Seeking Alpha
Independent research, long/short equity, tech
Profile| Send Message| ()  

In the mid-90s, I worked for a company that sold software to many of the companies in the midst of the desktop internet revolution. As I would leave the sales calls, I would call my broker to buy stock in those very same companies. Unbeknownst to me at the time I was laying the groundwork for my investment premise today.

  • Identify emerging trends as soon as possible: The build-out of the internet was a long term trend that would impact millions.
  • Buy leading stocks in trend: As investment dollars poured into the internet, the leading companies’ stock exploded as they reaped the majority of the profits.
  • Ride it as long as possible: Ride ‘em as long as they are printing money.
  • Jump off: When the trend stops going up move on. Much easier said than done.

When Apple (AAPL) released the iPhone in 2007, I knew it was the beginning of something. I wanted my BlackBerry to be able to do what my golf partner could do with this iPhone. I also realized that I wasn’t the only one wanting that capability. Thus, I began investing in the smartphone revolution by buying stock in Apple, Research in Motion (RIMM) and Nokia (NOK). Over time I began adding stock of companies that supplied components to the device makers as well as companies speeding up access to the data and services desired by mobile users.

As important as it is to identify the leaders, it as important to understand the ones that will be disrupted. Some leading companies simply do not embrace change enough. Ken Olson is the computer industry’s poster child for this. His quote in 1977 will live in infamy, “There is no reason for an individual to have a computer in his home.” Research in Motion is a company that I believe have hung on to their beliefs on mobile computing for too long. Each day more people are seeing it in a similar light.

As my thoughts on mobile evolve, it is taking me to places not quite as simple as Apple vs. RIM. In February, as it started becoming apparent that electronic wallets powered by Near Field Communications (NFC) chips may be the next big thing in mobile - I added NXP Semiconductor (NXPI) to my 8 Ballers of Mobile portfolio. The ability to pay for things using a mobile phone is interesting, but security matters may slow its adoption. I believe the ability to make local offers in context may take off faster. Imagine chatting with a friend on Twitter about buying an iPad. Then while on your way to the Apple store, you receive an offer from Best Buy for a free $25 iTunes card if you buy an iPad from them. I believe that some serious bucks will be made at this intersection of mobile, social and cloud, but the question is how to play it through the stock market?

Big Data is a term often associated with this area. I pinged a couple Twitter buddies about their favorite Big Data plays. Salesforce.com (CRM), Oracle (ORCL), IBM, EMC and NetApp (NTAP) were among the replies. I was leaning more towards data integration company Informatica (INFA). However, I got pretty pumped when I saw this interview about TIBCO (TIBX) and their 2 second advantage.

I love this comment by TIBCO’s CEO Vivek Ranadive,

In 20th century content was king. In the 21th century context will be king. We have so much data now, but the useful life of the data keeps coming down. And the amount of time that we have to do something about it is coming down even faster.

TIBCO’s software enables companies to process their data in context and faster (2 seconds before anyone else). Many companies have warehouses chock full of data, but processing it in real-time is a whole different ballgame. As you can imagine, TIBCO’s stock price is through the roof. It closed at a 52 week high on Friday and is up 140% over the past year. The company has also been subject to takeover rumors by HP (HPQ).

I may be a little late to the game with TIBCO, but will be spending a lot of time trying to find other companies in this domain. I bought a small starter position on Friday.

The 8 Ballers of Mobile portfolio is outperforming the S&P 500 15.8% vs. 4.9% YTD. Stocks are not equally weighted. Since the 8 Baller portfolio has a maximum of eight stocks, under performers are constantly being pruned. Combining this pruning strategy with the use of the 200DMA as a catastrophic stop should minimize the loss of the gains when the music stops.

Disclosure: Currently long: ARM Holdings (ARMH), NXP Semiconductor, Aruba Networks (ARUN), TIBCO, Open Table (OPEN), Sina Corporation (SINA), Apple. Positions may be sold at any time.

Source: Playing the Intersection of Mobile, Social and the Cloud