PowerTrends and a Tech Trio
06/20/2014 10:00 am EST
Joining us today is Chris Versace, editor of PowerTrend Profits, focuses on enduring trends that could revolutionize industries. Here, he discusses some trends impacting the tech sector, along with a trio of favorite stocks.
Steven Halpern: Joining us today is Chris Versace, editor of Power Trend Profits. How are you doing today?
Chris Versace: I'm doing fine, Steve, thanks for having me on.
Steven Halpern: Your proprietary Power Trends analysis method focuses on uncovering new social and economic enduring trends that you expect will shape future markets. Could you give our listeners an overview of this approach?
Chris Versace: Sure, Steve, you know, at heart of Power Trends, it's really the intersection of several forces. What's going on in the economy, what's going on from a demographic perspective, what's going on from a psychographic perspective and, by that, I mean what's going on with consumers and businesses?
Are they spending, where are they spending, why are they spending, where they're spending, but also, too, there's overlay of technology which, we know, has a very transformative effect on industries, you know, building up new ones and destroying old ones just like the publishing industry, for example, or even retailing, but we also have other factors too that we pay attention to.
What's going on, on an international stage as well as what's coming out of DC—and by that I mean Washington, in terms of the regulatory front—so we put all that together and really look at the intersections of what's to come.
Steven Halpern: Now, today, we're going to focus on the technology sector. Could you highlight some of these power trends that you see as having as the greatest impact on the investing landscape within the tech arena?
Chris Versace: Sure, Steve. When we look at technology with a power trend view, there are really two that jump out. The first is “Always On, Always Connected,” and, as that name hints at, we look at the world around us of, not only just smartphones and tablets, but, increasingly, other connected devices.
We've heard a lot of news already in 2014 about companies like AT&T (T), General Motors (GM), pushing into the connected car. We've got Apple (AAPL), Google (GOOG), and others trying to figure out how to get into the house.
At WWDC, recently, Apple unveiled their home kit. Google has bought Nest and later, in the month of June, Google has their annual IO conference, and, I suspect, we'll be hearing even more about connected devices, so that's the first one.
The second one is how we're using some of these smartphones, tablets, and other devices. One aspect to that is payment and I do see an increasing shift to, what I call, “the cashless consumption,” no longer using cash, but potentially replacing credit cards, debit cards, as people look to pay with their smartphone, for example.
A great app out there is the Starbucks (SBUX) app. Now, I use it all the time. I can collect my rewards, get notifications, extra bonus items, all by paying with my iPhone, which is linked to my credit card or debit card.
Steven Halpern: Now, you turned bullish on Facebook (FB) last year at a time when the shares were very out of favor on Wall Street and, since then, the stock has risen and sentiment has improved. What's your outlook for social media, in general, and for Facebook, in particular?
Chris Versace: Well, when it came to Facebook last year, you have to remember that the shares were under a lot of pressure, really coming out of the IPO and there were some questions as to whether or not Facebook was really going to make it in mobile.
So, from my vantage point, I turned bullish when the signs were showing that yes, they were going to be successful in mobile and the risk reward in the shares was extremely high.
And, to answer your question about Facebook, once again, I'm extremely bullish on the shares. We've seen them pullback well off their highs and they're on the cusp of really monetizing several platforms that they have.|pagebreak|
One is the continued monetization through video, and other means, of the core franchise that is Facebook. But we're also seeing monetization in Instagram and other areas, as well as international expansion of these efforts, so all of this tells me that there's probably more upside in Facebook shares than in downside.
As far as social media, in general, Steve, is, you know, two thoughts: one, I do think we're going to see the cream rise and the companies that are able to monetize will be successful, but I do think that social media is very crowded and I would not be surprised if, over the coming 12 to 18 months, we see some consolidation as well as players leading the fold.
You know, there's a lot of talk that Google Plus might be rolled up into a different product and disappear altogether, I wouldn't be surprised if—with so many people trying to crack this code—that we do see a number of exits.
Steven Halpern: Now, another tech stock that you've been bullish on is Qualcomm (QCOM), which makes the chips that run many of these devices you're talking about. What's your outlook for Qualcomm here?
Chris Versace: Well, to me, Qualcomm—at the heart of it—is a “buy the bullet, not the guns,” type of solution, you know. A lot of people get caught up in, “oh, this is a fantastic device” or “that device,” but what we've seen in the world of smartphones, just like we've seen in any consumer electronic market, is that the lion share of volume tends to consolidate around the top three players.
We'll see it in tablets and we'll see it in other environments as mobile continues to move, but that's really the secret, as mobile continues to transform and grow through this world of increasingly more diverse connected devices: the connected car, the connected home, mobile commerce, as well as mobile health.
All of these devices will need some form of connectivity and, to me, that speaks to the heart of what makes up Qualcomm, because, not only are they the chips, but they're the licensing business model and it's a real nice push/pull.
“If you want to buy our chips, well then, you're going to license our technology.” “If you want to license our technology, you're going to have to buy our chips.”
So it's a very, very robust business model that spits out a ton of cash and the company is, what I call a “dividend dynamo” company, because if you look back over the last few years, they continue to increase their dividend and guess what, they've got a hefty share repurchase program—so I like the stock a lot.
Steven Halpern: Now, another tech leader that you suggest could be benefiting from multiple powerful drivers or power trends is Amazon (AMZN). What's the story behind this?
Chris Versace: Well, there's really a couple of things that feed into Amazon. One, we know that with more and more devices out there, people are increasing shopping online and kind of looking past brick and mortar stores.
And, to me, one of the real game changers is Amazon Prime, and I say that because you can now get goods shipped to you within two days. You know, you almost don't even need to go to the mall anymore, but, at the same time, we also know that job creation has been lackluster.
Wages are under pressure and consumers are starting to feel the bite of higher gas prices, higher food prices, so their overall disposable income is going to come under greater and greater pressure.
To me, that says that people will turn increasingly to online shopping looking for great deals and, at the heart of that, is Amazon.
And where we stand today, in June, heading into the back half of the year, which is filled with holidays, filled with Christmas shopping and other holiday shoppings, now is the time to buy Amazon to get ahead of that seasonal trade.
Steven Halpern: Well, we really appreciate you taking the time today. Thank you for joining us.
Chris Versace: Oh, thank you, Steve. Happy to do it and happy to come back anytime.