Mad Hedge Technology Letter
March 5, 2018
Fiat Lux
Featured Trade:
(IS THERE A TURNAROUND PLAY AT WESTERN DIGITAL?),
(WDC), (MSFT), (NVDA), (STX), (INTC), (CSCO), (SNAP), (GPRO), (APRN), (CRM), (NFLX)
There is a new investment theme that is starting to permeate Silicon Valley.
It hasn't gone mainstream yet but is starting to attract attention because of the spectacular numbers it will bring in.
I call it the "Legacy Turnaround Play."
It goes something like this. Find an ailing technology dinosaur from the Jurassic Period (i.e. the 1990's), infuse it with new management and technology, and the shares go ballistic.
The poster boy for the strategy is none other than the former beast of Redmond, Washington, Microsoft (MSFT), founded by my friends Bill Gates, and the company supervising adult, Paul Allen.
Up until the Dotcom bust, it looked like Microsoft would rule the universe forever. Almost two decades later, its Windows operating system still runs 70% of the world's computers.
The day Bill Gates retired from active management was the day (MSFT) went ex-growth. Steve Ballmer was never more than the custodian of a gigantic legacy business that went nowhere. The shares remained stuck in the doldrums for 15 years.
Also on that fateful day the Gates Foundation sold the bulk of its Microsoft shares, investing tens of billions of dollars into US Treasury bonds. I know this because I reviewed the fund's holding many years ago. It was one of the wisest investment decisions ever made.
Steve Ballmer mercifully retired in 2014, hiring Satya Nadella to replace him. The pick was controversial at the time because Nadella hailed from India.
However, he possessed a vision of The Cloud that was way ahead of its time and proved dead on correct. Since Nadella joined Microsoft, the shares have rocketed some 163%.
This has spurred a frantic search for the next Microsoft, and every legacy tech company is being put under a microscope to ascertain its possibilities.
Intel (INTC) and Cisco Systems (CSCO) are now in the running for "Legacy Turnaround" status, and their share prices are reacting accordingly.
The Silicon valley jungle telegraph has told me that another firm may be about to join its ranks.
That would be Western Digital (WDC). However, the burden of proof is still on the company's management.
You all remember the old Western Digital. Spun off from Emerson Electric Company, Western Digital was the world's largest manufacturer of chips for hand held calculators during the 1970s, the cutting-edge consumer technology product of its day. When the personal computer industry showed up, it moved rapidly into hard drives.
Since then, it hasn't really done anything new, except build bigger and faster hard drives in physically smaller sizes. The problem with that approached is that the world has been moving towards solid state storage now for years.
The hard drive is about to become one of the great dodo birds in the history of technology. Western Digital's shares are virtually unchanged in three years, completely missing the 2016-2018- tech melt up.
You can forget about buying Western Digital (WDC) for a quick-in-and out trade. HDD (Hard Disk Drive) sales are down a dreadful 5.6% YOY.
It was hard to identify a tech stock that didn't have a phenomenal year in 2017 unless it was tainted with terrible offerings like Snapchat (SNAP). The secular long-term growth story for technology is the crux of the bullish argument in equities.
A good chunk of Western Digital's business is derived from the declining HDD storage industry which is a continuing source of torment.
(WDC) is attempting to cross over into SSD (Solid State Drives) which is ripe for hyper-growth in tech storage. Gobbling up SanDisk in 2016 and Tegile Systems in 2017 were definitely positive steps in the right direction.
In 2014, HDD was a pristine $32 billion per year market, but sunk to $20 billion by 2017.
Begrudgingly, (WDC) dominate 40% of the HDD market along with Seagate (STX) who also control roughly 40% of market share.
HDD revenues still comprise the biggest portion of WDC's total revenue.
Once that number shrinks down to 30-35% then a resurgence in the stock could be in the cards and management can start beating the drums of resuscitation.
(WDC) sold off hard after last quarter's earnings first and foremost because of the bitter tussle with Toshiba who is mired in years of chaotic management and mislead investors.
Traders dumped the stock after finding out guidance for earnings per share between $3.20 and $3.30 down from the previous quarter of $3.95.
Making matter worse, (WDC) lost over $800 million last quarter. (WDC) undeniably have a few dilemmas to solve.
Contrarians can argue that (WDC) is cheap on a PE multiple basis. However, (WDC) has been cheap for the last 10 years with no multiple expansion and could still be cheap 10 years from now.
This company has shown zero EPS growth. There is a difference between cheap and great value.
Client Devices revenue for the December quarter increased by 9% YOY, primarily driven by significant growth in SSD's. Their Client Devices segment was down 1% QOQ because of the heavy drag of HDD devices.
One warning sign is how management obscures revenue segments by "client devices" instead of filtering them out into separate categories in the earnings report clearly stating SSD and HDD unit sales.
Management is inherently camouflaging the HDD segment headwinds. It appears less harsh to the novice investor to group HDD weakness with SSD strength.
Data has been created at a record rate worldwide and the value of data is increasingly fueled by advancements in mobile, cloud computing, artificial intelligence and the (IoT) Internet of Things.
The intense growth in data is ramping up demand for larger and more reliable storage infrastructure. To be on the wrong side of this momentum is a death knell especially if you consider tech investors are willing to pay such a premium for growth.
Unfortunately, Western Digital (WDC) utterly fails because it's eggs are in the wrong basket and there is no growth story. The rhetoric is mainly a legacy business that must worry about survival even though revenues are increasing and during a climate of global synchronized growth.
Investors love tech but only the right tech. The wrong tech are companies such as Gopro (GPRO), Blue Apron (APRN), or the Footlocker (FL) of video games, GameStop Corp. (GME) have defective fundamental pillars that should be discarded right away.
The growth percolating in the pipelines is across the board but not in legacy tech dinosaurs with a deficient business model.
The guidance for total gross margin next quarter is 42% to 43%, and although quite healthy, analysts believe margin growth has peaked and further improvement in total revenue is limited.
There are better options in technology with more exciting charts and clear-cut growth stories like Netflix (NFLX), which sport a parabolic chart and a long runway.
Tech is the poster child of growth, and any tech company not growing is not worth investing in.
There is a chance that (WDC) has put in a double top adding to the technically bearish sentiment.
If you look at the rest of your portfolio of tech names we have recommended they are most likely higher probability longs.
Even if you analyze a broad swath of tech from software services such as Salesforce (CRM) to hardware products like NVIDIA (NVDA), accelerating users/units and higher revenue with secular growth is the constant variable.
There is opportunity cost of owning stocks that are falling in a rising market. Stay out of Western Digital until positive clues surface concerning the turnaround.
And especially stay out (WDC) until there is visible momentum and incontestable technical support.
Remember that great companies beat on the bottom and top line sequentially then confidently raise guidance. (WDC) is not a great company, not yet anyway.
Mad Hedge Technology Letter
March 2, 2018
Fiat Lux
Featured Trade:
(WHEN WILL THE GOVERNMENT HAVE TO KILL A FANG?),
(FB), (AAPL), (NFLX), (GOOGL), (AMZN), (TWTR)
??
By now, we all have major over weightings of FANG's in our retirement portfolios. And the greatest threat to those holdings is the prospect of imminent government regulation.
The prospect of government involvement in the FANG's should therefore be more of just passing interest to us.
The relationship between large cap tech companies and the US government is not exactly a match made in heaven.
The hot button political topic of the day is how Russia used Facebook (FB) to influence the US presidential election. (FB) in effect lowered the drawbridge to allow our foreign enemies to come flooding in, and no one noticed until it was too late.
In fact, to say that government and tech are constantly butting heads would be an understatement. However, not all governments are created the same.
China's government has built a formidable moat around their tech industry, granting priority only to local firms and shutting out the rest. Notice that Alphabet (GOOGL) closed its offices in China five years ago.
Europeans have stuck with the school teacher approach by punishing their pupils individually. But the school itself has bigger sway in the grand scheme of things.
Broad based guidelines from the European Commission were handed down today dictating that Google (GOOGL), Facebook, and Twitter (TWTR) have one hour to remove unsavory content from their platforms, or else.
Keep in mind, these new protocols are "voluntary" and follow a series of other "voluntary" self-regulating precepts.
FANG's are still not accountable for anything posted on their platform and are thus insulated from liability. The notion that FANG's will self-police their own platform still pervades through official channels.
Fining FANG's appear authoritative enough to diverse political constituencies, but cash isn't a problem for FANG's. Each one is a mere slap on the wrist.
Preventing a FANG's unstoppable business model is the only solution and that will never happen.
Obviously, the E.U. have a sluggish grasp of how Fang's actually work.
FANG's are an entirely American made creation. Government, by and large, subscribing to the wonders of dynamic market forces, allowed the contest to play out in the trenches and not behind the scenes.
America's hyper competitive business model is also a graveyard littered with once promising tech companies, like MySpace, Napster, and Blackberry's (BB) mobile phone division.
The hope is that FANG model will continue to naturally evolve and self-regulate.
The big takeaway from government is that regulating big tech is a complicated issue. And government will deflect responsibility if pressured into destroying a Fang.
In essence, the net benefit of keeping the FANG's around could be greater than the net cost of getting rid of them for a sovereign nation, especially the consumer.
Today, FANG's are untouchable in cloud services, social media, search capability, e-commerce, advertising, tablets and mobile. The modern economy can't function without them.
Google and Facebook are observing and tracking every user's move, and that feedback is following through back to their reservoir of big data.
The colossal data profile they possess on each individual deduces users' hobbies, purchases, search trends, browsing patterns, location history, and loads more, even sexual orientation.
This probing system refines their hyper-targeting model, which has many unintended consequences, such as the ability to weaponize parts of the platform by rogue elements.
Fixing this problem is challenging and it's possible there are no good fixes out there at all. Jack Dorsey pleaded to users today to give suggestions on making Twitter a better user experience.
He knows the increased pace of weaponization on his platform will ultimately come back to haunt him as the CEO.
FANG's apply user data as inputs for evolving Artificial Intelligence (AI) consisting of a collection of filters. This check lists controls the content that pops up on to your screen based on the structure of finely tuned algorithms.
Google and Facebook (FB) offer the highest quality hyper-targeting in the world and advertisers pay for that quality.
If a negative unintended consequence transpires from a rogue algorithm, the FANG's have proved adept at paying lip service to the right actors to stave off the heat for another day. Kicking the can down the road seems to be their long-term strategy.
Complicating the mess is the fact that 100% of the blame cannot be directly pinned on an unknowing FANG if a team of nefarious hackers cause a ruckus from their computers in some distant land.
The fundamental idea of profit through data privacy and accumulation violently conflicts with the FANG's core business aspirations: hyper-targeted advertising based on increasingly intrusive personal surveillance. They will not change themselves if it means hindering their profitability.
Who would?
One challenge that the American government must hurdle is understanding the magnitude of the situation at hand. Do our politicians understand how to instill more algorithmic accountability and instill privacy policy transparency?
Effectively, playing Tech God is a slippery slope to go down. It's easier said than done, and there are many moving parts to this game. American big government is not ready to destroy a FANG in the land of free enterprise.
You can kiss the nine-year equity bull market good-bye if the government actually kills off Facebook or a Google!
The consensus view is the FANG's will continue to increase our standard of living.
Accelerating additional hyper-targeting, greater algorithmic favoritism, squashing competition and widespread erosion of adjacent industries. And most importantly for investors - higher profits and share prices.
Consumers have benefited immensely from all these free services. It's the competition that's complaining because they aren't FANG's themselves. Life must feel very unfair if you don't have the same tools as FANG companies.
Amazon was clever enough to take profits from their Amazon Web Services (AWS) division to bolster their loss-making e-commerce division. In the process, they crushed American brick and mortar retail.
Shareholders call this genius, while competitors and politicians call this a breach of anti-trust.
Any regulatory blow back that results in a dip of share prices should therefore be bought once the dust settles.
That day could be sometime in the far future, but there will be many twists and turns until we arrive there.
Investors need to ask themselves, does the government have the authority and the determination to ruin a FANG? The answer is no.
What the government is telling investors is they will dabble with the bare minimum of token regulation, but aren't ready to drop the guillotine on large cap tech. The long-term secular growth story is still intact albeit with occasional regulatory friction.
Every dip will be bought by investors queued up for years patiently waiting for an entry point, and the shares upside will be tapered by occasional regulatory headlines.
Regulation will never amount to more than that.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Yu'e Bao or "leftover treasure" in English has caught the attention of over 400 million Chinese investors.
This money market fund has exponentially grown into a $250 billion fund by the end of 2017, and is now the largest money market fund in the world!
This product isn't offered by Bank of China or another giant state-owned bank or financial enterprise, but Alibaba's (BABA) Ant Financial (gotta love those Chinese names).
Assets under management are up 100% YOY and it now accounts for a quarter of China's money-market mutual fund industry in just one fund.
These inflows coincide with the sudden migration into mobile payments. Common folk are comfortable with investing their life savings in these short-term instruments with a too big to fail, larger than life firm like Alibaba.
Yu'e Bao derives its funds from Alipay users, Alibaba's digital third-party platform, that allows consumers to pay for everything in life from theater tickets to utility bills.
Service is unified on a holistic graphic interface and users can easily divert their cash into this fund with a few screen taps on their app. Yu'e Bao's ROI offer a 7-day annualized yield of 4.02%, down from the introductory annualized rate of 6.9% around the launch in 2013.
Yu'e Bao's short-term yield outmuscles the 1.5% interest rate on one-year Chinese bank deposits and the 3.6% yield on 10-year Chinese government debt.
Weak banking regulation has spawned a mammoth FinTech industry in the Middle Kingdom. Only one yuan (16 cents) is enough to create an account and considerable retail flow has rushed in.
China has catapulted ahead of the rest of the world emerging as the leader of global FinTech (financial technology) innovation. The pace, sophistication, and scale of development of China's FinTech has surpassed the level in any other developed countries.
The country's digital metamorphosis has enhanced e-commerce, payment systems, and connected logistical services. The Chinese discretionary spender for the past decade has been the deepest and most reliable lever of global growth.
Mobile third-party payments in China, 90% cornered by Tencent's Wechat and Alibaba's Alipay, are estimated to reach a lofty $6 trillion in revenue by 2019, more than 50 times that of the US.
These omnipresent payment systems are now deeply embedded into the fabric of Chinese society. Its commonplace to witness homeless people on Shanghai subways waving around a scannable image for Wechat or Alipay money transfers instead of physical cash.
Even in rural farmlands, shabby convenience stores prioritize digital currency and sometimes don't accept paper currency at all. Yes, China is beating the US to a cashless society.
Digitization is changing the competitive balance, and global banks must embrace large-scale disruption caused by big tech platforms.
Banks in China regard these companies as potential collaborators resulting in a net positive long-term infusion of enhanced products and services.
Agreements have been forged between the Bank of China with Tencent, and the China Construction Bank has linked up with Alibaba.
China has incorporated the technical power of AI and machine learning into its Fintech platforms at every opportunity. Robo-advisors are also making inroads, creating a bespoke financial program for the individual.
This trend has so far failed to go viral in America, where individuals still prefer plastic cards or even paper cash. E-commerce clocked in a paltry 9.1% of total US retail sales in the third quarter of 2017.
Even though most of us have our heads buried deep in our smartphone virtual world, Americans are still programmed to whip out debit or credit cards at every opportunity.
Chinese that visit America carp endlessly about America's archaic payment system.
Ultimately, American payment systems are ripe for digital disruption.
The American consumer will ultimately cause severe damage to MasterCard (MA), Visa (V), and American Express who are happy with current status quo.
The lack of innovation in the US Fintech sector is a failure in the otherwise fabulous technological leadership of the US. American smartphones should already be a fertile digital wallet, not just a niche market.
Savvy Jack Dorsey even invented a firm based on this inefficiency, exploiting the lack of proficiency in domestic FinTech with Square (SQ).
American big tech will gradually utilize China's FintTech model and extrapolate it with "American personality". It is much more of a two-way street now than before with cutting edge ideas flowing both ways.
The next leg up after digital wallet penetration of FinTech are money market funds on tech platforms. In effect, the Chinese innovation of this industry has allowed more variations of potential financing for the ambitious Chinese, and the same trends will gradually appear on Yankee shores.
Ironically enough, Amazon's (AMZN) land grab in the field is more prevalent in China, as artificially low financing and juicier scale justify this strategy.
The scaling premium also explains why corporate China's early adopter advantage is so effective because not many countries boast a 1.3-billion-person consumer market.
Soon, Americans will wake up to the reality that American FinTech must advance or foreign firms will rush in.
Mediocrity is not good enough.
iPhones and Android consumers could direct savings into tech money market funds with compounding yield all on a single digital platform.
Tech companies could deploy some of the repatriated cash to invest in some fledgling FinTech expertise to smoothly execute this new endeavor.
Consequently, a successfully created money market fund on a tech platform would enlarge the already substantial cash hoard these firms have. Not only will the large tech get bigger, but the big will get absolutely massive.
The determining factor is financial regulation. Capitol Hill has drawn a large swath of mighty Silicon Valley tech titans to testify because they are stepping on too many toes lately.
A scheme to hijack the digital payments market and dominate the mutual fund industry will cause unyielding push back in Washington. Especially, when the Amazon death star continues pillaging select industries of their choosing and eliminating brick and mortar jobs by the millions.
JP Morgan (JPM), who has the largest institutional money market fund in the country, and retail stalwarts like Blackrock and Vanguard will be sweating profusely too if mega tech starts probing around its turf.
Alibaba is also coming for their bacon too with the failed purchase of payment transfer service, Moneygram International (MGI) temporarily shutting out Jack Ma from a foothold in the American payment system industry. How long will it take before they are allowed in?
The momentum for these financial instruments is robust as FinTech integrates deeper into consumer life. The global cash glut from a decade of cheap financing is causing profit hungry investors to starve for high yield vehicles.
The stability and clean balance sheets of tech giants give them ample chance to successfully execute. So why can't they also become banks? Would you buy an Apple, Amazon, or Google money market fund if they offered a 4-7% annualized yield?
I believe most Americans would.
??
Mad Hedge Technology Letter
February 28, 2018
Fiat Lux
Featured Trade:
(RED HAT'S TRIP DOWN THE YELLOW BRICK ROAD WITH LINUX),
(RHT), (ORCL), (MSFT), (CRM), (SAP), (VMW)
When a marvelous company with cutting edge technology keeps chugging along, you do not have to wonder why the heck its shares are surging.
This is the case with Red Hat (RHT) who is trading at an all time high even after a broad based correction.
The extraordinary development of this earnings season is the broad-based strength that second tier tech companies, the Non-Fang's, have displayed beating and raising guidance amid the backdrop of rising rates and inflation.
This is what happened when FANG share prices run too far, too fast. The Niagara Falls of cash pouring into the technology sector cash need other companies to spill into.
The pioneering Linux operating system company has exhibited emphatic strength after the tech sector led the equity recovery from the precipitous correction earlier this month and the Nasdaq has gained back almost all of its losses.
The broader market is concerned about higher remuneration costs and runaway inflation. Rising wages will inflict severe damage to wage bills.
Look no further than bitcoin software engineers who accept entry level positions of over $100,000/year and autonomous vehicle engineers who start out at net $300,000/year and quickly scale to $450,000/year because of the severe talent shortage in Silicon Valley.
Luckily, the Mount Everest wage levels are justified when gross revenue per employee is steadily gushing upwards such as at Red Hat. Technology companies are almost the only ones that can afford these wage hikes because they have the earnings to justify them.
In the company's latest earning's report announced, revenue was up a bubbling 22% YOY. Application development and emerging technology subscription revenues registered at $162 million, up 44% YOY.
Operating cash flow was up 18% YOY at $160 million. Upcoming earnings project accelerated revenue growth.
Red Hat (RHT) has been one of the many recipients of the secular growth trend of tech and is making all the right moves to command praise from industry analysts.
Similar to Amazon (AMZN), the company still trades relative to future growth projections and does not trade on bottom line performance - PE multiples are irrelevant.
A headquarter in Raleigh, North Carolina would have been a death sentence 15 years ago, but the city has turned into one of the hippest tech nerve centers for blossoming millennials.
It's affordability, low cost of living and abundance of high paying gigs has lured in young professionals in droves.
The research triangle circuit of Raleigh-Durham-Chapel Hill that feeds off of Duke University, NC State University, North Carolina-Chapel Hill and Wake Forest, give employers a formidable opportunity to cultivate an expansionary talent pool to cherry pick from.
The main arteries, I-85 and I-40, marry all these metro areas together making North Carolina well positioned to facilitate distribution.
Red Hat development is bound to open source software and Linux operating system offerings. Other know-how and expertise come in the form of virtualization, middleware, cloud, and storage technologies that equip a successful enterprises software business.
The extensive training and consulting they provide reverberates down to their revenue at 12% growth.
Red Hat Enterprise Linux (RHEL), an operating system platform outperforming in hybrid cloud environments ensures a healthy infrastructure.
Red Hat JBoss Middleware, a key for developing, deploying, and managing applications; integrating applications, data, and devices; and automating business processes in hybrid cloud environments is another application on offer.
The stamp of supreme quality was validated when Red Hat joined forces with Alibaba (BABA) Cloud. The certification process required the completion of distribution of Red Hat's software.
It will be jointly available for both firms' customers, ISV's (Independent Software Vendor) and 3rd party developers to boost their infrastructure with a cost-effective, fluid solution.
With Alibaba Cloud's global audience, having Red Hat Enterprise Linux on Alibaba Cloud Marketplace offers customers better results from a platform capable of deploying enterprise cloud architectures to exponentially expanding business demands of digital transformation.
Red Hat, which compete with Oracle (ORCL), Microsoft (MSFT), Salesforce (CRM), SAP (SAP), and VMware (VMW), are in an enterprise cloud arms race and management sense they cannot back down from their pursuits. As with many before them, evolve or go extinct.
Red Hat has used their unique understanding of Linux and open source to consummate a mixed cloud product around OpenStack. This process began in 2014 as CEO, Jim Whitehurst firmly understood Red Hat could not flourish with Red Hat Enterprise Linux alone.
By becoming specialists in the open source sphere, it gave Red Hat the perfect podium to offer their cloud products. The Linux system and cloud software feed off each other and the recently acquired JBoss middleware layer that is required to hold these two together act as another revenue stream.
Jim Whitehurst has convincingly noted that the current offerings will easily see them march above $5 billion total annual revenue up from the less than $3 billion annually they procure today.
Salesforce's sheer size represents the 800-pound gorilla in the room, but Red Hat is advancing nicely and regularly surpasses growth targets which crucially sustains positive investment sentiment.
Open source projects are the new normal and will progress because of the diverse community of stakeholders that are particularly keen in making the software succeed.
It's important to recognize that open source outperformance will create better products globally and holistically advance the enterprise software market.
Open source software has the long-term vigor to outlast proprietary developers that aren't as committed. If products are continually improving, they become being incredibly sticky inside the ecosystem.
Red Hat has positioned itself smartly and share the lucrative pickings with others in its peer group.
Red Hat has prospered in a brave new world where business is catering to tech to enhance product levels and service explaining why Walmart (WMT) is turning into a tech company.
Red Hat is still ubiquitously famous for building a fresh version of Linux, specifically, an enterprise version, but it has begun reaccelerating with tools on their Linux platform such as cloud and container products that will pad profit margins.
These existing clients that already use RHEL (Red Hat Enterprise Linux) will continue to thirst for the new add-ons that harness innovative technologies.
Red Hat's share price is on a tear in 2018, already up over 17% and over 60% over the last 365 days. Use the next entry point to splurge on Red Hat.
Mad Hedge Technology Letter
February 27, 2018
Fiat Lux
Featured Trade:
(WHERE TO FIND HIGH BETA IN TECH),
(SQ), (ROKU), (QCOM), (AMD), (JD)
??
So, you think the markets have been volatile lately?
I happen to know that for some of you the markets have not been volatile enough.
These people focus on a select group of technology stocks that often move three, four, or five times more than the main market.
I know this is not for everyone. However, today I will toss some red meat to those of you who are true volatility junkies. I will concentrate on five names. Hold your hats, fasten your seat belts, and down the Dramamine!
Either way, higher volatility is here to stay for the time being and traders need to readjust their portfolio strategies accordingly.
Square (SQ)
This Fintech outfit is visionary Jack Dorsey's brainchild. Square is an omni channel payments processor that focuses on bringing affordable payment solutions to small sized enterprises.
Their goal is to eat the lunches of giant, high charging Visa, Master Card, and American Express.
Jack Dorsey invented Square (SQ) after he was kicked out of Twitter (TWTR), another company he founded. It is reminiscent of Steve Jobs departure from Apple, only to return a decade later as the prodigal son to save the company.
Square overtook Twitter in market capitalization in November 2017, vindicating Jack's vision.
The pullbacks in the share price are often violent due to fintech's place as a still nascent segment of tech that causes the elevated beta. The proprietary technology developed at Square is wonderful...they even accept bitcoin.
Roku (Roku)
Roku has a Facebook type business model in terms of advertising, but they are in the embryonic smart television industry. They do not create original content like Netflix (NFLX) but harness a digital distribution platform for 3rd party content using the most sophisticated smart top box device.
In turn, advertisers are charged on Roku and it is a hot new product for all the Millennial cord cutters out there.
Roku posted an earnings beat last week, but its stock sold off a nauseating 22%. That was after the stock moved from $19.50 on October 30, 2017 to an all-time high of $52.31 on December 11, 2017.
Although this is a case of too far too fast, the technology is legit and could develop into the premier platform competing for millennial advertisement exposure.
Qualcomm (QCOM)
This San Diego based company earns the majority of their revenue streams from patent licensing and chip manufacturing. They have been a mainstay in producing chips for your iPhone as their claim to fame.
Qualcomm is the preeminent tech volatility stock in current day terms because of the current hostile takeover bid from Broadcom (AVGO). Hock Tan, the maverick CEO of Broadcom, won't take no for an answer.
This battle royale is taking place at the same time Qualcomm is attempting to buy Dutch semiconductor manufacturer NXP Semiconductors (NXP) for $44 billion. This defiant move has one unequivocal winner - Higher Volatility.
Expect treacherous whipsaws and shocking headlines to affect its share price for the foreseeable future.
AMD (AMD)
Dr. Lisa Su heads the cavalry of this always also ran microprocessor manufacturer. The majority of their revenue derives from CPU's and GPU's. Their main competitor in GPU's is Nvidia (NVDA), so the GPU market is now largely a duopoly.
The CPU chip struggle is contested by Advanced Micro Devices (AMD) and Intel (INTC). (AMD) has solidified their silver medal position in this market. (AMD) was trading down at $1.72 on September 1, 2015 and now sits at over $12.
AMD has a beta of 3.22 meaning it stock moves 322% relative to average stock price movements. Consolidation and chip shortages are overarching themes to the chip industry in 2018, which is why we have been so heavily long them this year.
JD.com (JD)
JD.com or otherwise known in local Chinese mandarin lingo as Jing Dong and is the younger brother of Alibaba (BABA) in a 2-horse race. JD.com is an e-commerce sales platform just like Amazon and mainly sells goods from 3rd party vendors.
Jing Dong is a BAT that isn't a BAT. I am not talking about the furry winged friend who sleeps upside down in a dark cave. I mean the Chinese tech BAT's comprised of Baidu (BAIDU), Alibaba (BABA), and Shenzhen's Tencent. They are China's answer to the American FANG's.
The Chinese e-commerce outperformance has put Alibaba squarely in the running for the world's first $1 trillion company. JD.com is headquartered in Beijing by Liu Qiangdong and Beijingers and Northern Chinese alike swear by this service, especially the authenticity of electronic devices.
If you order an iPhone X on their digital platform, a real iPhone X will actually appear. This isn't always the case in China. It has fewer problems with selling fake goods than Alibaba (BABA).
Alibaba is headquartered in Hangzhou and breeds higher trust levels in the South of China. JD.com also control its entire logistics chain, which streamlines its facilitation in the movement of goods. If the trade war between the US and China deteriorates, Alibaba (BABA) and JD.com (JD) will be hard hit, with JD shares dropping twice as fast as Alibaba's.
