A Look at Tomorrow’s Top Industry

08/26/2011 7:00 am EST

Focus: STOCKS

Martha Stokes

CEO and Co-Founder, TechniTrader®

Martha Stokes says the cloud-computing industry is poised to reinvigorate the tech sector. She tells MoneyShow.com that consumer-facing names such as Apple are among companies likely to see further price appreciation as cloud computing grows.

Kate Stalter: Today we are speaking with Martha Stokes, CMT, and she is the CEO of TechniTrader.com. Thank you so much, Martha, for joining us today.

Martha Stokes: Oh, thank you for asking me.

Kate Stalter: Wanted to start out with your take on the current market conditions. Obviously there has just been a lot of volatility. What do you believe is crucial for individual investors to be aware of right now?

Martha Stokes: I think individual investors need to stop panicking. A lot of this drawdown that is going on is not institutional managers, fund managers, or the buy side—the big wise, savvy money managers—selling off. This is small investors panicking, retail investors panicking, and they have taken a huge amount of money out of mutual funds and the self-directed 401(k)s because they are fearful that the same thing is going to happen that happened in 2008 and 2009.

But we are in a completely different environment at this point in time, and the institutions—the wise money of the market—are actually trying to hold on to a lot of the things that they invested in early this year, because we have this new technology coming to market that is driving forth that is going to propel us out of this economic problem that we have, in the next few years.

So, what I would advise is that we really need to just calm down a little bit and take a better perspective and also take a look at charts to see what is actually going on, rather than just listening to the news and all of the scary things that are going on.

To actually see a physical, graphical view of what is going on with your stocks or your funds would be a great idea, because if you looked at it, you would say, “Oh this isn’t so bad.” It is not as bad when you see it visually.

Kate Stalter: Go into a little more detail about why the charts are so important. Because you are absolutely right: A lot of individuals go by the fundamentals and are not reading charts at all.

Martha Stokes: Right. Fundamentals are absolutely crucial. My grandfather taught me when I was 12 about stocks, since I was interested, so I have been in the market forever.

What is important to understand about fundamentals is that when that earnings report comes out, that is four months old. That is four-month-old data already. So if you are reacting to that at that time, you are already four months behind where the company is right now.

Well, that is a huge amount of time. That is really old information, so you really want to use the chart to help guide you as to what is going on with the company right now. Because the wise money—big institutional funds that control billions of dollars in pension funds, billions of dollars in mutual funds—have access to information that the average investor does not have.

In other words, we don’t have an equal playing field when it comes to news and information from the companies. There are the institutional investors, and they know more things about what is going on than anyone, so track their information.

You can do this with charts, and you can see what they are buying int,  and you can see what they are moving out of, and you can see it in a graphical form.

Humans love to see things in a graphic form. Nowadays, more and more people are very visual, so using charts helps you to see where these institutions are buying and where these institutions are selling.

Also, it shows you, for instance, gold is heading toward a unsustainable peak. Everybody is rushing to buy gold, and I am telling my people it is time to start moving and rotating out of gold and selling gold, because it has reached its peak, but you cannot see that in your head with the numbers. You can see it on the chart.

So my recommendation is to find a Web-based or cloud-based, as they are now called, charting system that is free. There are all kinds of them out there.

I happen to like FreeStockCharts.com because it has a lot of great stuff for mutual funds and for people how like to do OTCBB, and for people who like to short-term trade. So there are all kinds of things that you can do there, and I add little notes in that area. I am not a part of that company, but I just like their charting service and I like the fact that it is free and anybody can use it.

So, you have a lot of opportunities to see what is going on with your mutual funds or your individual stocks and look at it on the long-term scale to see where it is in the cycle. Because all companies cycle independently. The sectors will cycle together, and then sectors within an industry will cycle, and then the business cycle and the economic cycle.

NEXT: More About the Next Big Thing

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What we have going on right now that is so exciting is that we have a new displacement technology that is coming to market, called cloud computing, and it is going to impact five major industries that have been kind of in a slo-mo stage since the 2002 collapse of the tech stocks. So now we have this rebirth going on, and it is very exciting, and there are over 600 companies already vying for this.

Now what really pushes the emphasis on this is, that this is technology we really need. The PC is outdated, it is old technology, it doesn’t work well, networking doesn’t work, it is extremely expensive and businesses are looking for a way to cut costs in IT. Government is looking for ways to cut costs in IT, and they are moving into this.

There is more money going into these new industries, cloud computing, from venture capital than any other new technology. Billions of dollars have been pouring into this all year long, and we know that because we have venture capital giving the money that these research-and-development small companies need to grow, that we are going to have a lot of new IPOs, and we are going to have a lot of blue chips moving, and we have this new technology coming to market at just the perfect time to pull the economy out.

So I am very excited, because it is like “great, let the stocks drop a little bit, because it gives good opportunity for better purchases of a lot of these great companies.” You can be looking at small caps, mid caps, blue chips, just any type of company you are interested in because there are so many, and it is so diverse and widespread throughout the entire computer industry.

It is affecting software, it is affecting hardware, it is affecting storage, it is affecting chip manufacturers, the Internet, broadband, the whole thing is moving, so we are going to have this big explosion in the next few years of growth.

So this is the perfect time to start looking. I am sitting here going, “I feel like I am back in 1985 and I am at the Consumer Electronic Show and I am looking at Microsoft (MSFT) and IBM (IBM) and I am going, ‘Holy cow,’ and I turn to my partner and I say, ‘This is it, buy Microsoft, it is all over.’ ”

And my partner is going, “No, no, no, Radio Shack (RSH), and all these others,” and I said, “Not a chance, not even Apple (AAPL).”

So we are looking at this and we are just seeing this really exciting stuff coming along, and the small investor doesn’t even know about it. They have never heard about it, and they don’t know anything about it.

I have some information on my Web site to help people get started, because we are at the beginning of something and it has been a long time since I have been this excited about a new technology.

Kate Stalter: Well thanks for that optimistic view, because I know these days a lot of people really think the sky is falling, so it is nice to hear something a little more upbeat.

Let me ask you this: Are there any from your chart tracking these days, anything that you are seeing along the lines of specific ideas that individual investors might want to start researching for their own watch lists?

Martha Stokes: Yes. For cloud technology I would say start researching your stories to buy companies. Start researching companies who are really dominant in the cloud. Right now there is a whole bunch of them that have been moving very well, that are retracing right now.

A good example would be IBM (IBM). Go to their Web site, peruse around what they have. There are many sectors within this industry, and they have a lot of information to get you started, so that would be a good research Web site to look at to get information about it.

Then there are other companies that you really need to worry about and avoid. Cisco (CSCO) is in trouble; Microsoft is in serious trouble, and you need to really watch, because if these companies don’t jump on the bandwagon of this, they will be left behind.

Nobody remembers Wang, nobody remembers Altera, nobody remembers DEC or Digital Research. Those computer companies went out of business because they did not jump and move.

So you need to know which companies are really growing, and you need to start by learning about the different sectors. The Cloud Expo also has a lot of good information about companies that are moving in this area that have a lot things going for them.

Salesforce.com (CRM) was one of the first cloud-based systems that businesses just jumped onto; it has been growing for several years.

Of course Apple is the founding father of this whole technology boom, with the consumer mobile devices that it developed. We have some issues there with Steve’s retirement, which is unfortunate, but they are going to be introducing the first consumer-based cloud this fall that is something to take a look at.

So there are a lot of different ways you can go, and of course there are lot of small caps that are moving as well, that are intriguing and interesting, and I do have some cloud information for people. If they want to come to my Web site they can start reading and getting some information to point them in the right direction.

I don’t recommend stocks; I teach people how to analyze chart and analyze fundamentals and risks to make their own choices.

My thing is to teach people how to choose stocks for themselves, rather than specific recommendations, but I would definitely say go to IBM to get some information about cloud technology and learn about it and then move on from there.

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