If somebody gave you $100,000 to invest in the stock market, what would you invest in? With thousands of stocks available to buy and to short these days, which ones will give you the most bang for your buck? That seems like the million-dollar question that investors are constantly asking themselves.
So what do you do? Well, it really depends on your strategy of course. While some people like to day trade and short stocks, others are content holding stocks long term. Some investors like growth stocks while others like value or the momentum kind. Which one is better? Frankly there's no right or wrong answer here so long as you are making money.
Today I would like to show you ten stocks that I strongly believe will outperform the market over the next year or so. Whether you have a portfolio set up or are looking to set up a portfolio, these ten technology stocks are definitely worth your time looking over.
Adapting To Life's Changes
If you have not already noticed by now, much of our lives require regular maintenance. Unfortunately many of us cannot escape many of life's tasks such as running errands and paying bills. Many of us have regular doctor visits to make sure that we are keeping our bodies fit. As investors we must make sure that our investments are maintained and are working for us as well.
The markets are continually changing and the mix of investments that you put into place will probably change as well. If you let your portfolio roam free for too long, your long-term plan could be in jeopardy. Your future and retirement holdings could become too heavily invested in stocks or bonds, that could potentially increase your losses when the markets go south. So what should investors do?
There are many different answers to this question. First, some experts recommend rebalancing based on an indicator, for instance when a piece of your portfolio drifts outside your desired range. Second, firms say it's fine to pick a date, stick to it and rebalance it once a year. Lastly, it is interesting to note that Vanguard has found that rebalancing once or twice a year is only necessary when a portfolio has drifted from its goal by at least 5 percent.
If we look back at the history of the markets, we can see that it is important to adjust to the market conditions. Take for instance what took place in the 1940's. Back then, investors had around 95% of their portfolio in stocks. Crazy right. Now fast forward to the 1980's and investors showed us how balanced they became with a portfolio consisting of 60% stocks and 40% of bonds, according to Vanguard.
The best way to protect yourself against risk in the stock market is to simply not invest at all. But because we're investors, those are the risks that we take. Nevertheless there is one important thing that investors can do to help limit their risk. That my friends, is being diverse. So what does it mean to be diverse?
The picture above sums up diversification. Diversification is something all investors should take into consideration. By spreading your investments around, investing in companies of different size, geography and economic status, you are limiting the risk and protecting yourself. Combining investments that don't move in sequence with one another is a great way to reduce risk and limit the bumps along the way. This helps you from being tied to the fate of one market or region that underperforms.
A balanced portfolio involves having a diverse group of stocks and bonds which helps to spread your risk so not all of your eggs are in one basket. Many investors like to invest in different sectors such as (Financial, Consumer Goods, Healthcare, Technology) to get that diversity. However, for this portfolio, I'll be focusing only on stocks in the technology sector.
On June 28, 2013 Russell announced the reconstitution of its indices (Russell Global, Russell 1000, 2000, 3000 & Russell Microcap Indexes). Russell, like many other firms and institutions, rebalances the indexes every year to reflect the changing markets and to maintain true representation of those markets, capitalization and style.
While some investors like having institutions and money managers taking care of their money, some investors like doing it all on their own. While some argue that one way is better than the other the truth is that each of these things have pros and cons.
Because of how popular the internet has become, it's hard not to see investors bragging about their stock picks and how much money they've made on a particular investment. However, where are those same people when they are wrong? Ironically they are nowhere to be found.
Today I would like to show you what I bought if I had an extra $100,000 to invest in. Whether they turn out great or fall flat on their face I will be checking in periodically to talk about my picks and to give updates on them as well. So don't worry, I won't be running away from these picks anytime soon. So what does my portfolio include? Well without further ado, here it is.
Youku Tudou (YOKU)
NQ Mobile (NQ)
* Results reflect Friday's closing prices
Investors should be warned however, that as fast as the prices of these companies can go up, they are able to come down just as fast as well. So to make sure everything is fair and equally weighted, I split the $100,000 and put $10,000 in each of the ten stocks.
As you can see some of these companies are some of the biggest in the world, while others are some of the smallest. Some of them are known throughout the world while others are barely known. So why am I investing in these companies? Here are the reasons why.
When most people think about Apple they usually think iPhones, iPads and Macs. One of the things that gets often overlooked is the amount of cash that Apple has been hoarding over the years. Last March, Apple had over $137 billion in cash and rising. Then in April, Apple made it public that it will be returning close to $100 billion to shareholders by the end of 2015. Apple said that it will increase its share repurchase program from $10 billion to $60 billion as well as up its dividend 15% to $3.05 per quarter.
Apple has been pounded over the last year or so as it has lost more than 40% of its value. While it's true that Apple's margins have been slimming down, investors need to realize that Apple cannot continue to grow 100% every year. Apple is still Apple and millions of people still love their products. Because of this, as well as the amount of cash that Apple is giving back to its stockholders, I feel confident that Apple will return back levels it was seeing before its fall from grace. Apple currently has a forward P/E ratio of 9 which is significantly lower than the market average. I currently have a price target of $600 on Apple.
Baidu, often called the Google of China, is one of China's biggest companies. Baidu currently dominates the Chinese search engine field with a market share of close to 70%.
One of the reasons for the drop in share price over the year is the fact that Baidu is facing stiff competition from Qihoo (QIHU) in the search engine business. Qihoo operates mainly as a mobile security provider but has migrated into the search engine business with its wide user base. Last month, Baidu fired back at Qihoo when it launched its own service called Baidu Antivirus. Baidu has made it known that it is a trusted company and looks to protect user privacy unlike other companies such as Qihoo.
Baidu currently has a forward P/E ratio of 15 which is why I feel the company is undervalued. I feel that Baidu will be able to overcome its recent challenges and with its new products will reward investors who have patience. I have a Buy rating on Baidu with a $125.00 price target.
Priceline has been on a tear the last couple of years climbing almost 500% as it's reached a new 52-week high on Friday ($920.92). Just when I think Priceline's magnificent run is over, it just keeps climbing higher. Many analysts feel that Priceline will top $1,000 this year.
Priceline, known for its name your own price system, is one of the top travel companies in the entire world with all of its worldwide services. With a forward P/E ratio of 19, I feel that Priceline is still undervalued for the type of growth that it has given investors. I still have a Buy rating on Priceline with a $950.00 price target.
Dangdang is often times called the Amazon of China because of its marketplace program similar to that of Amazon.com (AMZN). Even though Dangdang has similarities of Amazon, it is not a true representation of it.
In May, Dangdang announced the launch of a Flash Sales Channel. So what exactly are flash sales? Flash sales are time-limited sales of products and service, offered by retailers at steep discounts to help offload surplus. Online retail sales in China are expected to more than triple by the year 2015, climbing to around $160 billion.
Peggy Yu Yu, Dangdang's Executive Chairwoman, talked about the future and direction of the company saying:
"Dangdang's marketplace enjoys rapid growth momentum and is an important driver to help transition our brand to an integrated online shopping mall. The Flash Sales Channel is our latest initiative in further enhancing Dangdang's open platform to attract more merchants, especially well-known brands, to our marketplace."
I find Dangdang to be a very attractive stock. The growth in China, as well as Dangdang's new shopping mall and flash sales, show great promise. It doesn't hurt that Dangdang's cash per share stands at $3.20. This means that almost 50% of Dangdang's stock value can be explained by its cash on hand. I have a Buy rating on Dangdang with a $10.00 price target.
Yandex is commonly known by many as the Baidu and Google of Russia. However, unlike some of its peers, Yandex not only serves the local people of Russia but internationally as well with countries such as Turkey and the Ukraine depending on Yandex.
Yandex has a market share of around 62% in Russia, and continues to fight off Google in the search engine field. Shares of Yandex have been on a roll this year as they are up over 30% year to date.
Analysts have predicted a 36% jump in net income for Yandex in 2013 which is higher than most of its internet peers. Erik Lam, director of Asian equity sales likes Yandex saying, "Even though Yandex looks a bit pricey, it's pretty tough to argue against it if you look at the pace of its latest earnings growth in comparison with global peers." I like Yandex as well, as I currently have a Buy rating with a $35.00 price target on it.
Youku Tudou is often known by many as the YouTube of China. Youku is actually China's leading Internet television company with hundreds of millions of users.
Just last month, Chinese web giants, Youku Tudou and Sina (SINA) teamed up as they agreed on a strategic content-sharing alliance that benefits both parties. In the deal, in exchange for access to Youku Tudou's video library, Sina will leverage its PC and mobile platform to promote Youku Tudou's licensed content to its Weibo users. The alliance between the two will also draw even bigger gains in mobile traffic as both companies have hundreds of millions of users.
Dele Liu, President of Youku Tudou talked about the alliance saying:
"Creating and sharing content is at the core of the Internet, and Youku Tudou's cooperation with social networking sites such as Weibo is a powerful move towards deepening consumers' online video viewing and sharing experience. We look forward to showcasing our content in new and innovative marketing formats as we work to expand our lead in the online video industry."
Next month will be the one year anniversary celebrating the merger between Youku and Tudou. The merger has helped Youku generate revenue and decrease costs. Analysts expect revenue to surge nearly 50% next year. I have a Buy rating on Youku with a $28.00 price target.
Pandora has been on a roller coaster ride over the last year or so as its stock price has bounced from the low $7's all the way up into the $20's.
One of the reasons for such a price increase over the last little bit has been because of Pandora's better-than-expected earnings results. During last quarter's earnings results, we learned that mobile listening hours and mobile ad revenue reached record highs. Investors have been pleased with the results and the record highs that Pandora continues to set. However, will Pandora be able to keep it up?
A couple of weeks ago Apple unveiled iTunes Radio. Many analysts and investors still have a wait and see approach with iTunes Radio to see what kind of impact it will have on Pandora and other companies. I personally feel that Apple will need some time for customers to jump on board with iTunes Radio. I feel that Pandora won't feel the heat from Apple until sometime next year. On that note, I have a Buy rating on Pandora with a price target of $21.00.
Vipshop is China's leading online discount retailer. Vipshop offers branded products to consumers in China through flash sales on its vipshop.com website. Shares of Vipshop are up 800% over the last year or so and look to continue flying. Who is going to stop them?
Looking over last quarter's earnings report, we can see that Vipshop net revenues increased over 200% to US$310.7 million from US$101.3 million in the prior year period. For the upcoming quarter, Vipshop expects to see net revenues between US$330 million and US$335 million, representing a year-over-year growth rate of approximately 144% to 148%.
Now who wouldn't want to buy a company that is growing 100-200% year over year. I like Vipshop a lot as I have a Buy rating on the company with a price target of $40.00.
Vringo, together with its subsidiaries, engages in the innovation, development and monetization of its mobile technologies as well as its intellectual property. Most investors know Vringo because of its court case against tech giant Google (GOOG).
On November 6, 2012, a jury unanimously returned a verdict award for Vringo amounting to $30.5 million in respect to past damages by the defendants' infringements commencing from September 15, 2011. It was also confirmed that Vringo would also be compensated by Google, with a running royalty rate of 3.5% through 2016. Estimates have royalties in the range of $635 million that Vringo would be receiving.
Vringo and Google are both awaiting Judge Jackson's post trial ruling as Vringo has asked the judge to award it an enhanced royalty rate between 5-7% because of Google's ongoing infringement. If such an award is indeed granted, Vringo would collect over one billion in royalties. Not bad for a small company that Wall Street currently values at two hundred and fifty million.
Over the last couple of months, a number of positive developments have taken place for Vringo. First, it was able to come to a licensing and settlement agreement with Microsoft (MSFT), as well as being added to the Russell indexes. Investors are also looking forward to the ZTE case, which begins in October. It doesn't hurt either that insiders are buying shares, signaling their belief in the company. Remember there is only one reason for insiders to buy shares. That is to make money. Investors in the stock market must remember that insiders have access to every bit of company information that you could ever want. Based on this insight, it would be tough to bet against the company. I have a Buy rating on Vringo with a price target of $8.00.
Since starting my portfolio on April 1, 2013 (the start of the second quarter), it has grown to over 20%. Not bad for a three month span. So what technology stocks do you like for 2013-2014? Do you have a top 10 list? If so, I would love to hear what your technology portfolio would look like over the next year or so.
Disclaimer: I'm currently long Vringo, and look to add more of the companies mentioned in this article. Investors are always reminded that before making any investment, you should do your own proper diligence on any stock mentioned in this article and to make sure you are comfortable with your investment strategy. Have a great day and as always, I look forward to hearing your thoughts or questions that you might have.