Jim Cramer comes up with some cool acronyms. First there was C.A.N.D.I.E.S – seven growth stocks that included Chipotle Mexican Grill (CMG), Apple (AAPL), Netflix (NFLX), Decker Outdoors (DECK), Intuitive Surgical (ISRG), Express Scripts (ESRX) and Salesforce.com (CRM). After several months, the under performing Intuitive Surgical and Express Scripts were booted out and replaced with F5 (FFIV) and Amazon (AMZN) morphing the acronym into FADS CAN. All of the stocks, with the exception of Chipotle and Deckers, are some of the leading stocks in the one of the most exciting trends of the decade – the mobile revolution.
During the internet boom, in the late nineties, I learned many lessons. One that continues to be integral to my investment philosophy is focus. It is so easy to get caught up in the hot stock of the day. Obviously I still do it on occasion, but it is the exception – not the rule. I have found that I am most successful when I focus on two or three trends/sectors at a time. I try to identify trends that have long term catalysts and limit my stock selection to those areas. This allows me to go deeper in those areas and possibly discover some jewels.
Mobile is the obvious 800 pound gorilla trend and has been a favorite of mine since 2007. Earlier this year I wrote an article “For Investors the Smartphone War is Over.” In my opinion, Apple and Google (GOOG) have won the device war and the rest are playing for table scraps. I know the Research in Motion (RIMM), Nokia (NOK) and Microsoft stories well, but devices are only part of the story. Better opportunities abound in the ecosystem from components to infrastructure to applications.
So in 2011 my battle cry will be QOFAR. I know it doesn’t sound as cool as CANDIES or FADS CAN, but in this game it is not about being cool, it's about printing green. QOFAR is five mobile stocks I believe will be showing me the money in the new year.
Components (Qualcomm) (QCOM):
Component plays can be heart breakers. Nothing quite like waking up to news that your favorite play has been designed out of the next generation gadget. Thus, it is important to stick with the high value plays. Google’s OS, Android, is running on more than 90 different smartphones and Qualcomm’s chips are embedded in 75% of them (“Qualcomm the Switzerland of Mobile.”). Qualcomm will benefit as Android continues gaining market share in 2011. However, what is even more exciting is that Qualcomm is rumored to be a key supplier in the upcoming Verizon (VZ) iPhone. If this materializes, Qualcomm’s revenue and earnings will be significantly higher than the current Street estimates which will drive the stock price higher.
Other Component Plays: ARM Holdings (ARMH), MIPS Technology (MIPS), SanDisk (SNDK), Skyworks Solutions (SKWS), Broadcom (BRCM) could be a major player in Near Field Communications, a hot area for 2011.
Applications (OpenTable) (OPEN):
Open Table takes a simple process, restaurant reservations, and brings it to the 21st century by leveraging the internet and mobile. T3Live does a much better job explaning Open Table’s value than I could ever do – read “How OpenTable is Leading a Restaurant Revolution.” Unlike many social media companies, Open Table has a defined business model and it is building barriers to protect its position.
OpenTable is fast becoming a sort of social network for internet-savvy restaurant-goers (affluent individuals), a highly attractive market for advertisers. The stronger its following becomes, the harder it will be for competitors to wrest away market share and the greater its scope will grow.
Open Table’s growth opportunities are off the charts. Bank of America/ Merrill Lynch projects its North American restaurant penetration can reach 60% by 2016 and its international growth trajectory is similar to the US.
Other Application Plays: SalesForce.com, NetFlix, LogMeIn (LOGM), Oracle (ORCL)
Platforms (Apple):
What needs to be said about Apple? The company flipped the industry upside down with the release of the iPhone in 2007 and everyone has been playing catch up since. The company is well positioned to continue growing as it leverages its first mover advantage in tablets and is probably father long than its competitors in the Next Big Thing – Digital Living Room.
Other Platform Plays: Google
Infrastructure (F5 Networks (FFIV), Riverbed Technology (RVBD)) :
If we think of voice as an application on our phones – it is probably one of the least used applications. Email, Twitter, Facebook are used far more than voice. Businesses are using mobile applications like SalesForce.com to drive productivity. Mobile data usage is putting tremendous stress on the existing infrastructure. Matter of fact, corporations are completely overhauling their networks around the concept of cloud computing.
Cloud computing enables corporates to better optimize servers deployed in different locations and different time zones instead of purchasing additional capacity in any single location. But for this to work, all other elements of the data center need to be upgraded, including the network, the software, the storage and many other components. - Bank of America/Merrill Lynch
I won’t even pretend to be an expert in cloud computing, but two companies in the middle of this shift are F5 Networks and Riverbed Technologies. F5 maybe one of the purest plays. Its technology is said to make the new networks run like Cisco (CSCO) routers in the first stages of the internet. F5 technology is almost a requirement in today’s bandwidth-heavy networks. Riverbed’s technology helps improve the performance of applications run over the web.
Back in the desktop internet days, some of the biggest winners were network infrastructure companies. Many of these companies are harder to understand so the opportunities for mis-pricing are probably greater. I wouldn’t be surprised if that happens again in mobile.
Other Infrastructure Plays: Amazon (Amazon Elastic Compute Cloud), Rackspace (RAX), Acme Packet (APKT) (“Here is what it does“)
Conclusion:
Chipotle and Deckers are two great growth stocks in Cramer’s FADS CAN thesis. However, they are outliers. All of the other companies are mobile related. Just like he replaced stocks in his original thesis – a day may come when he replaces these two or others. Will he replace those with mobile companies, restaurants or retailers?
I have found that as a trend progresses I become more knowledgeable in the area. Thus, by focusing on a trend, my stock selection process becomes more efficient. I’m not saying that my way is right and Cramer’s way is wrong, but focusing on stocks within a trend works best for me. In 2011, my portfolio will be anchored by the QOFAR five. I am sure I will be sprinkling in other mobile jewels as the year progresses.
Disclosure: At the time of this writing I am long: Qualcomm, Open Table, F5 Networks, Apple and Riverbed. Positions may be sold at any time. |
发表于 2010-12-21 23:43
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