Over the weekend on the Online Money Show, a radio show featuring Seeking Alpha contributors and their views on key market events, I interviewed Galileo Russell about cloud computing and the author's recent article entitled 'Blue Skies Ahead for Cloud Security Powerhouse Websense'. This show is a must listen for anyone who may be 'cloud computing challenged' and feeling left out of possible inveting opportunities in this fast growing tech industry.
During the show, Galileo and I did an overview of cloud computing that I called cloud computing 101. We then discussed the future of the cloud, the major players and primary competition and a cloud security company called Websense (NASDAQ:WBSN). Galileo believes Websense is the best way to play the emerging cloud computing trend and he offers compelling reasons to support his thesis. He explains why he believes that companies like Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Salesforce (NYSE:CRM), Priceline (NASDAQ:PCLN), Citrix (NASDAQ:CTXS), just to name a few, should be left alone. Certainly not everyone will agree with this point of view, but Galileo's arguments are thought-provoking nonetheless.
The interview runs at just under 20 minutes and can be heard instantly by clicking play below:
www.OnlineMoneyShow.com Cloud Computing Show
Another possible cloud investment opportunity I bring up during the interview is the Powershares Dynamic Networking ETF (NYSEARCA:PXQ). This ETF offers exposure to a bundle of cloud stocks and is up 15% for the year. PXQ is one way to play the future of cloud computing if you are bullish. A few key PXQ holdings are Riverbed Technology (NASDAQ:RVBD), VMWARE Inc (VWM), Qualcomm (NASDAQ:QCOM) and Cisco (NASDAQ:CSCO).
Galileo's impressive presentation made me consider possible trades on Websense. The stock on Thursday was trading at $24.07 and the JAN 2012 $22.50 call option could be purchased for $3.90. If the stock gets to $30 anytime between now and next January, you have basically doubled your money. With so many networks being hacked right now, companies that provide cloud security very well may begin to trade up.
Another play is to buy the stock and buy the JAN 2012 $22.50 put for $2. This makes your max loss $3.57 per share with a breakeven at $26.07 and gives you the rest of the year to see it rise. I also like the PXQ ETF because it is a true basket of cloud stocks but found the bid ask spreads to be a bit wide for my taste.
Disclosure: David Oldenburg have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Galileo Russell has no long positions in any stocks mentioned but may initiate a long position in WBSN over the next 72 hours.