All posts by Dana Blankenhorn

Technology

5 Cloud Stocks to Help Your Portfolio Fly

Source: Shutterstock

Cloud stocks are divided into three categories: the cloud owners, the cloud arms merchants, and the cloud users.

The five Cloud Czars — Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon.Com (NASDAQ:AMZN) and Facebook(NASDAQ:FB) — all built clouds with cash flow from existing businesses. Apple and Facebook still run this way.

Clouds are built on open source software and commodity hardware. They’re meant to give their biggest benefits to users. Companies built using the cloud can become huge, like Netflix(NASDAQ:NFLX), Intuit (NASDAQ:INTU), Adobe (NASDAQ:ADBE) and Salesforce.com(NASDAQ:CRM).

Then there are the cloud arms merchants, companies whose main business is providing hardware and services to cloud owners. These include Nvidia (NASDAQ:NVDA), Intel(NASDAQ:INTC), Cisco Systems (NASDAQ:CSCO) and Dell Technologies (NASDAQ:DELL).

Analysts have lately become enamored of cloud arms merchants as large enterprises build their own data centers on the cloud model, creating the “hybrid” cloud. That’s the first place to seek cloud growth today.

Here’s how to get your share.

Microsoft (MSFT): The Unpunished Czar

Is a Death Cross Brewing in Microsoft Stock?

Source: Shutterstock

Elizabeth Warren says she wants to break up the Cloud Czars, saying that they’re too powerful.

All but one: Microsoft (NASDAQ:MSFT).

Why not break up Microsoft, especially since it’s now the most valuable company on the board, a market cap of over $900 billion, supporting 2018 revenues of $110 billion — nearly one-third of which it turned into operating income?

Maybe it’s because Microsoft pays its taxes, including almost $20 billion worth last year. But it’s also because Microsoft has already been visited by the antitrust police, 20 years ago. It paid dearly, losing its monopolies in PC operating systems and applications and then drifting for over a decade, held down by lawyers and fear.

Satya Nadella relaunched Microsoft as a cloud player in 2014, though Microsoft’s Azure cloud isn’t a monopoly. Nothing Microsoft does is a monopoly any more. Sony (NYSE:SNE) bests it in gaming  and its Edge browser and Bing search engine are considered also-rans.

But Microsoft is competitive in every cloud niche, it has a dividend yielding 1.6%, its trailing price-to-earnings ratio sits at under 30 and its public profile is low enough to stay well away from regulators. It is once-burned, twice-shy — a sadder but wiser cloud company.

International Business Machines (IBM): Big Blue Lays it All on Red

International Business Machines (IBM): Big Blue Lays it All on Red

Source: Shutterstock

International Business Machines (NYSE:IBM) has bet its future on buying Red Hat(NYSE:RHT) for $34 billion and making itself into a private cloud play.

Since the deal was announced in October, IBM shares are up 25%, well over the 16% gain of the Nasdaq. The shares are still cheap, sporting a P/E ratio of under 15 with a $1.57-per-share dividend paying a yield of 4.5%. Its market cap is just 1.5 times its sales, also cheap for a technology stock.

IBM was late to the cloud party because its older businesses did not need the cloud to operate. Mainframes were sort of clouds before clouds existed, and IBM has monopolized that business for decades. But clouds are slowly sinking that business, and IBM was run out of its old niches in PCs and minicomputers by Chinese competition, eventually selling most of its hardware units to Lenovo (OTCMKTS:LNVGY).

Instead, IBM sank its cash flow into the dividend. It bought a small cloud player called Softlayer, but wasn’t big enough to compete in public cloud. The idea behind the Red Hat deal, as the press release on it stated, was to transform IBM into a “hybrid cloud” provider.

The strategy is simple to describe. Red Hat software, including its Linux operating system and OpenShift (which lets companies put their own software into clouds as self-contained “containers”), will be offered by both Red Hat and IBM’s existing programmers. Enterprises can replace their aging data centers with small clouds, then quickly scale customer services compatible with those internal systems on public clouds.

If the strategy works, the value of IBM stock could easily double from here within a year, as it becomes a premier cloud merchant. But there is a lot of competition. It’s your cheapest speculation in the cloud.

Palo Alto Networks (PANW): Securing the Cloud

Palo Alto Networks (PANW): Securing the Cloud

Palo Alto Networks (NYSE:PANW) has gone from zero to $22.5 billion in market cap since 2005 on the back of cloud security.

Originally a “next-generation firewall” company, providing security products to keep bad guys out of data centers, Palo Alto has spent over $1 billion on acquisitions in the last two years. Most recently it bought Demisto, an Israeli security company, for $560 million. Demisto is in the business of “orchestrating” or automatically organizing a company’s security efforts using machine learning.

All this has given Palo Alto a cloud-like valuation. That $22.8 billion market cap supports just $2.2 billion in fiscal 2018 revenue. It should grow to $2.5 billion in fiscal 2019, which ends in July. Fast growth means all that money goes back into the business. There are no profits. But operating cash flow has grown consistently and will blow past $1 billion this year.

Palo Alto’s move to cloud is transforming the revenue mix into monthly subscriptions instead of one-time payments, making it a favorite among analysts.

The company is in a key niche, security, and leading with today’s key customers, those with clouds.

ServiceNow (NOW): Automating Workflows in the Cloud

Cloud Stocks: ServiceNow (NOW): Automating Workflows in the Cloud

ServiceNow (NYSE:NOW) may be the biggest software company you’ve never heard of, thanks to the cloud.

ServiceNow is in the business of automating workflows. Its cloud-based platform organizes the movement of information among employees and customers. It started within computer departments in 2004, and has since expanded into serving entire enterprises, both internally and externally. The concept is that “work is the killer app,” and its latest update, dubbed Madrid, applies this to the mobile world as well as the desktop.

Shares rose 43% over the last year, despite the tech wreck. More important, they’re up almost 300% over the last five years. The $43.8 billion market cap is held up by $2.6 billion in 2018 revenue, up from $1.9 billion a year earlier. That’s growth people will pay for, even absent profits, and the company came close to break-even last year, losing just $26 million.

That computer workflow management piece of the company includes cloud management, making it a key competitor in the hybrid cloud world. It works with Microsoft but also Amazon’s AWS and VMware (NASDAQ:VMW).

ServiceNow has 37 analysts following it now, 28 of whom give it buy ratings . It’s expected to finally become profitable in 2019, to the tune of $3.10 per share.

VMWare (VMW): Essential Infrastructure

Cloud Stocks: VMWare (VMW): Essential Infrastructure

Source: Shutterstock

In addition to commodity hardware, two key technologies were required to make the cloud work.

First comes virtualization, a virtual operating system that runs on top of applications and lets them all run regardless of the operating system they’re written for. Then comes distributed computing, in which jobs can run on part of one computer, on several, or on thousands at once.

So before there could be clouds, there was VMware, serving up virtualization. In the last decade it was the more-profitable spin-off of EMC, and 80%-owned by that company, which makes large data storage systems. Today EMC and VMWare are part of Dell Technologies but its tracking stock still trades, and since its new parent went public at the end of 2018 it’s up 33%.

VMWare is a prize for analysts, investors and Michael Dell, who paid $67 billion for EMC (and its 80% stake in VMware) in 2015,  because it is a lean, mean profit machine. Revenues have gone from $6 billion in fiscal 2017 to $8 billion in 2018 and to $9 billion for the 2019 fiscal year, ending Feb. 1, with net income rising to $2.4 billion last year. That means VMWare trading at “just” 8.5 times sales, which is considered affordable for the growth.

For the world of hybrid cloud, VMWare now offers its own operating system, Cloud Foundation,which runs on EMC hardware . This lets companies easily connect their existing VMWare data centers to public clouds like Amazon’s. It has also signed a partnership with Microsoft to converge their previously competitive hypervisors , the software that makes virtualization possible, bringing some of its customers to the Microsoft cloud.

VMWare already is where IBM wants to be.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.comor follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT, AAPL and AMZN.

Source: Investor Place

Pot Stocks

Tilray Stock Mania Holds Its Breath as Earnings Approach

The social stigma against marijuana continues to slowly dissipate.

Tilray Stock Mania Holds Its Breath as Earnings Approach

Source: Shutterstock

A construction worker’s pick-up truck passed me twice during a recent walk, apparently looking for a job site, the smell of marijuana smoke redolent in the air. It’s still illegal to smoke in Georgia, but that doesn’t mean the illegal market isn’t operating …

But what about the legal market?

Stock in Tilray (NASDAQ:TLRY), the Canadian pot company, now sits finely poised between earnings due on today after the bell and a shortage of stock to short.

Tilray stock is expected to lose 12 cents per share on revenue of $14.15 million. (Earnings Whispers puts the numbers for earnings and revenue at -15 cents and $17.69mm, respectively.) But that may be less important to speculators than Tilray’s efforts to create credibility with the marijuana and general investor communities.

Consider the following: Tilray has appointed Andrew Pucher, a former managing director at Goldman Sachs (NYSE:GS), as chief corporate development officer.

Pucher joins a team that now includes former executives from Nestle (OTCMKTS:NSRGY), Diageo (NYSE:DEO), Coca-Cola (NYSE:KO) and Starbucks (NASDAQ:SBUX). Further, Tilray has a partnership with Novartis (NYSE:NVS), a joint venture with Anheuser-Busch InBev(NYSE:BUD) and a production agreement with the privately-held Authentic Brands Group.

Finally, Tilray last week announced a deal to buy Manitoba Harvest from Compass Group(NYSE:CODI) for about $315 million.

With all this corporate star power and deal-making, you would think Tilray would be a major pot producer.

What About the Product?

What product?

Tilray sold no marijuana during the first two weeks after Canada legalized it in October. CEO Brendan Kennedy insisted that this will have changed by this quarter, while simultaneously announcing he bought producer Natura Naturals for $26.3 million. If all this is leaving you skeptical about the company, you’re not alone …

Tilray short interest recently stood at 4 million shares, 24.62% of the company’s float, and there’s no more available to borrow. That’s why shares of a company that may report revenue of $17 million trade at a market capitalization of almost $7 billion.

The other is that most of the shares don’t trade, with over 78% held by “individual stakeholders.” There are 79 million shares outstanding.

The Marijuana Market

Speculators are betting that over the next few years, many more U.S. states will legalize marijuana sales and are looking to legislators for guidance.

New Jersey is the latest with a bill to allow recreational sales. Meanwhile, Massachusetts is getting a network of pot shops, debate has begun in Connecticut and New York Governor Andrew Cuomo is pushing the issue.

But despite the examples of Colorado and Washington, the path to legal pot is still not a straight line.

Minnesota Republicans recently rejected a legalization effort, prospects are dimming in New Mexico and New York’s move is being held up by black legislators who want specific provisionsfor their communities to benefit.

As a result, most moves lately have been toward legalizing medical marijuana, with doctors’ prescriptions and extensive regulation. Florida is moving in that direction. So is Oklahoma.

All that said, marijuana remains an illegal drug under U.S. law.

People are still being put in jail for marijuana offenses and Tesla (NASDAQ:TSLA) CEO Elon Musk may lose his SpaceX security clearance after being shown on video smoking pot on a podcast.

Bottom Line on Tilray Stock

Despite the success of Colorado, where marijuana sales are now growing at only single-digit rates in the fifth year of legalization, the product remains controversial.

Tilray and its competitors are preparing for an opportunity that may not come to them for years. Meanwhile, marijuana stocks have been bid well beyond fundamentals. A lot of people are cashing big paychecks, and the dream of a well-regulated American pot market remains hazy.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.comor follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this article.

Source: Investor Place

Technology

3 Beaten-Down Tech Stocks You Can Buy Now

Source: Shutterstock

The latest October collapse of tech stocks has unveiled many bargains. Some are obvious. Others are less so. For investors with cash to spend, tech stocks that have been beaten down offer good value. You can buy at these levels and feel confident that in five years your money will have built something.

But the obvious buys are not always the obvious names. That’s because, as with recessions, corrections do show the bankruptcy of some business models. Not everything will come back.

So, tread carefully.

Here are three stocks, ranked from the most obvious to the least obvious, that I think will rally from here.

amazon stock

Source: Shutterstock

Amazon (AMZN)

Since Sept. 27, Amazon (NASDAQ:AMZN) shares have fallen 18%. Founder Jeff Bezos’ personal fortune has dropped by about $27 billion. But Amazon will come back. During 2018 it solidified its position as the only choice for e-commerce infrastructure. When the Administration moved to increase postal rates, Amazon yawned, because it has already invested in delivery infrastructure to become independent of the U.S. Postal Service.

If the anti-trust police come after Amazon it will have millions of allies, because 53% of its salesare generated by third parties. While Walmart (NYSE:WMT) is taking inventory risks, Amazon is laying those off, acting more like a franchisor than a franchisee. It gets increased margins without battling over prices. It also has thousands of businesses, large and small, who will go to bat for it if the anti-trust police ever come calling.

At its Oct. 29 opening price of $1,645 per share, Amazon is selling for 3.5 times its anticipated 2018 revenue of $230 billion. That’s still high for a retailer, but low for a tech company. Only 60% of sales in its third-quarter report came from products. The rest was in services, and $6.7 billion of that was from Amazon Web Services, where 31% of revenue hit the net income line.

With revenue growing 34% per year, AWS growing at 42% per year and international revenue now 31% of the total, Amazon stock is a can’t-miss proposition.

Investors Won't Believe the Micron Stock Hype Without Evidence

Source: Shutterstock

Micron (MU)

Micron Technology (NASDAQ:MU) is cheap, but for a good reason. Its price-earnings multiple of 3 is misleading — memory chips are commodities, and those earnings could disappear in a flash. For fiscal 2018 they were huge, $14.1 billion, or $11.51 per share, on revenue of $30.4 billion. But in its conference call announcing those earnings, chief financial officer Dave Zinsner cut his earnings forecast for the current quarter.

That announcement spawned the recent wreck of tech stocks. Since Sept. 20 Micron shares are down 18.7%, opening for trade Oct. 29 at about $36.50 per share. The market cap of $40.2 billion is just one-third higher than last year’s sales of $30.4 billion.

In past technology cycles, memory prices have collapsed. Micron has been left in terrible shape. It had started making PCs before the last recession and declared bankruptcy on that unit. After the dot-com bust, between May 2001 and early 2003, Micron stock lost 80% of its value.

But it may truly be different this time. CEO Sanjay Mehrotra rode out several tech recessions as co-founder of SanDisk. Micron is buying out Intel (NASDAQ:INTC) in flash memory, forcing Intel into the arms of Chinese partners the Administration may not want it to have.

Then there’s the supercycle. Memory and intelligence are being added to millions of previously inanimate objects. Consumer products are coming under voice control, city streets are being automated, cars are becoming intelligent and industrial service cycles are becoming automated. It’s a trend that’s just getting started, with the number of networked devices expected to top 50 billion in just two years.

Who needs crypto-miners, or even cloud data centers, when you have a sure thing like that?

IBM Stock Drops in Pre-Market Trading on News of $33B Red Hat Acquisition

Source: Shutterstock

International Business Machines (IBM)

At its October 29 opening price of $120.60, International Business Machines (NYSE:IBM) has a market cap of just $114 billion, on expected 2018 revenue of $79 billion. It’s super cheap, especially with a dividend of $1.57 per share, still supported by earnings, yielding 5%. But that’s not the reason to speculate on its comeback. The reason to buy is its $34 billion acquisition of Red Hat (NYSE:RHT), the leader in cloud software, and what it portends for the company’s future.

What it means is that IBM is finally serious about open source and the cloud, with which it has had an on-again, off-again relationship for decades. IBM did buy cloud provider Softlayer for $2 billion in 2012, but it was still lagging, focused on creating “solutions” rather than offering tools, as Microsoft (NASDAQ:MSFT) does.

But the cloud is a tools business, built on open source software that customers can adapt and even contribute to. Red Hat is the unquestioned leader in this business, and since it will represent 30% of IBM’s value when the deal closes in 2019, IBM will have to listen to it.

This analysis is highly speculative, but I’m not the only reporter making it. Red Hat CEO Jim Whitehurst should be the first person IBM turns to as a successor to IBM CEO Ginni Rometty, who is 61. That’s about the age previous IBM CEOs like John Akers and Sam Palmisano were at retirement.

If she does make that announcement, IBM stock is going to soar.

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Source: Investor Place 

Pot Stocks

3 Pot Stocks that Stand Out in the Crowd

Source: Shutterstock

Pot stocks are as hot in 2018 as bitcoin was in 2017.

Advocates insist, however, that marijuana will not suffer the same fate because there is a real market to be served — and a real product to sell. Canadian legalization alone is expected to result in sales of $5-7 billion next year, and many U.S. states are looking enviously at Colorado, the first state to legalize recreational marijuana.

Thus, valuations in the cannabis sector are extremely high, and they have recently been correcting.

The Canadian market officially opens Wednesday, so speculation and excitement over pot stocks are at a fever pitch. It’s not just about smoking. Edibles, oils and the possibility of pharmaceuticals are also driving money into the market.

And in this still very speculative space, every pot stock has to have a gimmick, which lets it stand out and convinces investors that it’s less risky than those other marijuana stocks. This gimmick could be a corporate investment, it could be technology or it could be raw distribution power waiting for the U.S. market to open up.

Here are 3 pot stocks with less risk.

Canopy Growth (CGC)

Source: Shutterstock

What makes Canopy Growth (NASDAQ:CGC) stand out among pot stocks is the $4 billion Constellation Brands (NYSE:STZ) put into the company a few months ago.

Constellation is one of the largest — and smartest — liquor companies in the world, having begun as a small New York wine producer and grown into a giant with beer brands such as Modelo and liquor brands such as Svedka vodka.

Constellation is a legitimate player, with $7.5 billion in revenue, a dividend of nearly $3 per year, and a market cap of $42.66 billion. Their willingness to put a big portion of that into Canopy, for a 38% stake, put the whole sector into overdrive.

CGC stock’s $11.46 billion market cap, however, is built on sales of $77 million in 2017, $48 million for the first six months of 2018, and a lot of hype. On October 15, Canopy paid about $330 million to acquire the assets of Ebbu, a hemp research company in Colorado.

Cronos Group (CRON)

Drug Company Partnerships Set Cronos Stock Apart, but Not Enough

Source: Shutterstock

What sets Cronos Group (NASDAQ:CRON) apart — besides its partnerships with pharmaceutical companies like Gingko Bioworks, which wants to produce cannabinoids through fermentation — is the fact that it was the first pot company to list on the Nasdaq. Also, since listing in Canada in 2016, CRON’s value has grown 6,500%.

CRON’s valuation is not built on sales, however. Cronos reported revenue of just over $4 million in 2017, and about $6 million for the first six months of 2018. The balance sheet showed just $5.3 million in debt in June, against $9.2 million in cash, and operating cash flow was approaching balance.

By pushing the idea of marijuana as a pharmaceutical, and as a raw material from which drugs can be extracted, Cronos hopes to enter the U.S. market with products before mass legalization, and thus gain scale it can use to grow into the market as it matures.

Of five analysts following the stock, two currently have it on their buy lists.

MedMen (MMNFF)

Wait for the Next Big Correction to Jump on Canopy Growth Stock

Source: Shutterstock

MedMen Enterprises (OTCMKTS:MMNFF), based in Culver City, CA, makes no pretense to being anything than what it is: a marijuana dispensary. It’s not a Canadian company, and it’s not a pharmaceutical company. It sells pot to medical marijuana patients who need it and recreational users — in locations where recreational use is legal.

The goal of MedMen is to gain distribution in the medical pot business that will let it expand into the recreational side as it develops. It has dispensaries in 4 U.S. states, including high-profile locations like Manhattan and Las Vegas.

MedMen went public in May but the stock didn’t see much action until last week. MedMen announced an acquisition of PharmaCann for a reported $682 million in stock. Buying medical will add licensed dispensaries in other states, mainly in the Midwest, to its network, giving it a total of 79 cannabis facilities in 12 states.

The deal sent MMNFF stock rocketing. Since the announcement, the stock is up 51%. While other pot stocks have been falling lately, MedMen is powering ahead.

CEO Adam Bierman said that the acquisition makes MedMen “the largest U.S. cannabis company in the world’s largest cannabis market” — and that sounds like a good place to be in as more U.S. states move toward full legalization.

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Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Uncategorized

3 Best Wireless Stocks to Buy for the 5G Rollout

Source: Shutterstock

Looking over the last two to five years, the best wireless stock name jumps right out.

It’s T-Mobile US (NASDAQ:TMUS). The company has continued to grab marketshare with its “Un-carrier” ads and CEO John Legere ditching his suit to dress like an aging hippie. But the game is changing. Since bidding to buy Sprint (NYSE:S), the two stocks have moved in near lock-step.

But more importantly, there’s 5G to consider. The next mobile technology, which will make frequencies as high as 28 GHz usable by carriers, and offer speeds equivalent to wired broadband, will also cost billions of dollars to implement.

So which are the best wireless stocks to buy for the 5G rollout?

5G Wireless Stocks to Buy: T-Mobile Sprint

How the T-Mobile Stock Merger Changes the Landscape for Wireless Carriers

Source: Mike Mozart via Flickr (modified)

T-Mobile should still be on your list of mobile stocks to buy, especially if they win approval of the Sprint deal, which is not yet certain. Over the last three months the performance difference between the two stocks has widened again, as uncertainty over the merger’s future has grown.

The uncertainty is thanks to the Administration’s on-again, off-again merger policy, which still seeks to keep AT&T (NYSE:T) from buying Time Warner (even after it has done so), is stopping all Chinese money at the border, and appears inconsistent to critics.

T-Mobile says it’s already deploying 5G, across all the spectrum it owns, and that the merger will increase competition  because the combined company will be as big as AT&T and Verizon Communications (NYSE:VZ).

Sprint has claimed its 5G plans will deliver speeds 15 times greater than present 4G technology. The company believes new 128-radio Massive Input Massive Output (MIMO) gear will get it to market faster than competitors, using existing 2.5 GHz spectrum, targeting service next year. The merger with T-Mobile should help Sprint keep these promises.

5G Wireless Stocks to Buy: AT&T

Is AT&T Stock and Its Dividend a Must-Buy Ahead of Earnings?

Source: Shutterstock

I own AT&T. I’ve been disappointed with the stock, but it remains a good investment for you because it’s dirt cheap.

The company’s 50 cent per share quarterly dividend now yields over 6%, it has a price to earnings multiple of 6.4, and it has earnings to cover that dividend. The struggle with the Justice Department over Time Warner will eventually end, the balance sheet shows it has assets to afford 5G deployment, and it is already rolling out the technology in major markets.

The 5G data signals run so quickly that fiber is often needed for backhaul to get the full effect, and the company has been rolling out fiber for years.  Its purchase of FiberTower was controversial… because it might give AT&T an unfair advantage when it comes to 5G rollout frequency.

AT&T dominated 4G and is ready for 5G.

5G Wireless Stocks to Buy: Google

google stock

Source: Shutterstock

Your best bet for 5G profits is a speculative surprise.

It’s Alphabet (NASDAQ:GOOGL), also known as Google.

Google laid fiber cable behind my house a few years ago but didn’t light it because the per-house cost of running the wire was prohibitive.

With 5G, that problem goes away. Google says it wants more frequencies to be shared, the way WiFi is shared, and thinks sales of spectrum slow innovation, but the government still plans to start auctioning 24 GHz and 28 GHz spectrum in November, and Google is the only potential bidder with a crying need.

High frequency spectrum would let Google deliver its Fiber service to consumers with radios, rather than running wires, and make that profitable. Gaining spectrum wouldn’t just let it deliver fixed broadband but make it a true wireless carrier.  No wireless company can compete with Google’s balance sheet, with $4 billion in debt on nearly $200 billion in assets.

I had shares of Google, but got out when it crossed $1,000, and that was a mistake. Google’s price to earnings multiple of 52 makes is super-expensive right now, but the next stock market correction is likely to hit it hard, and when it does I’ll be a buyer.

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Source: Investor Place 

Technology

Alphabet Inc’s Google Is Still Growing, But Where Is It Going?

Alphabet Inc (NASDAQ:GOOGL) shares have risen 37% over the last year, beating the NASDAQ average. When it reports earnings on February 1, Google is expected to announce over $100 billion in revenue for 2017. If Alphabet meets estimates, the company should show earnings per share (EPS) of $32.33 for the year.

The question for investors: At a time when Google is entering more competitive markets, does 15%  growth in revenue and earnings justify a price of $1,138 per share?

As I’ve written before, Google is no longer just a cloud company, but a cloud-and-devices company. And in this new market, it finds itself fighting against companies just as good as itself, like Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN). The company is also working against new political headwinds.

Google Is Still Growing

Despite slowing growth and storm clouds on the horizon, Alphabet stock keeps rising because its earnings multiple keeps rising. The price to earnings multiple is currently at 39, up from 30 a year ago.  Yes, the average S&P 500 stock is now at a PE of 26, but does GOOGL deserve the premium, and does the S&P deserve the price?

Google is now third on Fortune’s list of the most-admired companies, which is great. But the two companies ahead of it are Apple and Amazon, increasingly competitors.

To further branch out, Google is making yet-another attempt to crack the Chinese market, signing agreements with Tencent Holdings Ltd (OTCMKTS:TCEHY), and investing in Chinese technology companies.

Google will benefit more from having its devices manufactured in China than China will from Google’s presence due to the country’s strict internet censorship and policies which don’t favor foreign tech companies.

Where Does Google Go From Here?

Right now, Alphabet is focusing its investments on expanding its cloud footprint, laying more fiber cable globally and trying to crack the developing AI market currently led by Amazon.

It is this competition with Amazon that Google bears are watching most closely. More online shoppers are using search engines to find products than before, but in the U.S., 49% go to Amazon first. Amazon is growing faster than Google in entertainment — thanks to its Alexa speakers and Fire Stick. The two companies are currently dueling across platforms and devices, with moves like Amazon disabling Fire Stick’s YouTube app four days before Google was planning to pull support.

Google appears to be waiting for better wireless technology before moving toward the high-speed internet sector currently dominated by Verizon Communications Inc. (NYSE:VZ), AT&T Inc.(NYSE:T) and Comcast Corp. (NASDAQ:CMCSA). The comany has pulled back on Google Fiber, no longer announcing new cities or even lighting fiber it’s laid in the ground. Experiments with serving homes from poles are continuing. 

The Bottom Line

While Alphabet remains a great company and a good stock, it’s facing new competition on multiple fronts where victory for it is uncertain.

Google’s growth continues to slow, thanks to the law of large numbers. And as its competition with Amazon increases in both cloud and devices, its margins are not going to accelerates.

The company has $86 billion stashed overseas and could bring some of that back to the U.S., benefiting shareholders. But Google is a global company. It needs the cash where it is, and Apple stock didn’t exactly take off like a rocket when it announced its repatriation scheme.

So why again am I supposed to pay a premium PE for this stock?

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Source: Investor Place

Cryptocurrency, Technology

Where Is Blockchain Heading? Your Questions Answered

The talk around bitcoin, cryptocurrency and blockchain is getting silly.

This is because now that the mainstream business media has hold of the story, they’re desperately trying to fit it into past patterns. History may rhyme, but it never repeats.

The TV machine trots out so-called “experts,” employees of large companies and salesmen, who are just as clueless as you or I about what will happen. Instead, they trot out theories and talk analogies. It’s 1994 for blockchain, they say (maybe). They say some of the dot-com winners went on to great things — look at Amazon.com, Inc. (NASDAQ:AMZN) (name three more).

I was there. In 1999, I was an “e-commerce expert” with a six-figure paycheck. In 2002, I made precisely zero dollars. Same in 2003.

The truth is that almost every company we thought would be worth something in 1999 turned out to be worth nothing. It even took Amazon 10 years to get back to its 1999 price. If you were near retirement in 1999, you probably weren’t around to see it.

What about Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Facebook, Inc.(NASDAQ:FB)? Google didn’t become public until 2004. Facebook didn’t exist in 1999. Apple Inc. (NASDAQ:AAPL)? The iPhone was still eight years away.

Forget first-mover advantage. Look for second-mover advantage — the guy who learns what the first mover is doing wrong and takes over from him (or her).

One of the more hilarious calls of the dot-com “experts” in the 1990s was to tell Yahoo! to stop focusing on mere “search” and become a “portal.” Buy GeoCities, they said. Buy Broadcast.com. Yahoo! did.

What we know, from history, is that first-mover advantage in the internet age wasn’t worth a thing. Even Bill Gates knew nothing. If you want to chuckle, read Gates’ 1995 “magnum opus,” The Road Ahead. He barely had a clue. And if Bill Gates didn’t have a clue in 1995, neither do you.

I’ll take your questions now.

Is bitcoin a bubble?

Yes.

Are the other alt-coins bubbles?

Yes.

Does that mean they’ll all be worth nothing in a year?

No, but most will.

Can I tell the difference, right now, between the winners and losers?

Not bloody likely.

What about ICOs?

You mean you want to buy something you can’t value, that’s completely unregulated, and that might be as phony as Bitconnect, which closed Jan. 17 after being accused (repeatedly) of running a Ponzi scheme? Have fun!

What about blockchain? Is blockchain like the internet in 1994? Is it going to create enormous value over the next 20 years?

Why, yes. It will also destroy millions of jobs, including high-salary jobs — especially for those in the business of making premature predictions.

How, then, do I get ready for blockchain?

The only stock I can recommend is Microsoft Corporation (NASDAQ:MSFT). The combination of blockchain and the cloud is the raw material from which a lot of great stuff is going to come. We just don’t know what it is yet.

If you want to go out on a limb, try some IBM (NYSE:IBM). It’s grabbing on to blockchain like a dying man grabs for a cancer cure. It also has cloud-related business. Maybe something will come of it.

Beyond that, understand what blockchain does, and in the future, look for companies that prove an ability to make markets with it.

Here is all you really need to know.

Blockchain automates trust.

It does this by encrypting each block of a database, organized as a general ledger. Buyers and sellers can be tied to transactions, bids and asks, without being identified until after the deal is done, if then.

All that paper you shuffled to get a car loan or a mortgage and all those forms you filled out at a doctor’s office or for the government? They’re just blocks in a chain. We can find them, we can refer to them, and we can make them legally enforceable so you never need to fill out a form again.

Let that help you get to sleep at night.

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Source: Investor Place