All posts by Joseph Hargett

Growth Stocks, Technology

Bigger Than Apple

With the end of 2017 approaching, I want to take a moment to look back at the past year. Think back to the beginning of 2017 for a moment. Fresh off the November election, I think we all expected the stock market to rally.

But did you expect the Dow Jones Industrial Average to be up more than 24%?

If you did anticipate a large gain for the Dow, what component did you have pegged as the top gainer? For many readers and investors, it was likely Apple Inc. (Nasdaq: AAPL). As you can tell from the title of this article, that’s not the case.

Since tech has been hot in 2017, and was on fire heading into the year, you might have guessed Microsoft Corp. (Nasdaq: MSFT) was the top Dow performer. Or maybe with President Donald Trump’s promised rollbacks of financial banking regulations, you had JPMorgan Chase & Co. (NYSE: JPM).

None of those things came to pass, however. Apple has only gained about 49% so far this year, while Microsoft is up 37%. JPMorgan has added a mere 22% despite all the bluster back in January over reversing Obama-era banking restrictions.

No … 2017 was the year for manufacturing and capital equipment. The No. 2 biggest gainer on the Dow in 2017 was Caterpillar Inc. (NYSE: CAT), with a year-to-date return of 58%.

You may remember that I first recommended CAT stock back on June 7, and then reiterated my bullish stance on September 20. CAT stock is up 43% since June, and is still powering higher on strong global demand for construction and mining equipment.

While a 58% return is nice, the biggest gainer on the Dow is currently up more than 88% since the start of the year. This company’s shares have also come in as the 12th-biggest percentage gainers among all U.S. NYSE stocks. What’s more, those gains could extend well into 2018…

Flying the Skies with Boeing Stock

The list of investors who picked Boeing Co. (NYSE: BA) to be 2017’s biggest gainer on the Dow has to be pretty short, especially compared to the list expecting Apple to rise to the top once again. But in 2017, the Boeing stock price was a bigger gainer than Apple.

While Apple was plagued with analysts’ delivery concerns (that were only partially true) regarding its new iPhone, Boeing was raking up multibillion-dollar deals to replace aging fleets across the globe.  Boeing’s “iPhone” launch was its unveiling of the new 737 MAX 10 at the Paris Air Show back in June.

The unveiling provided considerable momentum for Boeing, and by the beginning of December, the company had net firm orders for more than 660 aircraft on the year. By comparison, Boeing brought in just 668 orders in all of 2016, and leading competitor Airbus had only booked 333 net firm orders by the end of November.

Furthermore, December is typically a huge month for aircraft orders, with Boeing finalizing more than 200 orders in the last week of 2016. In short, Boeing is not only trouncing fellow Dow component Apple, it’s also blowing past direct competition from Airbus.

As a direct result of 2017’s strong performance, Boeing recently boosted its quarterly dividend to $1.71 per share — a year-over-year increase of 20%. The company is also returning additional cash to shareholders next year by approving an $18 billion stock buyback program.

And these solid fundamentals are all without the Republican tax plan in place. With many analysts expecting some form of tax plan from Congress, Boeing is sure to benefit.

Investing in Boeing Stock

The problem with Boeing stock is that the shares are a victim of their own success. BA has ridden support at its 20- and 50-day moving averages to fresh all-time highs near $295. While this normally wouldn’t be a bad thing, especially for current BA stockholders, it has placed the shares in overbought territory.

BA’s current Relative Strength Index comes in at 75, with readings above 70 typically considered overbought. What this translates into is a short- to intermediate-term pullback for BA stock, possibly to the $275 to $280 region, which is home to support in the form of BA’s 20-day moving average. A pullback to this area would definitely make BA a buy.

 

The list of investors who picked the Boeing stock price to be 2017’s biggest gainer on the Dow has to be pretty short. But they were right...

 

Finally, Boeing will release its fourth-quarter earnings results on January 21. Boeing is expected to report a profit of $2.87 per share, up from $2.47 per share in the same quarter last year. Revenue is expected to rise 3.8% to $24.17 billion.

Boeing has had a habit of besting Wall Street’s targets this year, so another stronger-than-expected report could help BA stock blow past overhead resistance at $300.

Just remember to wait for a pullback for a better entry price before taking the plunge.

Until next time, good trading!

Joseph Hargett

Assistant Managing Editor, Banyan Hill

In this exciting NEW VIDEO, Wall Street legend and former multibillion hedge fund manager Paul Mampilly pulls back the curtain on the biggest investment opportunity in the market today. What insiders are calling “The Greatest Innovation in History,” this revolution will mint more millionaires and billions than any technology that came before it. Right now, the current market for this technology is just $235 billion, but given how fast this technology is moving experts predict it will soar to $19 trillion by 2020. But 8,000% growth is just the beginning—and now’s your chance to get in on the action. [CONTINUE TO VIDEO]

Source: Banyan Hill

Growth Stocks

Make a 50% Gain on This Trendy IPO

I learned a hard lesson about collecting a few weeks ago.

It’s a lesson that spawned from my childhood. Like all boys growing up, I was fascinated with baseball. Initially, I followed my hometown heroes, the Cincinnati Reds, but as I fell more in love with the sport, more teams were added to the list. By the end, my all-time favorite team was the Oakland Athletics.

As a way to follow the players I liked best, a few of my relatives introduced me to baseball cards. Not only could I collect cards of my favorite players, but I could also make money on those cards when I got older. Baseball cards tend to go up in value, my relatives told me. Hold on to them until you get older, and you’ll be set.

It was a dream come true to find out that a hobby I loved could eventually pay off big down the road. I would go on to collect binders filled with cards picturing Reds outfielders Eric Davis and Ken Griffey Jr., as well as my favorite A’s players, Mark McGwire, Jose Canseco and Rickey Henderson…

Those of you familiar with baseball and card collecting already know where this is going. Not only was the McGwire/Canseco era plagued with doping scandals, which ultimately undermined card value, it was also a period during which companies like Topps, Donruss, Fleer and Upper Deck printed massive amounts of cards.

While I was aware of the baseball doping scandals, I hadn’t a clue about the massive card printing issue until a few weeks ago. Having abandoned card collecting in the late 1990s — I literally stuck the things in a shoebox at the back of my closet — I naively took my cards to a local shop to finally cash in on a few of those cards.

 The shop owner wouldn’t even look at them. “They just left the card printing presses running in the ‘90s,” he told me. “Nothing I can do. Maybe in another 10 years when everyone has thrown them away?”

The lesson here is that collectibles are a fickle market, especially when mass production and pop culture are involved. But one rapidly growing company is ignoring that lesson. Funko Inc. (Nasdaq: FNKO) believes it can turn both pop culture and mass production into a profitable business model for collectibles.

The Fun in Funko

If you’re not familiar with Funko, the company makes collectable toys, including a popular line of Pop! plastic figurines. These collectibles feature pop culture icons … like characters from Star Wars, The Walking Dead and Marvel, among many, many others.

The key business strategy for Funko is to identify a pop culture trend, license the character rights, and start producing figurines and collectibles before the trend dies. So far, the company has been relatively successful.

In the third quarter last year, Funko raked in roughly $112 million in sales. Growth was solid enough that Funko decided to go public to raise additional funds and pay down debt. FNKO stock had its initial public offering (IPO) at $12 per share amid a respectable amount of fanfare. However, FNKO would ultimately plunge 41% on its first day of trading on the New York Stock Exchange.

Lackluster IPOs are not a new thing for 2017. In fact, there were only a handful of real successes. But Funko is far from a failed IPO just yet.

On Tuesday this week, Funko released its first quarterly earnings report as a publicly traded company. While net income fell to $8.3 million from $17.2 million last year due to rising expenses related to debt and the company’s $4 million acquisition of a U.K. animation studio, sales jumped 21% year over year to $142.8 million.

But those financial hurdles should diminish going forward. Funko plans to use its IPO cash to pay down debt and finalize the acquisition of the animation studio, which it has rebranded as Funko Animation Studios.

Furthermore, Funko’s third-quarter performance has attracted analysts’ attention. Bank of America Merrill Lynch just issued a “buy” rating and a $12 price target for FNKO stock, noting that sales came in above forecasts and that the Toys R Us bankruptcy has cast an unwarranted negative shadow over Funko.

Investing in Funko

Having learned my lessons on pop culture collectibles the hard way — I’m looking at you, Ken Griffey Jr. — I’m leery of investing in Funko right now. The shares have shown considerable volatility, surging more than 20% following their third-quarter earnings report, only to come plunging back to earth shortly thereafter.

Still, the shares are showing some price support near their emerging 20-day moving average. This is especially encouraging given that FNKO only IPO’d on November 1.

Funko Inc. believes it can turn both pop culture and mass production into a profitable business model for collectibles. Here's why you should invest.

The problem is that volatility is going to stick with FNKO stock until the company can provide a solid history of meeting or beating Wall Street’s fundamental expectations. That’s going to take time. It is also going to mean continuing to capitalize on emerging pop culture trends in a timely fashion.

If you’ve got the stomach for a bit of risk, FNKO stock may never trade this low again if it can continue to show double-digit year-over-year growth. Personally, however, I would like to see the shares sustain support above their 10- and 20-day moving averages before finally investing — and right now that means a sustained trend above support near $9 per share.

Until next time, good trading!

Joseph Hargett

Assistant Managing Editor, Banyan Hill

Right now, an untapped ocean of energy—found underneath all 50 states—is about to transform the world’s energy industry. In fact, there’s enough of this energy in the first six miles of the earth’s crust to power the United States for the next 30,000 years. Wanna know this untapped energy source? Learn NOW! And as companies rush to extract this energy from the ground, they’ll need the help of one Midwestern company’s technology to make use of it. This is your chance to take advantage of John D. Rockefeller-type fortunes. Early Bird Gets The Worm...

Source: Banyan Hill 

Uncategorized

AMD Is the Tech Bargain You’ve Been Waiting For

Everyone loves a bargain.

We love that feeling of uncovering a hidden gem that everyone else has overlooked. The mispriced vintage Corvette with the small scratch in the quarter panel that you could easily buff out. The big-screen HD TV in the open-box area of your local electronics shop.

You get the picture.

But even your most savvy bargain hunters have nothing on investors looking for “the next big thing.” In fact, this speculative drive to “get in early” often leads investors sorely astray.

Their emotions get the better of them, as they inflate what are essentially short-term market trends into major stock-trading drivers

This leads to unreasonable expectations and equally unreasonable stock prices.
It leads to irrational trading.

 One of the best examples of irrational expectations this year is Advanced Micro Devices Inc. (Nasdaq: AMD).

Cryptocurrency Craziness

If you remember the last time I checked in with AMD, the stock was riding high on an influx of revenue from the growing cryptocurrency mining market. Ethereum was the “next big thing,” and investors were speculating heavily with AMD’s value despite signs that this fad wasn’t going to last.

Even Wall Street analysts were guilty of pumping up AMD stock amid the Ethereum fad, with several boosting their ratings and price targets to, honestly, unsustainable levels. AMD stock quickly shot into overbought territory, driven by a fad and a wild surge in emotional investing.

Back then, I warned investors that AMD was due for a correction as “profit-takers emerge, and the more bearish contingent in the brokerage community begins to sound off on valuation concerns and cryptocurrency pitfalls.”

This week, Morgan Stanley did just that. The brokerage firm said that “cryptocurrency mining-driven sales for AMD’s graphics chips will decline by 50% next year, or a $250 million decline in revenue.” Morgan Stanley also noted that video game console sales would drop by 5.5% in 2018, but that’s a drop in the bucket for AMD, and investors were likely already expecting this given the age of the current generation of consoles.

You could almost hear cryptocurrency speculators’ hearts break as AMD stock plunged 9% following the report.

The Real AMD

To remember the real reason you should be investing in AMD, we have to look back to 2016. The company caught fire early last year when it previewed several new chips, including its new central processing unit (CPU) chipset, Ryzen, and its new graphics processing unit (GPU), Vega. Both products held considerable promise, and AMD was expecting strong sales once the chips launched.

But both Ryzen and Vega blew analyst expectations out of the water. When they hit the market earlier this year, Ryzen and its sister chip, dubbed Threadripper, not only outperformed competing chips from Intel Corp. (Nasdaq: INTC), they beat them in pricing as well. At the same time, Nvidia Corp. (Nasdaq: NVDA) was touting its Titan Xp GPU as the fastest in the world, but AMD’s top-of-the-line Radeon Vega Frontier Edition GPU quickly stole that title.

As a result, AMD saw its market share in the desktop PC market rise roughly 45% to its highest level of that past 10 years at 31%, while Intel’s fell to 69%. It is also stealing server-side and data center market share from Intel via the increasingly popular Threadripper CPU.

And that is just AMD’s core business operations. When we get to areas like virtual reality, driverless vehicles and artificial intelligence, AMD is already on the cutting edge and poised to be a market leader.

Many of you at this point may be asking: “But what about AMD’s weak earnings report last week?”

And I would counter with: “What weak earnings report?”

Just look at the numbers. AMD earned $71 million, or 7 cents per share, last quarter on revenue of $1.64 billion. Not only did this top Wall Street’s expectations, it put last year’s loss of 50 cents per share on revenue of $1.31 billion to shame. What’s more, AMD boosted its full-year revenue growth forecasts from mid- to high-teens to above 20%.

So why did AMD stock plunge roughly 20% after such a stellar report? Because the company said that fourth-quarter earnings would fall 15% sequentially (even though that’s still a 20% increase year-over-year). Once again, it all comes down to an irrational level of bargain hunting, and an excess of emotional trading.

Investing in Advanced Micro Devices

But you are in luck! This emotional storm has left AMD trading at a considerable discount … and quite a bargain given its considerable growth potential — AMD is expected to see sales grow about 17% next year, compared to 12.3% for Nvidia and a measly 2.3% for Intel.

Back in July, I said I would be a buyer at about $13.25. That still holds true, making AMD at below $11 a steal. AMD could easily be worth its earlier valuations north of $15 as Ryzen and Vega continue to add market share and as AMD moves deeper into profitable deals in artificial intelligence (AI) and data centers.

Putting a $15 price target on AMD means the stock has more than 30% upside through next year. How many other large companies, aside from Alibaba Group Holding Ltd. (NYSE: BABA), can you say that about?

So, ignore the cryptocurrency hype and focus on AMD’s core products and its potential with leading technologies like AI and data centers. I won’t promise you a smooth ride, but at bargain prices like these, it should be quite a profitable one.

Until next time, good trading!

Joseph Hargett
Assistant Managing Editor, Banyan Hill Publishing

It’s not silver or platinum. It’s not aluminum, nickel or lithium, either. But this “magic” METAL is found in everything from cars to airplanes, smartphones and computers, even batteries and cosmetics. It even has the power to fight diabetes, depression, weight loss and cancer. It’s worth billions, even trillions. But here’s the problem—this metal is disappearing. The world’s reserves are quickly being sucked dry. But a group of geologists have just struck the motherlode, and the one company behind it could earn investors an absolute fortune as they solve the greatest commodity crisis in human history. [FOR MORE INFORMATION CLICK HERE]

Source: Banyan Hill

Growth Stocks, Technology

Netflix and Amazon Have Plenty of Growth Ahead

Watching television in the ‘80s was easy.

Most of America has had just three broadcast channels to choose from — four if you were either really lucky or had someone stand next to the TV and hold the antenna.

Where I grew up in rural Kentucky, we were fortunate to get the Big Three: NBC, ABC and CBS. With only three channels to choose from, there was little need for a remote control, especially if you had a younger sibling you could make get up and turn the nob.

Until the late ‘80s to early ‘90s, when cable TV became mainstream, the Big Three ruled the American living room uncontested. They controlled everything you watched, from your mother’s soap operas to the nightly news to Saturday morning cartoons to late-night television. And they controlled when you watched them.

Commercials were king then, just as they are now, only the revenue they generated was considerably higher than today’s standards. After all, they had a captive market of consumers divided only three ways.

With their oligopoly in place, the Big Three grew fat, happy and complacent with their dominance of the TV market. So much so, that when cable TV finally rose to the mainstream, the Big Three still controlled the vast majority of channel offerings.

But while there were more channels, that didn’t necessarily mean more content. With only two other networks offering any real competition for American living rooms, the Big Three began recycling content across all the cable TV channels they controlled. As Bruce Springsteen so eloquently put it in the early ‘90s: “There’s 57 channels and nothin’ on.”

In 2007, 15 years after Springsteen’s lamentation of the state of American home entertainment, Netflix Inc. (Nasdaq: NFLX) dropped a bomb that would forever change the landscape of American television: online video streaming.

And here we are, a decade later. The cable TV industry is dying, NBC, ABC and CBS viewership is in decline, and a new Big Three is emerging in the online world of streaming TV.

The New Big Three

A new era of American TV is rising from the ashes of the broadcast model, and a new Big Three has emerged to take the place of NBC, ABC and CBS. Investing in these companies now will get you in on the ground floor of not only the revolution in American living rooms, but global living rooms as well.

The cable TV industry is dying, NBC, ABC and CBS viewership is in decline, and Netflix and Amazon are taking over the online world of streaming TV.

Share of consumers who have a subscription to an on-demand video service in the United States in 2016 and 2017.
(Source: Statista)

Netflix — The Godfather of Online Streaming

No one should be surprised by the fact that Netflix is at the top of the current online streaming market. After adding 5.3 million subscribers last quarter, Netflix now has roughly 109.3 million subscribers around the globe.

Netflix currently dominates online streaming stateside, and is present in about 75% of all streaming households. Because of its market dominance, analysts are concerned about market saturation. After all, Netflix only added 850,000 U.S. subscribers last quarter. However, it’s important to point out that only one-third of American households currently stream online TV and movie content.

So, while Netflix may have saturated the current available market, that available market is set to grow by leaps and bounds as the rest of America wakes up to the online TV revolution.

What’s more, Netflix is already following in the early footsteps of broadcast TV pioneers. Founded on providing access to content produced elsewhere — Walt Disney comes to mind — Netflix is poised to spend $8 billion next year alone just to create its own original content. As with all things, the initial cash outlay is more than a bit off-putting. But once Netflix has a solid catalog of original content, spending is sure to fall more in line with the former kings of cable TV.

So, while NFLX stock is a bit on the pricey side right now (partly due to the stock market’s run-up on easy money), the shares still have plenty of growth ahead of them.

Amazon — The Jack of All Trades

With the amount of cash Amazon.com Inc. (Nasdaq: AMZN) has to throw around, it could easily topple Netflix and become the No. 1 streaming service. But that’s not Amazon’s business model. Amazon is a retailer, first and foremost — a task the company does extraordinarily well.

While Netflix gets the credit for being the first major online streaming company, Amazon actually launched its streaming service as Amazon Unbox in September 2006, about four months ahead of Netflix’s online launch. With its hands in several pots at once, Amazon didn’t really get serious about its streaming service until a few years ago.

After several name changes and service iterations, Amazon Instant Video was christened in February 2011 and bundled with Amazon Prime, giving the service an instant subscribership in the millions. How many millions remains unclear to this day, however, as Amazon has never released subscription numbers for either Prime or Instant Video, which was renamed again in September 2015 to simply Amazon Video.

Current estimates place U.S. Prime subscriber numbers at about 79 million, but there is still no way to tell whether or not every Prime member utilizes Amazon Video. Still, the estimated subscriber numbers are more than enough to put Amazon in the No. 2 spot behind Netflix as part of the new Big Three.

Clearly, Amazon isn’t content to let things rest at that. The company has launched Amazon Studios and is spending $4.5 billion this year on original content. Amazon is clearly getting serious about its Amazon Video service, and should come out swinging next year.

The cable TV industry is dying, NBC, ABC and CBS viewership is in decline, and Netflix and Amazon are taking over the online world of streaming TV.

(Sources: The companies, JPMorgan)

That said, AMZN stock is not a pure play on online streaming. The company brings with it considerable baggage and heavy spending across the board — not the least of which is Amazon’s move into the grocery market with its acquisition of Whole Foods Market.

For these, and a multitude of other concerns, I’m considerably less bullish on AMZN stock than I am on NFLX. In fact, I believe that Amazon Video will play more of a spoiler for Netflix than a real benefit for Amazon for the time being.

Hulu — The Broadcast Industry’s Frankenstein

It’s not fair to say that the original Big Three of broadcast television have no presence in online streaming. Hulu is, in fact, the old model trying to keep pace with the new.

The company is owned by a collaboration of “last generation” broadcasters and content creators, including Walt Disney (ABC), 21st Century Fox (Fox Entertainment), Comcast (NBC Universal), Time Warner (Turner Broadcasting System) and Japan-based Nippon TV.

But there are key differences that give Hulu a considerable advantage over both Netflix and Amazon. For one, Hulu gets first-run TV shows the week they air — which should come as a no-brainer since the companies producing the content are Hulu partners. That also means Hulu has considerably less overhead costs for content acquisition.

That said, Hulu has also moved into the realm of original content, spending $2.5 billion this year … with considerable success. In fact, Hulu upstaged both Netflix and Amazon this year by sweeping the awards at the Emmys.

That said, subscriber numbers are impossible to pin down on Hulu. The company stopped releasing subscriber figures last year when it said it had 12 million U.S. subscribers in 2016, compared to Netflix’s 47 million.

While Netflix now reports more than 52 million domestic subscribers, Hulu will only state that it has 47 million unique viewers, which it claims means more to advertisers. This metric is also convenient for diverting comparisons with Netflix’s subscriber base.

In case you missed it in the last paragraph, Hulu also has commercials in addition to its monthly subscription fees. It seems that some habits die hard where the former Big Three are concerned.

Finally, it is all but impossible to directly invest in Hulu. The collaboration is not publicly traded, and even investing in all the companies involved would be difficult, costly, and subject to more pitfalls and distractions than trying to make an online streaming trade out of Amazon.

A Final Note

For investing purposes, Netflix remains the best direct trade on the future of online streaming, with Amazon a close second.

These two giants are also international. No longer are just American living rooms in play, but Indian, British, Australian, Japanese and a host of other venues around the globe. For Hulu, it’s just America and Japan.

This is the real key difference in the new “TV” networks, and it’s why Netflix and Amazon are far from hitting the top of their current growth curve.

Until next time, good trading!

Joseph Hargett
Assistant Managing Editor, Banyan Hill Publishing

In this exciting NEW VIDEO, Wall Street legend and former multibillion hedge fund manager Paul Mampilly pulls back the curtain on the biggest investment opportunity in the market today. What insiders are calling “The Greatest Innovation in History,” this revolution will mint more millionaires and billions than any technology that came before it. Right now, the current market for this technology is just $235 billion, but given how fast this technology is moving experts predict it will soar to $19 trillion by 2020. But 8,000% growth is just the beginning—and now’s your chance to get in on the action. [CONTINUE TO VIDEO]

Source: Banyan Hill

Technology

These 3 IPOs Are a Breath of Fresh Air for Investors

Comfort is a double-edged sword.

On one hand, comfort is a reward for a job well done. A chance to sit back on one’s laurels and take it easy for a while, secure in the knowledge that your job, income, investments, etc., will take care of themselves.

On the other hand, comfort breeds sloth. It invites a level of overconfidence and carelessness that can be devastating to your job performance, income streams and investments, if allowed to fester.

Like many investors, I’ve grown a bit too comfortable this year. Not only have I been loath to leave the comfort of my home office and my daily routine, I’ve grown way too accustomed to markets hitting all-time highs every other week.

It’s past time to diversify and inject a bit of new blood into your portfolio. Trading IPO stocks can be a risky bet, but it can also be quite rewarding.This week, I’m shaking things up a bit. I’m writing to you from a cozy little cabin in the Smoky Mountains just outside of Gatlinburg, Tennessee. I’m sitting at a stylized log-cabinesque kitchen table as my family enjoys the outdoors in a cold mountain stream right behind our back door.

With the change in setting comes a change in perspective. We’ve become too accustomed to riding the coattails of big-name tech companies in 2017. As I noted last week, market leaders like Facebook Inc. (Nasdaq: FB), Alphabet Inc. (Nasdaq: GOOGL) and Microsoft Corp. (Nasdaq: MSFT) might be all that stand between us and a major market correction.

It’s past time to diversify and inject a bit of new blood into your portfolio … especially in the tech sector. It’s time to get a little uncomfortable.

When It Comes to IPOs, It’s Quality Over Quantity

Investors were scared off from the initial public offering (IPO) market early in the year. It’s not hard to see why. Both Snap Inc. (NYSE: SNAP) and Blue Apron Holdings Inc. (NYSE: APRN) were extremely hyped heading into their respective IPOs, and both turned out to be abject failures for investors.

Another issue that investors have clung to is the diminishing number of IPOs. Since 1996, the number of companies going public dropped from more than 8,000 to about 4,400 last year. That number is expected to fall even further in 2017.

It’s past time to diversify and inject a bit of new blood into your portfolio. Trading IPO stocks can be a risky bet, but it can also be quite rewarding.

The latter issue can be attributed to a wealth of funding from private offerings — due to the current easy-money environment from the Federal Reserve — and a wealth of red tape. In fact, the head of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, and the president of the New York Stock Exchange, Tom Farley, said that they believe regulations are the No. 1 reason for the decline in IPOs.

But if red tape was really the issue, no company would ever go public.

In fact, the problem with this year’s class of IPO offerings has been quality, not quantity. Snap emerged on the scene only to be copied heavily by Facebook and every other social media company on the market. Blue Apron, meanwhile, was smacked down by Amazon Inc.’s (Nasdaq: AMZN) acquisition of Whole Foods Market.

But when you look beyond this disappointing duo, you find that there are excellent opportunities to be had.

Roku Inc. (Nasdaq: ROKU)

ROKU stock was priced for an IPO of $14 per share. However, Investors weighed concerns about the company’s future ahead of the stock’s launch and decided that Roku has plenty of potential. The shares surged 68% in their public debut, closing at $23.50. ROKU stock has since consolidated nicely despite its ups and downs.

While concerns about content and competition remain for the set-top box maker, Roku has done more than hold its own against much bigger competitors. In fact, Roku had a 32.6% market share of America’s 150 million connected-TV users last year — ahead of Google Chromecast (29.9%), Amazon Fire TV (26.3%) and Apple TV (19.9%), according to research firm EMarketer.

Once the company starts focusing on content — and potentially its own licensed content — it’s off to the races.

Switch Inc. (NYSE: SWCH)

Data centers are big businesses … just ask IBM, Amazon and Alphabet. But legacy data centers are long overdue for disruption. That’s where Switch steps in.

The company offers ultra-advanced, high-tech data center solutions focused on security and sustainability. The company also manufactures all its own data centers using patented technologies, simultaneously increasing margins and cutting down on costs.

It’s part of the reason why SWCH stock jumped 44% during its IPO. Switch currently owns three large high-tech data centers and is developing a fourth. Furthermore, Switch’s SEC filings show that it has been profitable in every quarter of its existence, save one where it paid $27 million to unbundle its power use from Nevada’s grid. This level of profitability and growth should be music to investors’ ears.

Coming Down the Pike

As with most IPOs, SWCH and ROKU will bounce around for a while, providing opportunities for those who missed out on the initial surge. But if you are looking to get in on the ground floor of an IPO later this year, there is at least one “do” and one “don’t” to keep in mind.

Do consider database specialist MongoDB. Why? The company operates what is called a NoSQL database that is poised to disrupt old-school database firms like Oracle and Microsoft. While this may not sound flashy, MongoDB makes the most popular NoSQL software on the market.

Don’t consider HelloFresh. Why? HelloFresh is basically another meals-to-order company like Blue Apron. The firm claims that its IPO will be different than Blue Apron’s, but the business model is essentially the same. What’s more, the real reason that Blue Apron is struggling — Amazon’s Whole Foods acquisition — continues to be the 400-pound gorilla in the room for this market.

It’s past time to diversify and inject a bit of new blood into your portfolio. Trading IPO stocks can be a risky bet, but it can also be quite rewarding.Remember, trading IPO stocks can be a risky bet, but it can also be quite rewarding. After all, you have to take a few chances here and there to keep your portfolio fresh.

On a side note: I took a break in writing today’s article to go for a quick hike, and got to see a black bear mother and her cubs playing from about 500 feet away. Risky? Yes. Rewarding? Most certainly.

Until next time, good trading!

Joseph Hargett
Assistant Managing Editor, Banyan Hill Publishing

In this exciting NEW VIDEO, Wall Street legend and former multibillion hedge fund manager Paul Mampilly pulls back the curtain on the biggest investment opportunity in the market today. What insiders are calling “The Greatest Innovation in History,” this revolution will mint more millionaires and billions than any technology that came before it. Right now, the current market for this technology is just $235 billion, but given how fast this technology is moving experts predict it will soar to $19 trillion by 2020. But 8,000% growth is just the beginning—and now’s your chance to get in on the action. [CONTINUE TO VIDEO]

Source: Banyan Hill