In 2014, we discussed well over 100 ways to make huge gains from technology stocks.
And I’m looking forward to sharing many more tech investing ideas with you in 2015.
Before we get started on that, I want to address the questions and comments you’ve had about our twice-weekly chats.
Let’s get started with a comment about a company whose services most of probably use every day…
Q: Thank you for your insight. It has given me a more thorough understanding of what Google is really all about!
– Charles W.
A: Thanks so much for the nice comment. One of the many things I enjoy about what I jokingly refer to as “my job” is taking the opportunity to shine a new light on tech stocks that many investors simply take for granted.
I see this happen all the time. Wall Street and the mainstream financial media have a tendency to pigeonhole companies or focus mainly on the next quarter. Google is a Silicon Valley giant that is investing for the long haul, years and even decades from now.
That column also drew a question about the mechanics of investing in Google.
Q: Michael, I found your article about Google and Ray Kurzweil very informative. When considering an investment in Google, however, which ticker would you recommend: GOOGL or GOOG? I realize one has Class A shares and the other is Class C, but I‘m not sure which would be a better pick.
A: I’m glad you asked that question because it’s something that confuses a lot of investors, even some folks in the media who should know better. From a share-price appreciation, it probably doesn’t really matter.
But from a shareholders’ rights standpoint, there is a substantial difference. As Class A shares, GOOGL gives investors voting rights. GOOG represents nonvoting class C shares.
Most investors don’t attend shareholders meetings or vote on standard matters like hiring a new auditor. But if something major were to occur, such as a merger offer, you wouldn’t have a vote unless you owned GOOGL.
The REIT Stuff
In our Nov. 14 conversation, I mentioned that Sears Holdings Corp. (Nasdaq: SHLD) was considering turning itself into a real-estate investment trust (REIT). I suggested avoiding that one in favor of American Tower Corp. (NYSE: AMT), a company focused on real estate for the wireless industry.
Q. The article says that American Tower is a REIT, yet toward the end of the article you say that the company sports a 72% payout ratio. However, REITs are required to return no less than 90% of earnings to their shareholders. A clarification is in order.
– Jim L.
A. Jim, thanks for your question. You are clearly a savvy investor with a good head for numbers.
However, in this particular case, you seem to be glossing over the difference between the payout ratio with the company’s tax status. Yes, REITs are required under federal law to pay out 90% of their taxable earnings, which is different from their total earnings.
And the difference between gross and taxable earnings can be substantial. ZAIS Financial Corp. (NYSE: ZFC) is a high-yielding REIT. But its payout ratio is 60%, or 16% less than that of American Tower. In other words, many factors can affect both taxable income and the payout ratio.
The Power of Three
My Nov. 25 note to you on the three key signals every tech investor ought to know struck a chord with several readers.
Q. Your info is not only always informative, but very often (like now) has a calming influence. Thank you.
– Bob B
A. Bob, I really appreciate your comment. That’s exactly what I was trying to do with that column – not just give investors like you more peace of mind but also provide a brief guide to the type of empirical data you should be tracking.
Truth be told, we’re still in a major uptrend for both the broader market and for tech stocks. But it remains a volatile time. During 2014, the Standard & Poor’s 500 Index declined by 4% or more five times. And from mid-September to mid-October, it registered a 7.4% drop.
Periods like that can take a psychological toll on some investors. That’s why I start almost every day with the same ritual — scanning the markets for solid data I can use to make informed investment decisions.
This is so important, that it’s embedded in Rule No. 2 of my five-part strategy for building tech wealth – separate the signal from the noise.
On Dec. 10, we talked about three technology investments you can use to double your money
Q: As always I love your analysis. What about FBIOX?
A: First of all, Jeanne, thanks for continuing to read this column and for keeping in touch. I very much appreciate it.
As regards the Fidelity Select Biotechnology Portfolio (FBIOX), it’s a solid investment. However, it’s a mutual fund. This is an investment vehicle I recommend for retirement accounts where the plans are so restricted you cannot invest in exchange-traded funds (ETFs).
I recommend that, whenever possible, you invest in ETFs over mutual funds, because ETFs generally have much lower expense fees, no sales commissions and no minimum purchase amount. Unlike mutual funds, they trade as though they were stocks.
Having said that, FBIOX trades at $224 and has done very well over the past year, gaining more than 24%. By mutual-fund standards, it actually has a low expense ratio of just 0.76%. But it requires a minimum investment of $2,500.
By contrast, iShares Nasdaq Biotechnology (Nasdaq: IBB) is a popular ETF that gained more than 36% over the same period but has an expense ratio of just 0.4%. It trades at roughly $306 a share, but there’s no minimum investment.
During our Dec. 12 chat, I highlighted three scary stocks that I think investors ought to avoid this year.
Q: I have never shorted a stock ever. It might be time, and the three worst tech stocks might be the ticket. It all makes sense to me.
– Ken L
A: My hat’s off to Ken for his enthusiasm and optimistic outlook. Those are two very good traits in an investor, ones that over the long haul stand you in good stead.
However, shorting stocks is beyond the scope of this advisory service, so I can’t add much insight into the mechanics of it all. I will say I think you need to be careful when you short stocks because you have to “borrow” them from your broker using a margin-approved account.
And remember, my main focus here is to bring you tech investments that offer life-changing gains. You can only find five- and 10-baggers by going long in such areas as mobile, biotech, cloud computing and Big Data.
Q: What other tech stock would you recommend besides Ambarella to invest in? Please let me know your best stock.
– Chuck F
A: I’m glad you asked that question, Chuck. I get suggestions similar to that one from time to time.
I launched Strategic Tech Investor with one big goal in mind – to help investors make money in technology stocks, which over the long haul are the greatest source of wealth in this country.
That means going well beyond a quick stock suggestion. The idea here is to help you all become better informed, savvier and more profitable investors.
And the only way to really do that is to provide in-depth analyses, case studies and examinations of the unstoppable trends driving tech winners. Of course, we’ll be discussing this all in terms of the five investing rules we use here regularly.
Now then, if you would like a longer list of stocks to consider for the year ahead, then I urge you to get a copy of my 2015 Forecast issue of Nova-X Report. In this special issue, we provide a wealth of information regarding seven tech stocks we think will do particularly well this year. To get ahold of this special report, just click here.
Once again, I want to thank the many readers who take time from the busy live to follow this service as well as post comments and questions. Strategic Tech Investor would not be a success without the support of its loyal, thoughtful readers.
So, I hope you’ll continue to join me here twice a week – and that you’ll keep using our tips and strategies to get you on the road to wealth.
- Strategic Tech Investor: Thanks to Its “Secret” Side, This Company Will Dominate the Future.
- Strategic Tech Investor: A REIT to Avoid – and One to Buy Now.
- Strategic Tech Investor: If You’re in Tech, You Must Follow These 3 Signals.
- Strategic Tech Investor: The Second Rule for Grabbing Massive Tech Profits.
- Strategic Tech Investor: Three Double-Your-Money Tech Plays for 2015.
- Strategic Tech Investor: You Should Shun These 3 Scary Stocks in 2015.
- Strategic Tech Investor: How We’ll Double Our Money Again With the Stock of 2014.
- Strategic Tech Investor: The New High-Tech TV That Can Make You Rich.
- Strategic Tech Investor: The Secret Blueprint for Creating Massive Tech Wealth.
- Nova-X Report: 2015 Forecast.