Why I like Cisco Systems (CSCO) Now

Please find below a link to a 1-page PDF format report on why I think Technology mega-cap Cisco Systems (CSCO) is such a good value stock here, following a strong positive recent Q2 earnings release. 

Cisco: Growth from the Internet of Things

Is Today's Society Addicted to Technology?

Please click on the web link below to read the article and watch my video

International Business Times Article link (including link to 4-minute Video) 

Is today's society addicted to technology? The benefits of the tech we use on a daily basis are plain to see. But with the pervasive influence of social media applications like Facebook, Instagram and Twitter in everyday life, are we becoming slaves to the technology rather than it being just a productivity-enhancing tool for us to exploit?

People are increasingly developing unhealthy relationships with technology, particularly the mobile technology contained in our smartphones and tablet computers, to the extent that you can now seek professional psychological help for technology addiction, much as with other established addictions such as drugs or alcohol.

The Internet of Things in an Always-Connected World

The fact is that the internet is becoming increasingly easy to access, given the advent of wi-fi hotspots throughout cities and the advent of 3G and now 4G mobile phone networks designed to carry ever-larger amounts of data to and from our various mobile computing devices.

Whether you like it or not, and I personally have my reservations, mobile technology is becoming ever more pervasive, with the introduction of wearable technology such as the iWatch, technology-enabled clothing and even now shoes.

This technology growth can be clearly seen in the demand for semiconductor chips, the building blocks of all technology from PCs to mobile phones to sensor-based embedded technology found in domestic appliances, cars and in all manner of industrial automation (Figure 1), with growth in semiconductor demand from the "Internet of Things" forecast by Gartner to grow 36% in 2015.

1: The Internet of Things Semiconductor Revenues by Electronic Equipment

Healthcare Monitoring is a Huge Advantage on the Way

A new source of growth in the Internet of Things relates to health and exercise monitors, which can not only record your pulse, distance walked/run, time slept and calories burnt, but can now push users to adopt "healthy habits" by exercising more regularly throughout the day.

On the basis that in healthcare, prevention is better than cure, this wearable tech area is clearly set to grow quickly in the near future, suggesting that demand for sensors is set to explode. Already there are a wide variety of wearable watches and gadgets that serve to encourage you in a healthier lifestyle, as detailed in this CNET article.

US Technology Has Performed Very Well of Late

This strong growth in revenues as business investment in technology ramps up and as consumers continue to buy into handheld and wearable tech in ever-greater numbers has been reflected in the strong performance of US technology stocks since the beginning of last year (Figure 2) - the technology-heavy Nasdaq 100 index has gained 50% in sterling terms versus less than 10% for the FTSE 100.

2: US Technology Has Vastly Outstripped the FTSE 100

Source: Bloomberg

This outperformance looks very impressive, but needs to be set in the context of the last 14 years, where the Nasdaq index is still struggling to recapture its year 2000 highs, lagging the FTSE 100 over this longer timespan (Figure 3):

3: But the Nasdaq Still Lags from 2000

Source: Bloomberg

Best Ways to Invest in Technology

With spending on technology of one sort or another taking up an ever-larger slice of the economic spending pie, I see tech stocks maintaining this outperformance trend going forwards.

I prefer to invest in this theme using Technology-focused exchange-traded funds, such as the two I have listed below. As a side-benefit of investing in one of these exchange-traded funds, a UK or Europe-based investor also has the currency benefits of being invested in US dollars, at a time when the US dollar continues to strengthen against all European currencies thanks to its stronger underlying economy.

• The Source Technology S&P US Select Sector ETF (code: XLKQ). This London Stock Exchange-listed fund invests in US Technology heavyweights such as Apple, Microsoft and Google and is quoted in pounds sterling.
• The Powershares EQQQ Nasdaq-100 ETF (code: EQQQ). This London Stock Exchange-listed fund invests the constituents of the technology-heavy Nasdaq 100 index, which is comprised of 60% Technology stocks, 15% Biotech & Healthcare stocks, and 25% other sectors. The largest holdings are also Apple, Microsoft and Google, and again is quoted in pounds sterling.

All the best,
Edmund

Why Sandisk is a Top Technology Pick

There are many reasons why I feel US semiconductor maker SanDisk (SNDK on Nasdaq) is one of my favourite Technology stocks of the moment. 

This is an interesting turnaround, because several years ago I was in fact an actual bear of the stock due to its very high valuation. These days, I am a big fan of the company and the stock for 7 key reasons:

1. Well-Positioned Thematically

Sandisk is a key technology company exposed to some of my favourite long-term investment themes - The Internet of Things, the Mobile Internet and Big Data. 

2. Wide Moat

Sandisk is a leading NAND flash memory maker, the type of memory used in USB drives, smartphones, tablet computers and solid state hard drives. This type of storage is more expensive per gigabyte than a traditional mechanical hard drive (of the sort found in desktop PCs), but has the advantage of consuming far less power (important for mobile computing), having much fast data retrieval times and also being more robust (mechanical hard drives are typically very sensitive to shocks and extreme temperatures). 

Sandisk spends a heavy 12% of sales on Research & Development, which over time has led to the building of an extensive portfolio of valuable patents, which Sandisk monetises in the form of royalty payments received from other semiconductor makers who use their designs and technologies. This, combined with Sandisk's focus on higher-end NAND flash memory applications has allowed the company to maintain gross margins well north of 50%, over 10% better than their memory maker rivals such as Toshiba and Micron, and currently as high as 53%. 

3. Strong Free Cash Flow

This high profit margin is converted in to bundles of cash, with between $1.4-1.6bn of net free cash flow generated per year over each of the last two years. With $4.2bn of net cash already on the balance sheet, this equates to a 8-10% free cash flow yield on Sandisk's enterprise value. Even with the drag of this cash pile on profitability, Sandisk is still achieving a Return on Equity not far shy of 15%. 

4. Valuation is attractive

An ex-cash 2015e P/E of under 12x and EV/EBIT ratio of 7.8x is cheap for such an innovative growth company, which is also paying a steadily rising dividend (1.1% yield) and which is also buying back shares (Sandisk is a member of the Powershares Buyback Achievers portfolio, for instance). 

5. Profit momentum is positive

Despite continued deflationary pressures in terms of $ per gigabyte of NAND flash storage, the drive to lower manufacturing costs and also the surge in volume demand is leading to upwards revisions to both sales and earnings forecasts (the company's consensus 2015e EPS forecast is over 10% higher today than it was at the start of 2014).

6. Leading sell-side analysts are positive

The average consensus target price is $114 (vs. $97.55 now), while leading brokers such as Sanford Bernstein have a very bullish $150 target. 

7. Positive Technical Analysis

SanDisk (NSQ:SNDK) trades at $97.55 at present, while there is an upside price gap to fill on the share chart at $105.80, giving clear upside in the short-term. There is also a solid upwards price trend, in place since mid-2012. 

All in all, I see a good number of reasons to be a buyer of SanDisk (SNDK) today, although as always, you are advised to Do Your Own Research!

Edmund

See more at: http://www.stockopedia.com/content/why-sandisk-is-a-top-technology-pick-85555/#sthash.ciKy2SVf.dpuf

Bloomberg TV:Debunking "Sell in May and Go Away"

I appeared last week on Bloomberg TV in the morning, talking to host Mark Barton about why the "Sell in May and Go Away" saying is no longer strictly correct - rather, June to September is more the danger period for stocks...

CLick on the Bloomberg link below to see the Interview:

Debunking-sell-in-may-and-go-away

On CNBC Europe this morning - my preferred sectors...

I went on CNBC Europe's WorldWide Exchange programme this mornign to talk about company results and my favourite sectors. What are they? Well:

1. UK housebuilders - like Inland Homes (INL), Barratt Developments (BDEV) and Telford Homes (TEF). Note the strong results this morning from builders' merchants Travis Perkins (TPK), helped by the strong UK housing market, together with the Government's aid from the Help 2 Buy programmes.
   
2. Technology stocks, in particular semiconductors - Infineon (IFX in Germany) and Sandisk (SNDK in the US) would be two good plays here; cash-rich and benefiting from the "Internet of Things" theme.
   
3. Mining stocks, which are cheap and recently posted good Q4 results: in the short run, they will be driven by sentiment over Chinese growth, but I still like Rio Tinto (RIO) and Anglo American (AAL) in the medium-term. 

While stock markets had a very strong 2013 and have bounced back to new highs this year, I see further positive momentum ahead as economic momentum picks up in the Eurozone, and recovers from a short-term dip in the US and China. 

Video: Why I like the (US) Technology Hardware space

Good day to all,

I wanted to draw your attention today to a video I recorded with the financial news and analysis website Mindful Money, focusing on why I like the Technology Hardware space (particularly in the US) right now.

Please click on the link below to go to the Mindful Money home page, and then click on the video on the right-hand side of the page to play it (7 minutes long):

Mindful Money Video on Technology Hardware

I hope you find it interesting!

All the best,

Edmund

Weekly Global Strategy Screencast: Playing "The Internet of Everything" investment theme

Screencast: Playing "The Internet of Everything" investment theme

In this week's animated presentation with audio commentary, I take a look at how to play the "Internet of Everything" investment theme, without falling into the trap of paying very high valuation multiples for social media and e-commerce stocks, i.e. the likes of Facebook, Amazon.com and Linkedin.com. 

Screencast presentation (Youtube): Investing in "The Internet of Everything"

Or simply click to watch the video (small window size) below:

For an introduction to the Internet of Everything, watch the Youtube videos below:

Introduction to the Internet of Things

What is The Internet of Things?

Dr. John Barrett: The Internet of Things (speech)

Happy investing!

Edmund