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Category: Financial Markets

Beating Smart Money & Bloomberg Video

The best gains come from getting in front of the herd. The second issue is that many tech companies go through periods of high growth yet can’t sustain this long-term unless there is excellent product market fit. Momentum investors and trend followers struggle most when it comes to FAANG-like gains because they can’t determine the true gems from those that are simply doing what most tech does (disrupt a market for a period of time).

Algorithms led to the fastest bear market in stock market history

Last week, I wrote about how algorithms led to the fastest bear market in history. I explained that what’s driving the speed and severity of the bear market is the escalation of algorithmic trading, which is more prevalent than it was during the Great Recession in 2008. March 2020 holds the record for how quickly stock prices dropped into a bear market — only 16 days after the S&P 500 Index hit its last closing high Feb. 19. The second-fastest bear market was the notorious 1929 crash that set off the Great Depression, followed by the elevator drop of 1987’s Black…

RSA 2020 Recap: Cybersecurity Industry is Consolidating

Over thirty-six thousand cybersecurity professionals attended RSA in San Francisco last week, with a full roster of executive keynotes and four crowded expo floors. Although a few companies decided to not attend due to the coronavirus outbreak, such as IBM, AT&T and Verizon, there was certainly no shortage of vendors present. In fact, the biggest challenge for any public investor in cybersecurity stocks is sorting through an industry that is at peak saturation. As of 2018, there were over 1,200 cybersecurity companieswith up to 200 vendors competing in each layer. This leaves customers, such as Chief Information Security Officers (CISOs),…

Why no streaming company will be able to dethrone Netflix

Netflix critics see mountains of debt and bleeding free cash flow. Opportunists see a company with the world’s best track record for beating the odds in disrupting traditional media. For investors, it could be a costly mistake to be on the wrong side of that debate, as Netflix stock’s 52-week low is $231 and the high is $385, a sizable spread for a $125 billion market-cap company. In the two weeks that followed the streaming company’s second-quarter earnings release in July, Netflix shed $24 billion in market value. The Los Gatos, Calif.-based company releases third-quarter results Oct. 16. Investors are…

Governments won’t be able to stop Facebook and Google from abusive tracking on smartphones — but Apple could

Another day, another headline saying Alphabet’s Google and Facebook are being investigated for allegedly breaking privacy laws and engaging in anti-trust behavior. Google GOOG, +0.95% GOOGL, +0.98%  has been the subject of three antitrust investigations conducted by the European Union, resulting in more than $8 billion in fines. Now the company, which controls 31% of global digital ad dollars, will face the U.S. on anti-trust matters. A big question is if governments will be effective, as they may not understand how social-media and internet businesses operate. In April 2018, Congress tried to piece together how Facebook’s FB, +2.74%  platform works. It ended up being a disaster. Anyone who…

How to pick long-term stock winners in cloud computing

Cloud software stocks suffered a reversal that has produced losses of close to 50% from record highs. The story for those stocks hasn’t changed, but the valuations have, and that could be a good thing for investors who know what they own. The biggest risk for investors in cloud stocks isn’t the losses that have pummeled prices over the past two weeks, but rather the big reversal that may scare them away from the sector. It’s painful to watch large declines in stocks, yet nobody wants to miss out on a potential 10-bagger either. When the market rewards, and penalizes,…

Slack’s missteps have now made the stock a ‘buy’ at the right price

Slack Technologies is the fastest-growing software-as-a-service (SaaS) company of all time and a Silicon Valley favorite, yet the direct public offering (DPO) clearly did not go well for public investors. The shares WORK, +8.03%  opened at $38.50 on June 20, rose to $42 intraday, and have now sunk to a record-low of $26.25 in after-market hours leading into its first earnings report as a public company. The losses are at 36% from its intraday high, and that occurred when many cloud-software initial public offerings (IPOs) have enjoyed triple-digit returns since going public. So what went wrong? And, more importantly for growth investors, will…

Beaten-down Nvidia is diligently preparing to pounce on its rivals

Nvidia’s stock went from unstoppable to nearly uninvestable in the matter of a few weeks last year and has not recovered.  The sudden drop in Nvidia’s stock price and a competitive ecosystem that’s hard to understand are two reasons the chipmaker has scared away growth investors, who have opted for momentum bets such as cloud-software companies. The fact that semiconductor companies are cyclical, and mired in the U.S.-China trade war, has further overshadowed Nvidia’s growth potential.  But the real story is that Nvidia is spring-loaded as its product offerings quietly gather strength in a market of enormous magnitude: artificial intelligence (AI). The path…

Uber and Lyft: Unprofitable Powerhouses

Ride-share earnings this week proved that if you lower the bar to the ground, any earnings performance can leap over it. Both companies reported staggering losses that were delivered with positive PR spins.  Lyft reported “record second quarter results” while losing roughly the same amount of money as previous years. Uber had an epic $5 billion loss that is closer to $1.3 billion adjusted. The second number only looks acceptable in the parallel universe where a $65 billion market cap company can report any losses at all, let alone $4 billion per year.  Likewise, Lyft looks digestible compared to its counterpart…

How to Pick Growth Stocks in the Tech Sector

“What makes a solid tech stock?” may be one of the most important questions an investor can answer. Over the last decade, tech companies started to penetrate the top ten list of global companies by market cap. Today, tech dominates this list with Apple, Microsoft, Google, Facebook and Alibaba. Not all tech stocks are winners, of course, with IBM and Yahoo flatlining over the past decade and Cisco unable to reclaim its valuation from nearly twenty years ago. This is why it is important to follow guidelines for individual tech stocks regardless of a broader bear or bull market. Basic…