipkart.

A certain type of Walmart investor would be aghast at this unexpected new direction and amount of dollars drained.

In support of Walmart, CEO Doug McMillon has been positively vocal about the pivot to tech and e-commerce.

It should not be a surprise.

Old technology gets swept into the dustbin of history. Examples are legion.

Let me explain why.

The shift from horse-drawn carriages to the automobile was an equally jaw-dropping development at the time.

Not all horse-drawn carriage manufacturers were able to make the massive leap from creating simple horse-carriage passenger vehicles to automotive vehicles with combustion engines.

When Abraham Lincoln was transported to the Ford Theatre the night of his assassination, he was rolling in a Studebaker horse-drawn carriage.

Studebaker, which was established in 1852 with $68 of capital and a tool belt, was the only top-notch horse-drawn carriage manufacturer to make the gigantic shift from horse-drawn carriage builder to automotive producer.

The other players shriveled up and waved the white flag.

Studebaker actually manufactured both horse-drawn carriages and cars from 1902-1920.

The company mutated again during World War II making military vehicles, M29, M29C, and engines for B-17 bombers.

Financial mismanagement ruined the company. In 1963 it shuttered its South Bend, Indiana, factory and then went out of business by 1967, missing out on a chance to take on Uber and Waymo by about 55 years.

Such are the annals of history.

(GM) is the first American legacy car company to make the complicated transition from traditional American car producer to self-driving technology player.

And it could be the only one.

The deal will raise the price range for the Uber IPO planned for 2019. The (GM) cruise division will report financials separately from the rest of the (GM) balance sheet, which could be the precursor to spinning it out as its own company creating more shareholder value.

No matter how you dice this up, (GM) is the real deal. Investors voted with their feet causing the stock to explode skyward closing 13% higher on the news of the investment.

Buy (GM) on the next sell-off instead of chasing the bolted stallion out of the starting gate.

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Quote of the Day

"Indian software engineers are the best in the world; even in Silicon Valley, the best software engineers are Indians," - said CEO of Softbank Masayoshi Son