I found this technique quite useful. I’ve been using it in some of my investments as well. First, you will need to find a company which you believe it has growth potential and you are willing to invest in for the long run. How to find that specific company? Do a fundamental analysis on the company and try to determine if the company’s share is fair value. (There will be a separate post on how to do fundamental analysis in the near term). Let’s say you did your due diligence and came to a conclusion that you are going to invest in this company. You would buy 100 shares at first. Then you purchase another 2 blocks of 50 shares over the next month or two. Now you have 200 shares in total. Because you are planning to keep this company in your portfolio for the long term, you could keep 100 shares as your core position which means you will not sell those 100 shares in the near future. Stock price is never a straight line. There is always ups and downs. Now you have 200-100 = 100 shares left for you to trade around your core position. Some time later, if the share price goes up to say 6%(any target price you have), then you may sell 25(any number you would like to sell) shares and profit in. If it goes up again, you could sell another 25 shares. After you sell all 100 shares, you will have to wait for the price to come down. Once the price is close to the fair value that you estimated, you could buy back in again. Don’t purchase 100 shares at once. Try to break it down to blocks of 25 or 50. Don’t worry if you estimation is incorrect, you could always average down by buying shares lower than previous purchase. Please remember you still have your core position(100 shares) after all these trades. This might appear to be small income but over time the profits add up. In conclusion, it is a repetition of selling it when price goes up, and buy back when price drops.
P.S. While you are waiting for the price to drop, you still need to do your homework and keep up to date with your investment. Good news may trigger a pop whereas bad news could lead to a drop. Hope this could help, happy investing:)
We’ve been covering AMD for quite some time now. It is an interesting player in the semiconductor space.AMD reported its earnings after market closed on Tuesday. Its earnings and revenue both beat street’s estimates in Q3. Normally, if a company had a good ER beat, its share price would go up due to the hype. That is not the case this time around. AMD saw a significantly drop of price around 15% at one point right after the ER. As of today, it was closed at $11.84. What’s going on with the drop? During the conference call, AMD gave a prediction on decline of its sales revenue by 14% to 18% for Q4, which does not bode well with investors expectations. Also, there are some other factors that scared the investors away. Intel’s newly launched CPU was one. Moreover, spectators are still not convinced that AMD would be able to sustain its market shares versus tough competitions from NVDA and INTEL. Its huge debt on balance sheet does not help the situation either. All that being said, we are still bullish on AMD for the long run. It is a company which is working on turning itself around from the worse period in pre-2014. Its revenue and earnings are both improved from year over year. Here is a small sample: (source:ST.)
New product lines are continue to roll out in 2018. We also believe that the revenue from data-centers are coming in later in the year as well. It is also doing a decent job on reducing debts. However, it is not going to be a smooth ride in the near future. The volatility is going to be high as it is still one of the most shorted stocks in tech. Think twice before you decide to jump in whereas there are other great blue chip stocks in tech:)
P.S. We have positions in the equity mentioned above. Also, other tickers will be covered in future posts.
Stock market has been bullish for quiet some time now. All the major indexes have hit all time highs this year. There are some saying that we are experiencing bubble in the stock market. There have been two major bubbles in the past 20 years. As the chart shows below( Thanks to the MSCI ):
As you can see, there was the DotCom bubble back in 2000 and the housing bubble in 2008. It sure looks like we are at the edge of another bubble burst by seeing the pattern of the chart. What’s going to happen when stock market crash? Basically, there will be a drastic drop across sections in the stock market, in which would trigger investors panic selling to stop losses and push stocks prices lower. In worse case, it could cause a recession. However, we don’t see a crash happening any time soon. The world’s economy has been steadily recovered and growth since the last crash in 2008. There are some companies indeed over-valued in the market but not in such an alarming rate yet. As long as there is no sudden global event like wars among countries, which may trigger the burst. In the near future, we may see some correction which is a normal activity in the stock market. Overall, the market is still in a good place at the moment. We can’t predict what exactly is going to happen in the future, but opportunity would come for people who are prepared. We will revisit the situation next year.
We have our eyes on an upcoming IPO SWCH. Switch Inc. is a data center operator. What’s a data center? It is a facility which stores and manages data from organizations. We were not able to find too many details on its financials due to the private status. It is a profitable private company. Its revenue has a 20% gain from 2015 to 2016. It has long term loan at about $825M, however a lot of the loan has been invested into expansions. Currently, the company has 3 main campuses; it is eyeing to keep adding more facilities across the country. According to report by TechNavio, global data center market is projected to grow 11% annually over the next three years. There will be more data available as the society progress which means more data centers will be needed for organizations. It’s going to continue to be a profitable industry for years to come. This IPO is going to be starting at NYSE this Friday. We are planning to add it to our portfolio as soon as possible. For day traders, this might be a good chance to grab some gains from the hype (probably a two days windows), however we expect the price will settle down a bit after the hype of a new IPO. Long term value investors could wait and look for a more reasonable entry point once the price get closer to its intrinsic value. We will have a further discussion after more information is available to the public.
Some updates on Advanced Micro Devices Inc. (AMD):
AMD’s share price actually has down about 16% since the Q2 ER despite all the positive news so far this year. It is one of the most shorted stocks in the semiconductor space. It’s been a volatile stock historically as well. Before you decide to invest in AMD, please make sure your heart is ready for a roller coaster ride in the short term. It is going to be pretty volatile for some time since short interest is still extremely high at the moment. On a brighter side, AMD is continue its aggression on the market. New CPUs and GPUs lines are expected to hit the market during the rest of the year. Moreover, it has made some positive announcements with teaming up with various clients this year. Last week, AMD announced the collaboration with Amazon on use of AMD’s GPUs in their cloud computing platform. Prior to this, Baidu and Alibaba have also joined force with AMD to use its GPUs in their data centers earlier this year. Tencent and JD.come also welcomed AMD’s EPYC family CPUs last month. You may not see the result in the near term. We do expect to see increased revenue to come in 2018 and on. Overall, AMD is not yet a profitable company in the short term. It actually did a great job on reducing its debt from $20B to $14B in just a year. We are expecting AMD to continue with its debt reduction in coming years and We are liking the fundamentals of the company. I am bullish on AMD in the long run still.
P.S. We have added our positions in AMD recently.
Do you believe in Robotics and Artificial Intelligence? If yes, this ETF might be a good option for you. We have recently added it to our fund portfolio. BOTZ is an ETF that is specifically targeting Robotics and AI field. As of today, It is around $20.25/share. It is still pretty new since the launch in September last year. Mitsubishi, Nvidia and Fanuc Corp. are the top 3 largest holdings in this ETF. Its performance is impressive as a newly launch fund. Its return is about 39% since inception. BOTZ enable investors access through companies involved in automation, robotics and AI industries. It has 29 companies under its portfolio currently. You would get a good international and diversified exposure in the field. Robotics and AI sounds futuristic to a lot of people. I do believe in the advancement of today’s technology. Robotics and AI is imminent in the near future. It is not a bad time to invest in the tech field;)
The term ” Internet of Things” has been a hot topic in recent years. What is IoT? Basically, it is a network of smart devices which are connected to each other and internet. For example, your cellphone, digital pads, smart lights, smart cars, fridge and other smart appliances would be connected through the network and your will be able to activate commands to whichever things your intend to and perform the task it is asked to do. It is not from a science fiction; it is the way our technology is going to advance to. Researchers believe there will be around 34B smart devices in use in the world by 2020. IoT will not only benefit our homes but also across industries. There are a few IoT related companies on our watch list such as: Microsoft, Blackrock, Amazon, Alphabet Inc., Facebook, Apple, Skyworks. If you are looking for some long term investments in IoT, these are some of the safe bets we recommend.
P.S. I have positions in Facebook and Amazon.
Technology has advanced extremely fast in the last decade. We all benefited from the convenience that was created by technology. However, nothing is perfect; it also comes with bad things from time to time. There have been a couple very serious malwares attacks around the globe so far in 2017. WannaCry and Petrwrap were two malwares responsible for these attacks. Basically, they took computer systems hostage and asked for ransom money. The victims are spread around the globe and across different industries, including banking, transportations and governments etc.
More people than before recognize the importance of cyber security. It is not a bad time to invest into some of the cybersecurity firms in the market. FireEye Inc. (FEYE) is on our investing list. It provides products and services to prevent advanced cyber threats. It has some ups and downs in the last two years. It is currently trading at $15.60/share. It has performed pretty well this year. The sales revenue was up 3% from previous Q. It is up about 29% year to date. Its total debt is around $750M. However, the debt could easily be covered by its current assets, which are around $1080M. In a market expected to be worth $232B by 2022. There is still huge growth potential for companies like FireEye Inc. For cautious investors, you can still wait and see after the Q2 ER, which is coming out on August 1st.
Check Point Software Technologies Ltd. is also on our watch list. It will be further discussed in the future post.
P.S. I have a position in FEYE.
Lately I have been digging further into corporate finance. It is interesting to see how mergers & Acquisitions ( M&A ) work and the impact that has on the company. In 2017, One of the biggest deal was Amazon bought the Whole Foods for $13.7 billion in cash. The deal values Whole Foods at $42/share. Shareholders of Whole Foods enjoyed a $9 jump after the deal. How would this deal help Amazon? Retailing industry has been struggling in recent years due to online competitions and some companies are lacking the awareness of technology advancement, ultimately these companies disappeared. Back in 2015, Mr.Ma, CEO of Alibaba Group. mentioned that the combo of online retailing and physical stores are going to be the mainstream of retail world in the future because of the use of big data. You would not survive with only online platforms or physical locations. As I mentioned in the other post, big data is going to be the most valuable resource of the business world. Amazon’s deal fit perfectly with this formula. It has the largest data resource in the world. This would provide the exact information needed for its physical stores; in this case, the Whole Foods chain would be able to know what kind of inventory they should carry in the right location; what type of groceries that they should be invest in due to customers’ purchase patterns. As a result, company would minimize opportunity cost by analyzing big data.
What happen to the stock prices of companies that are involved in the M&A? Usually, there’s a short term effect on both companies. Generally speaking, the acquiring company’s stock price would fall due to uncertainties of the purchase. It creates concerns about that if it is a good buy among its shareholders. On the other hand, the targeted company’s stock price would rise because the acquiring company usually pays a premium for the acquisition.
There are a lot of cross boarder M&A so far in 2017 as well. I would love to dig further into them in the future posts.
It may have a high entry point now but Amazon is still a buy for me:) Could also wait and see potential dip later on.
P.S. I have a position in Amazon.
CryptoCurrency is gaining popularity among traders in the past few years. Bitcoin and Ethereum are the top 2 cryptocurrencies with market capital around $40B and $26B accordingly. Cryptocurrency is extremely volatile, therefore it is only recommended to traders with higher risk tolerance. Bitcoin vs USD was around $800 in the end of 2016. As of today, it is valued at around $2500 USD . Cryptocurrency is still very new to a lot of people. Its decentralized nature worries a lot of professionals and governments. A lot of big banks, accounting firms and governments do have their research on this newly digital cash system. However, They are not mainstream as non of these digital currencies are officially recognized by any governments nor any exchanges. They can only be traded on certain digital currency online platforms and applications.
To be honest, it is still too risky of an investment. If you really want to give it a try please invest with caution and maybe with your spare changes. Please never invest with your life savings and know your priorities. I do not have any positions in any of the digital currencies. We will keep an eye on any future developments:)