These Five Rules Could Make You 300% Gains as This Cloud Leader Rises to the Top

0 | By Michael A. Robinson
A Special Note from Michael: News about the coronavirus has been creating a lot of uncertainty in the markets. The last time we spoke, earlier this week, I mentioned that the fundamentals of the economy are still strong, and we could see a strong rally if virus pressure lets up due to something like a vaccine. Another good sign is the fact that, even with all of this doom and gloom going on, there are still people making money in the market. All you have to do is click here to learn all about it.

Tuesday was a very big day for the Democrats with Super Tuesday putting hundreds of delegates up for grabs.

That makes this an ideal time for a fiscal conservative like me to make a very important point.

If presidential candidate Bernie Sanders bounces back from his second-place finish and is elected in November, rich tech leaders like cloud pioneer Mark Benioff won’t be able to help save the lives of kids.

Here’s the thing. Sanders has been an outspoken opponent of wealth for many years. And if elected, he pledges to slap the wealthy with punitive taxes.

I believe that Sanders and his supporters are flunking the cosmic IQ test. Simply stated, without rich people, America would lose a huge chunk of funding for the arts as well as scientific and medical research.

With that in mind, today I am going to reveal five reasons why Benioff’s high-octane firm, Inc. (CRM), is a great investment.

Not only is it run by a generous billionaire but it is set to double in the next 2.5 years…

An Astounding Rise

Now then, there’s just no question that Benioff is a generous man.

He’s worth a cool $7.95 billion, much of it tied up in stock. But he frequently opens his checkbook for meaningful causes.

Among other things, his charitable foundation has donated $250 million to UC San Francisco’s children’s hospitals. They’re known as leaders in combatting childhood cancer.

And it’s all because of what I have been saying for some time now. The road to wealth is paved with tech. To be blunt, our chat today is not about charity, it’s about making money that allows us to be generous.

I hope do hope you don’t think this is a partisan attack on Sanders, who won the California primary and is now just short of 14% behind Vice President Joe Biden in the delegate count.

Sanders still has a shot at getting the nomination. So, I want to point out that the Vermont senator embodies a very short-sighted view in America today.

It has become popular to bash both Big Tech and billionaires. Lost in all the noise is one key fact – the rich in this nation give billions each year for charitable causes and support the arts like operas, symphonies, and art museums.

Not only that, but the profit motive is what drives visionary CEOs like Benioff. In launching Salesforce back in 1999, he established a company that today employs more than 30,000 people around the world.

Along the way, he has made thousands of investors rich and helped thousands more build the value of their 401K retirement accounts. That’s the payoff of creating a firm that now boasts a market cap of $171 billion.

In other words, cloud-based technology is a powerful force in the world today, and Salesforce is a best of breed firm. It’s focused on customer relationship management (CRM).

Market Research Media forecasts annual compound growth of 30% for cloud firms through the end of this year when the industry will be worth some $270 billion.

And just think, Benioff launched his company from humble beginnings. He started off working from a rented apartment in San Francisco.

Nearly every dollar of sales the firm brings incomes through recurring subscriptions. So, Benioff has become rich and helped the less fortunate by setting up a business model that is nothing short of a massive cash machine.

Clearly, this is a growth company with an exciting story to tell. To see how good an investment it really is, let’s run it through the five filters of my tech-investing process:

Rule No. 1: Great Companies Have Great Operations.

These are well-run firms with top-notch leaders.

There’s no doubt that CEO and co-founder Mark Benioff is a savvy business leader. He founded Liberty Software to publish video games at age 14. He was formerly a programmer at Apple Inc. (AAPL) and then a senior executive at Oracle Corp. (ORCL).

He has achieved a string of accolades for his business acumen. In 2017, Fortune ranked him third on its list of top business leaders. Harvard Business Review has hailed him as one of the 15 best-performing CEOs.

Yes, I know the stock got dinged a bit when Salesforce said on February 25 that co-CEO Keith Block is moving on. I’m not concerned because Benioff is the visionary leader behind the firm’s real success and he’s staying put.

Rule No. 2: Separate the Signal from the Noise.

To create real wealth, you have to ignore not just hype from the company but the noise you often hear on Wall Street.

Yes, I know that Benioff generates a lot of ink here in the San Francisco area and nationally as well. But please don’t think this is a PR-driven firm. It does well for others by being a great company.

Last June, Forbes said Salesforce commands 19% of the CRM market, with three times the segment sales of Oracle. This must be sweet for Benioff on a personal level. Before founding Salesforce, he spent 13 years at Oracle.

Rule No. 3: Ride the Unstoppable Trends.

Look for stocks in red-hot sectors because they offer the best chance for market-beating gains.

I earlier noted the massive growth of the overall cloud sector. So, let’s bring that down to what it means for Salesforce.

Consider that the firm now counts more than 150,000 global clients. Salesforce says that 97% of its top 100 clients now use more than one cloud service.

IDC says that the move from analog to digital data hosted in the cloud was worth a total of $14 trillion in 2018. By 2023, that figure will increase nearly fourfold to $52 billion.

Rule No. 4: Focus on Growth.

Companies that have the strongest growth rates almost always offer the highest stock returns.

Over the past three years, the company has grown sales by an average of 26%. At that rate, sales are doubling roughly every 2.75 years.

In its 2019 third fiscal third quarter, Salesforce had even better sales growth. They were up 33% from the year-ago quarter and came in at $4.5 billion.

Rule No. 5: Target Stocks That Can Double Your Money

This is where we look at Salesforce’s earnings growth and see how long it will take the firm to double profits. By doing that we can figure out how long on average it should take for the stock to roughly double.

I’ve gone through the firm’s financials in detail and I’m projecting earnings per share will grow over the next five years by an average 27.5%. I got that figure by subtracting knocking 50% off its recent earnings growth to be extra conservative.

Now we use what I call my doubling calculator. Mathematicians call it the Rule of 72. Let’s divide the compound growth rate of 27.5 into the number 72.

We find that it should take roughly 2.6 years for Salesforce to give us 100% gains. Indeed, at that rate, we should see a total of 300% gains in just over 5 years.

It’s like I keep saying. If you want to become wealthy, you need to be investing in the best tech stocks on the planet.

And doing so is a lot easier if you have a savvy Silicon Valley veteran in your corner like me.

So, I hope you will keep checking in with me as I share the tips and tactics that could help make you a high-tech millionaire.

Cheers and good investing,

Michael A. Robinson

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