Returned from CES last week. Slept for a couple days. Woke up. Tried to remember something that will change the world. Couldn't think of anything.
Here's a problem: CES is becoming like the old Comdex. It's like a giant star that's gotten too big and general and will soon Supernova and collapse in upon itself.
Here's another problem. Apple generates the most excitement, both form the technology and a investment perspective, in the mobile consumer electronics space. And Apple doesn't go to CES. So what you have is a gigantic hallway filled with 150,000 people trying to copy Apple.
What's more important is what Apple will do next. Apple will do a sleeker tablet with LTE connectivity. Apple will try to do TV -- again.
That being said, there was stuff to listen to. If you want a list of some potential future tech trends, I wrote about some futuristic stuff on Investor Uprising.
In terms of investment ideas, I believe that the place to look in mobile and consumer is in suppliers and chips, because clearly as devices multiply it opens up many chip markets for many players. Read my CES Investor's Guide on Investor Uprising.
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So far our outlook has proven astute, as we advised readers to be continue to be involved in the precious metals as the best hedge in the mounting global debt crisis, which is far from over. Gold has hit a new high this week, and is likely to continue higher -- with periodic pullbacks. But this week, even more action indicates that the European debt crisis is metastisizing and likely to spread to other markets.
The U.S. approval of a new debt ceiling has taken a back seat to some important developments in key markets.The warning signs include the following:
* The Swiss Franc spiking to all-time highs against the dollar and other currencies
* 30-year Treasury bond yield dropping to under 4%.
* All European bonds being sold
* Gold hitting new highs.
The markets are telling you something. Personally I have gone to a much higher cash position, and I have bought more gold and silver as protection against mounting currency devaluation. I also believe there are certain places to hide such as high-yielding energy, dividend, and biotech stocks.
As a reminder, in March, Investor Uprising launched a premium investment newsletter service that gives you access to our best ideas and detailed research. Investor Uprising Confidential (IU Confidential) published an important report, "All That Glitters: The Ultimate Gold Report," which told you why at $1,450 gold was still undervalued and likely to go much higher. Gold traded today as high as $1,646.The report tells you why this is likely to be only a way-station to much higher prices.
IU Confidential also completed some detailed research on the Biotech market, which shows that it can be a "place to hide." The biotech market, as measured by leading biotech indices, did not lose as much during the 2008 financial crisis -- and when it bounced back, the performance was much better than the leading indices. In other words, Biotech has outperformed the S&P 500 with less risk during the last five years.
Our research indicates this is likely to continue. You can still get both of these reports individually -- or subscribe to the service and get both of them plus five more bi-monthly reports for the next 12 months.
As a Rayno Report reader, this research is available to you at an exclusive low price. Click below for these exciting offers:
The Best of Biotech -- $399 Special (Regular $500)
The Ultimate Gold Report -- $299 Special (Regular $500)
Full Annual Subscription: IU Confidential Annual Subscription
(Includes The Ultimate Gold report, Best of Biotech Report + 5 more reports over the next 12 months!) -- $999 Special (regular $1250.
I have become fascinated by Acai, even though I can still not pronounce it correctly and I won't even bother trying to figure out how to print it with the accent which I can't find on my computer keyboard. I'm an admitted latecomer to the trend. Yes, it's old news. But it's still a good story. The recent New Yorker article did a great job outlining the background.
The New Yorker article tells the tale of how two SoCal chums and University of Colorado grads (Go Buffs!) Ryan and Jeremy Black "discovered" acai in the Braizilian jungle and started marketing it in the United States, kicking off what would become one of the most potent health-food marketing booms in recent history, aided and abetted by none other than Oprah.
What I found interesting about the article is not so much about the controversy surrounding the health benefits of acai (like most debates, the truth lies probably somewhere in between), but the entrepreneurial spirit of the two Black brothers and their partner Edmund Nichols. The went to the jungle with a load of credit-card debt, locked in a long-term contract to sell acai through a Brazilian producer, and spent hundreds of thousands in the first year to ship Acai to the United States. Within two years they were doing half a million in sales and now they do $50 million. Quite an adventure.
The other story in acai is about marketing. How does an obscure jungle fruit go from being a locally enjoyed delicacy to a multi-billion-dollar global business in ten years? Savvy marketing. The blacks hooked into real-world health research and captured the Brazilian mystique. The more nefarious marketeers later leveraged Acai into online marketing scams. But both the legitimate companies and online scammers had something in common: They knew that consumers like a good story, and you can't get much better of a story than a mysterious berry coming out of the Brazilian jungle.
Here is an abstract of the article from the New Yorker (full article available only in print):
It's hard to pick stocks in cloud computing, because so many of them have become absurdly overvalued. So what I do is look at a handful of them, learn about the companies, and try to figure out which ones have true staying power. Then you look for opportunities to buy them on pullbacks.
Riverbed is a company that I have been following for several years. I have published a profile of Riverbed here on my new site, Investor Uprising, in which I try to explain how Riverbed plans to expand. A true "best of breed" player in WAN optimization, Riverbed is now looking to use its leverage in that market to branch out and grow on more fronts. I had a chance to meet with several Riverbed executives at Interop in Las Vegas, and following those meetings I think the company is on the verge of taking it to the next nevel. CEO Jerry Kennelly very clearly described some growth opportunities for the company that will take it from a point-product company to a multifaceted networking power.
Here's the important thing about Riverbed: Its technology takes advantages of long-term trends in networking in computing: Data-center consoldiation, the migration of apps from the enterprise to the cloud, and outsourced networking optimization. If you are asking what this all means because it's too many buzzwords -- it's that large and small companies both are looking to outsource more of their technology and networking needs to service providers who operate in the "cloud" -- providing any application or computing online, at any time.
The reason this is important for Riverbed is because it flies in the face of what has built the existing networking juggernaut: Cisco Systems. Cisco is built on the emergence of Ethernet networks and IP routing. It comes from an era in which companies hired armies of IT people to configure and deploy Ethernet switches and routers. All of that is moving to the cloud and massive data centers run by service providers. The interesting thing here is that Cisco has displayed weakness in selling data-center products: Its software is aging and lacks the scale to handle the shift.
This is a profound shift and one to carefully watch in the networking space. On the valuation, Riverbed recently pulled back $10 from an all-time high and I used the opportunity to pick up some shares. The P/E is a palatable 30, given a growth rate in excess of 40%. The PEG is now 1.40, which is well of recent highs. You have to pay up for this company because it has such huge prospects.
(Disclosure: Long RVBD).
Another Fed day, another episode of serial money printing, another banner day and a new high for gold.
It really feels like gold has entered the final and most exciting stage of the bull market. As Jim Sinclair, long-term gold trader, Chairman of Tanzanian Royalty Exploration, and Publisher of JSMineset.com says, gold is ready to go ballistic.
It's another breakout in a series of powerful breakouts. We've been alerting you to these breakouts ever since this site was launched. Remember this one? Or what about this one? And this one.
It seems to happen at least twice a year now, gold consolidates for about six months and then breaks out into a powerful $200 move. But silver is now the star, having doubled in less than a year!
Here's some good reading on the topic:
- Investor Uprising has a great technical look at gold by Fred Goodman.
- My new site, Investor Uprising, has published an new exhaustive, 28-page report on gold, written by yours truly.
- Jim Sinclair says we're headed for $1650 next on the way to $2000.
Investment comrades, I have helped launched a new site sponsored by PRNewswire called investor Uprising. There, you will find everything you love to follow, including business trends, rising companies, stock picks, and model portfolios.
The Guide to Investment Metrics tells you how to screen for more reasonably valued companies. Investor Uprising expands on the investment philosophy developed in these pages: looking for reasonably valued, growing companies and invest slowly over time, ignoring volatile market swings and focusing on dollar-cost averaging. It works in bull markets, and it helps you survive in bear markets. By focusing on stocks with low valuations, you can reduce your risk.
Go to the site now and register -- if you are among the first 1,000 registrants you will be entered into a drawing for a free iPad!
Next week I am launching a new Website for PRNewswire called Investor Uprising. It is going to focus on high-quality investment opportunities and business trends. We'll also pick and watch lots of stocks on a GARP (Growth at a Reasonable Price) basis.
For the first project, we are creating a list of 30 companies which we will use to build an Index. This comes from a methodology I have used for 10 years to screen stocks and build "monkey" portfolios that can be bought and passively left alone. Using this method, the portfolios have averaged a 30% (cumulative) return since 2006 and none of them has ever lost money.
Next week you will find these stock picks on Investor Uprising (which has not yet launched), but today I'm going to give you four of them. Here are some low-PEG stocks we will be following at Investor Uprising.
Dolby Laboratories (DLB)
12-month sales growth: 28%
12-month income growth: 17%
Forward P/E: 15
Return on Equity: 20%
PEG Ratio: 1
Summary: Dolby is dominating the business for digital music tools. Specifically, it licenses many of the leading digital sound and signal processing systems for digital film, DVS, Blu-ray, and digital 3D systems. It has been steadily growing for years.
Veeco Instruments Inc. (VECO)
12-month sales growth: 150%
12-month income growth: 1,000%
Forward P/E: 13
Return on Equity: 46%
PEG Ratio: .72
Qualitative: Veeco is a leading manufacturer of important manufacturing and testing equipment in the LED, solar, and seminconductor market. It also makes equipment for the manufacturing of disk drives. If Veeco's growth rates seem absnormally hight, its because it swung from losses to a profit in 2010, yielding what looks like spectacular earnings growth. It has also growth its revenue through merger.
Gilead Sciences Inc. (GILD)
12-month sales growth: 0%
12-month income growth: -20%
Forward P/E: 9
Return on Equity: 45%
PEG Ratio: .70
Qualitative: Gilead is an extremely well-managed biotech company with a long track record of high ROE. Recently, it's revenues have been flat and earnings have shrunk due to maturity of some key drug markets. However, it is still enormously profitable, booking $2.9B in profits in 2010, and its valuation is just plain cheap.
Medifast Inc. (MED)
12-month sales growth: 57%
12-month income growth: 147%
Forward P/E: 10
Return on Equity: 33%
PEG Ratio: .50
Qualitative: Medifast is a fast-growing producer of diet supplements and nutrition products. The Medifast brands include many varieties of diet and weight-loss shakes, vitamins, food bars, and other food products.
Stay tuned for the launch of the new site! We are looking for moderators and bloggers. If you are interested, ping me at scott.raynovich@investoruprising.com.
I'll try to spare you political rhetoric and speak in simple terms: The U.S. Federal budget is out of control. The deficit remains over a trillion dollars, interest costs are increasing, and if something extreme isn't done very soon it will enter a death spiral.
President Obama has put out a budget showing $3.8 trillion dollars in spending in 2011. The projected federal revenues are $2.1 trillion, creating a $1.7 trillion deficit. Huh? This is somebody who said he was heading back toward fiscal conservatism.
That's insane. Not only will the deficit run over a trillion dollars for the third consecutive year, but the total federal budget only four years ago was $2.5 trillion. Folks, the budget has increased 37% in four years!
What if you own budget did that? What if all of the sudden you were spending 30% more than you brought in? What if you were running a company whose revenues were $2.1 trillion but whose expenses were $3.8 trillion? You would try to bring it into balance, no?
Both parties are hiding their heads in the sand. We all know that the bulk of the money is spent on the entitlement programs and defense. Neither the Democrats nor the Republicans want to touch entitlements -- and the Republicans won't touch defense. So we're stuck.
No, they're sticking to rhetoric about ticky-tack discretionary programs that cost few billion there and a few billion here. It doesn't make a bit of difference. We're talking about hundreds of billions of dollars in cuts being needed.
And would it really be "Draconian" to go back, say, to a $2.6 trillion level of spending, which is what we were spending in 2007? Was the government really that much different then? Is it 37% better now? I don't undersand how this can happen.
Radical change is needed now. Social Security and Medicaire reform is imperative. If you don't think so, just look at the chart below, produced by the independent CBO, and tell me the current Congress is on track to fix things.
Look at the chart above and tell me where the "draconian" cuts are. The budget is skyrocketing. The deficits are skyrocking. There are no draconian cuts.
The current path ain't going to do it. it's just common sense. Another year or two of deficits like this with rising interest rates, and the costs of servicing the debt feed on themselves. Let's get out of denial. Let's fix it.
2010 was a great year in the markets, and a decent year for the Rayno Portfolio, but let's not get too excited. It's like being happy about getting a new Toyota after your buddy totaled your Porsche. That's how I view the 2009/2010 market in the context of the 2008 financial debacle. Yes, I like the Toyota, but can I get the Porsche back too?
The Rayno Model Portfolio delivered a solid 9% gain -- 10.4% total if you include dividends. This is a slight underperformance in the S&P gains. But please keep in mind that we advised readers to go to 100% CASH (or better yet gold) at the beginning of 2008 -- and so our 2008 Model Portfolio lost no money in one of the worst financial crises in history. A 10.4% gain looks a lot better when you managed to avoid the 35% decline two years earlier.
The Rayno Model Portfolio still has a track record of having NEVER LOST MONEY, and the cumulative returns since 2005 are now in excess of 40% total since 2005. Again, a lot of this goes back to the decision of going to 100% cash in 2008.
Sometimes the best way to make money is to avoid losing it.
The results of the model portfolio are below. To summarize, there were some volatile results in our picks. Our best pick was silver, via the Silver ETF (SLV), which was up 70%. As you know we have been fans of the precious metals for many years, and we believe they are in strong, secular bull markets that will continue. I'm still a huge silver bull.
It's been an interesting year. Shortly after moving to Montana, in the "dark days of 2009" when nobody would pick up the phone, I found myself employment challenged. So I did what any crazy editor would do: I holed up in the office above my garage, with a view of the Rocky Mountains, and created The Rayno Report. It's been a labor of love for about 14 months, interrupted occasionally by powder days and the search for large trout.
The Rayno Report grew in 2010 and thanks to help from sponsors such as Adtran, it made money. My accountant reports I ended the year profitably. But these aren't the kind of profits that will allow me to buy an NBA team any time soon. A few weeks ago I was offered a job which will essentially allow me to do the thing I love -- cover and analyze markets in real time. So I did what any sensible father of three would do -- I decided to take the job.
