The Bull & Bear's
Tech Stock
Report
BIOTECHS
CHIPS
HARDWARE
SOFTWARE
TELECOM
CONNECTIVITY
EMERGING TECHS
Fourth Quarter 2013
INSIDE...
Tech Stocks That Should
Grow No Matter What
Morgan Stanley is out with a report on 40
“secular growth” stocks expected to grow
independent of business cycle fluctuations.
...Page 3
Secure a Richer Retirement
With the Company Making the
Products That Surround Your Life
Almost all of the products from companies like
Apple, Sony, GE, LG and Toshiba wouldn’t exist
in their current forms without this company.
...Page 4
How to Invest in Tech
Without Losing Your Shirt
With the swift pace of technological change,
it feels like there must be money to be made.
...Page 15
Ten Chip Stocks Under $10
Circuit makers serve largely separate
niches from cell phones to game consoles
to cameras and other devices.
...Page 18
Get Used to Stock Trading Snafus
Technology-driven trading snafus are starting
to add up for the nation’s stock markets.
...Page 19
Sponsoring Company
DTS8 Coffee Company, Ltd.
®
Licensed to Roast and Sell “Don Manuel ”
Brand Premium Colombian Coffee in China
Market; Targeting U.S. Market with Green
Bean Arabica Coffee Grown in China
...Page 16
Tech Stock Report's
Investment Newsletter Digest
The world’s most successful investment
experts and analysts give their Top
Stock Picks for the Technology Sector,
focusing on high growth technology
stocks as well as such technology
staples as Amazon, Apple, Best Buy,
eBay, Facebook, Google, HewlettPackard, Microsoft & Samsung.
...Page 6
Facebook vs. Google:
We still like Google
By Graham Pupo
The Complete Investor
When Facebook had its much
hyped public debut in May 2012,
it seemed unrealistic that a company with a modest $669 million
in 2011 profits
was valued at
$104 billion
– surpassing
even giant
Google’s
( G O O G )
(Growth Portfolio) debut.
Many doubted if Facebook ever could leverage
the site’s 1 billion active
users into significant ad
revenues and earnings.
Reflecting these concerns, the
shares fizzle, hitting a low in September before stabilizing at 425 to
$30 in following quarters.
In late July, however, Facebook
answered critics when it posted
stronger-than-expected results for
2013’s second quarter. Revenues
rose 61 percent to $1.6 billion, and
per-share earnings grew 44 percent
to $0.13. The shares topped $38 for
the first time since the IPO.
The improved quality of its
desktop advertising, which drew
new advertisers to the site, was one
factor. Going forward, profits could
be further boosted by Facebook’s
plans to sell space for 15-second,
TV-style ads – though there’s
concern these could annoy users,
causing usage rates to drop.
But for both Facebook and
Google, the real key to future profitability and stock market gains
lies in the rapidly growing mobile
arena. Facebook has struggled to
monetize this area, but in the second
quarter, mobile-generated revenues
leapt from
$374 million
to $656 million. Clearly
Facebook is
headed in the
right direction.
Still, between
Facebook and Google,
we’re sticking with
Google, which seems
better positioned to make deeper
inroads in the critical mobile
market. In it second quarter, Google
generated $12 billion in advertising
revenues. While $8.8 billion came
from ads on its primary Google Web
site and affiliate sites like YouTube,
Google and was no slouch in the
mobile market, where it is expected
to account for 56 percent of global
advertising revenue for 2013.
As consumers increasingly access
content through smartphones and
tablets, Google’s ability to continue
to sell mobile products will be
crucial. Google seems up to the task.
Currently some 1.5 million Android
phones are activated daily, while
Google Chrome, the company’s web
Continued on page 14
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TECH STOCK REPORT
Page 3
Tech Stocks That Should
Grow No Matter What
Steven Perlberg
Business Insider
Morgan Stanley is out with a
new report on “secular growth”
stocks. That is, 40 stocks that are
expected to grow independent of
the fluctuations of the business
cycle.
Tech stocks make up 40% of the
list, playing into “Cloud, Social,
Mobile, and Big Data themes.” The
next most common stock is retail
at 18% featuring restaurants,
online retailers, and performance
apparel.
Morgan Stanley analysts believe
that the names selected for this
report can grow strongly even if the
global economy grows more slowly
than our current, below-trend GDP
forecasts,” according to the report.
Note: The EPS growth is the
projected compound annual growth
rate (CAGR) from 2012-2015,
the PE estimates are based on
2013 Morgan Stanley research
expectations, and the PEG ratio
refers to the price-earnings to
growth ratio which is an indicator
of the stock’s valuation. Growth
stocks with lower PEGs are
generally considered cheaper.
Here are a few tech companies
that made the list:
Amazon.com (AMZN). EPS
growth: NM. PE 2013: 662.7. PEG
ratio: NA. “We expect Amazon to
benefit from the continued shift
of consumer spending to online/
mobile from traditional brickand-mortar retail,” writes Morgan
Stanley’s Scott Devitt.
C o g n i z a n t Te c h n o l o g y
Solutions (CTSH). EPS growth:
17.8%. PE 2013: 20.5. PEG ratio:
1.2. Cognizant is a “strong player
in a fast-growing industry that
benefits from increasing global
demand for high- quality, lowercost IT services from outside
providers,” according to Morgan
Stanley’s Katy Huberty.
Facebook (FB). EPS growth:
40.0%. PE 2013: 67.0. PEG ratio:
1.7. Morgan Stanley’s Scott Devitt
believes that Facebook’s attempt
to compete for TV ad budgets will
mean “substantial upside potential
to video revenue.” FMC Technologies (FTI). EPS
growth: 22.5%. PE 2013: 25.3. PEG
ratio: 1.1. FMC will benefit from
“accelerated growth in subsea
services” and growth in deepwater
oilfield development, according to
Morgan Stanley’s Ole Slorer.
Google (GOOG). EPS growth:
13.5%. PE 2013: 18.3. PEG ratio:
1.4. Google has YouTube to thank
for its projection. “We project that
YouTube could generate gross
revenue of $20 billion and operating
income of $5 billion,” writes Morgan
Stanley’s Scott Devitt.
LinkedIn (LNKD). EPS growth:
74.8%. PE 2013: 141.8. PEG
ratio: 1.9. “We believe LinkedIn’s
substantial opportunities in
recruiting, marketing, and sales
should enable it to outpace its
peers in top-line growth over the
next several years,” writes Devitt.
Palo Alto Networks (PANW).
EPS growth: 42.4%. PE 2013:
209.9. PEG ratio: 5.0. “We find
PANW well-positioned to sustain
a 30%+ cash flow CAGR through
C2015,” writes Morgan Stanley’s
Keith Weiss.
Pandora (P). EPS growth: NM.
PE 2013: 808.7. PEG ratio: NA.
“We think Pandora’s best-in-class
streaming music service should
help it disproportionately benefit
from the shift in listening from
broadcast to digital channels,”
writes Morgan Stanley’s Scott
Devitt.
QLIK Technologies (QLIK).
EPS growth: 49.2%. PE 2013: 99.4.
PEG ratio: 2.0. Rising demand
for data discovery and QLIK’s
upcoming QlikView Next release
should broaden its enterprise
appeal and drive sustained 20%-
plus growth through C2014,”
according to Morgan Stanley’s
Keith Weiss. SBA Communications
(SBAC). EPS growth: NM. PE 2013:
149.5. PEG ratio: NA. The wireless
tower operator “is a key beneficiary
of the boom in wireless data traffic
which is driving carriers to invest
aggressively in their networks,”
writes Morgan Stanley’s Simon
Flannery.
ServiceNow (NOW). EPS
growth: NM. PE 2013: NM (2014
estimate: 409.3). PEG ratio: NA.
“We see NOW as one of the best
growth stories in software, with
room for upside as new sales hires
become productive,” according to
Morgan Stanley’s Jennifer Lowe.
Splunk (SPLK). EPS growth:
NM. PE 2013: NM (2014 estimate:
338.6). PEG ratio: NA. “The log data
platform story should continue to
develop apace, with Splunk seeing
larger deals as it scales in the
enterprise while the apps strategy
drives use-case expansion and
further user adoption,” writes
Morgan Stanley’s Keith Weiss.
Tableau Software (DATA).
EPS growth: 8.1%. PE 2013: NM.
PEG ratio: NA. “Expanding the
use of a powerful analytics and
visualization solution outside of the
traditional business intelligence
user base opens a very large
market opportunity for Tableau,”
writes Morgan Stanley’s Keith
Weiss. Yelp (YELP). EPS growth: NM.
PE 2013: 404.2. PEG ratio: NA. “We
believe Yelp’s service facilitates
both local business discovery and
real-time demand fulfillment, on
the back of a growing shift from the
traditional yellow page industry
to online directory services,”
writes Morgan Stanley’s Jordan
Monahan.
Source: Business Insider. See the rest of
Morgan Stanley’s 40 Picks at the Busines Insider,
www.BusinessInsider.com.
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 4
Secure a Richer Retirement With the Company
Making the Products That Surround Your Life
By Neil George
Lifetime Income Report
Take a look around you. No
matter where you are, chances
are that you’re within feet of
something that wouldn’t work if it
weren’t for the company I want to
share with you today.
In fact, almost all of the products
from companies like Apple, Sony,
GE, LG and Toshiba wouldn’t exist
in their current forms without this
company.
It’s a big player. And it’s going
nowhere but up. Even its name
stands for “big” and “eternal.”
Those words could also stand for
its sales, which have seen doubledigit growth for years and years.
Or its margins on those sales,
which also expand double digits
each year. Or its revenues, running
at nearly a quarter trillion dollars
a year.
Most importantly, “big” and
“eternal” could refer to its stock
market returns. Over the past 30
years, this company has delivered
an average annual return of
over 22.1% – for a total return of
39,000%
It’s come a long, long way from
its humble beginnings as a noodlemaker.
I’ll share that fascinating story
in a second. But first I need to
warn you – there isn’t much of a
dividend here.
Don’t let that deter you from
pick­ing up as many shares as you
can, however. This company is the
living definition of a Long Hauler.
That is, it has proven it can go the
distance, bringing you reliable
capital gains to supplement gains
from dividends.
And that’s very important, even
if you’re the most die-hard income
investor. Let me briefly explain
why…
In It for the Long Haul
The Lifetime Income Report
portfolio has three groups – Cash
Cows, Long Haulers and Nibblers.
These aren’t just a handy way of
breaking up the portfolio. In fact,
you can apply this model to all of
your stocks, considering what each
of your stocks, bonds and other
investments is supposed to do for
your retirement portfolio.
Cash Cows form
the foundation. These
are investments
that have
p r o v e n
themselves to be able to stick
through all sorts of economic and
market trials, all while helping you
pile up bigger dividends.
Nibblers are the farm team.
Until they prove themselves, you
should just buy a few shares or
“nibble” on them as we see how
they pan out.
Then, of course, are the Long
Haulers. This is a small group,
because it’s tough for most stocks
to make the cut.
First, they need to be industry
leaders demonstrating “proven
growth.” That’s more than just a
company that’s selling and earning
more. No, to demonstrate proven
growth, a company’s stock price
must be consistently moving higher
– showing that the stock market
recognizes and is rewarding the
company’s successes.
Notice I haven’t said a thing
about dividends. While I like to see
a Long Hauler paying dividends,
it’s not a requirement. Instead, I
want the stock’s growth to offset
inflation risks. This way, Long
Haulers work hand in hand with
your Cash Cows.
So now that you know why
the Long Haulers are important
– despite having relatively lower
dividends – let me introduce you
to the perfect example of one that
belongs in your portfolio.
Three Stars
The company’s name will
almost certainly be familiar to you:
Korean electronics giant Samsung
(SSNLF).
It was founded by Lee
Byung-Chull in 1938. The name
literally means “Three Stars.” In Korea, “three”
connotes
something
big and powerful. “Star”
equates to
something eternal. Therefore, Samsung
means “big and eternal.”
So it’s a little funny that the
company started out trading green
groceries as well as making and
selling noodles. But from those
humble beginnings – under Mr.
Lee and subsequent management
– the company rapidly expanded
into multiple profitable product
lines.
In 1970, it shifted into the
technological world, manufacturing
Korea’s first black-and-white
television. Things only got better
from there, and now the company
dominates the global market for
consumer and business electronic
goods and components.
Today, its products are broken
down into four core business
lines: Digital Media, LCD,
Semiconductors and Telecom
Equipment.
Digital Media includes its
computer and related products,
ranging from ultra-light laptops to
its latest Galaxy tablets that use
Google’s Android and Microsoft’s
Windows 8.
This group also includes
televisions, a niche it absolutely
dominates. In fact, it’s so far ahead
of its peers in this arena that many
of the original makers of flatscreen televisions have completely
given up trying to compete with
Samsung. Instead, companies like
Sony and Sharp simply outsource
to Samsung to manufacture their
products.
The division rounds out
its expan­s ive products with
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
entertainment – devices ranging
from DVD players, game terminals
and other digital devices – to
household appliances, like the
latest nanotechnology wash­ing
machines and dryers.
Last year, Samsung sold over
$18 billion worth of these goods
and has been expanding sales
over the past three challenging
economic years by nearly 7%.
The LCD division makes the dis­
plays for not only its own phones
and flat screens, but also for
nearly everybody else’s products,
including those of Apple, Sony,
LG, HTC, etc. Essentially, there’s
a good chance there’s at least
one screen near you that came
from Samsung. So while this is
the smallest division, it’s also
important because it plugs into the
other groups.
The Semiconductor chips
business unit is the second largest.
Its sales climb by double digits year
after year – even as its competitors
have seen sales slides over the
past few years. Again, you’d be
hard-pressed to find a smartphone,
tablet or even a modern toaster
that doesn’t have a Samsung chip
inside it.
Telecom Equipment is the
behemoth of Samsung. With the
rest of the nearly quarter of a
trillion dollars in its annual sales,
this division has been ramping up
sales by an average annual rate of
over 40.3%
The Telecom group includes
industrial equipment for network
companies. Of course, it also
includes the most ubiquitous
phones on the planet, the Galaxy
smartphones. The company is
No. 1 in both overall phone sales
and smartphone sales. And while
Apple is struggling with innovative
new products in a post-Steve Jobs
world, Samsung keeps ratcheting
up new innovations. Not only is its
new Galaxy smartphone about to
be released, but the company also
introduced a “smart watch,” which
links to your phone.
The key to Samsung’s success
is that it has both sides of every
market that it operates in. On the
primary side, it brings out its own
product lines that quickly gain
Page 5
wide demand.
And the other side, every one of
its competitors – including Apple
– can’t bring out a single device
or product without at least one or
more of Samsung’s components,
from screens to chips.
It literally has a lock on getting
a piece of nearly every electronic
product everywhere on the planet.
And all of this is backed up by a
stellar balance sheet.
A Great Balance Sheet
and Still a Bargain
Samsung has lots of
cash coming in. So
much that its current
and quick ratios —
which measure the
amount of cash and
liquid securities on
hand against nearterm liabilities – are
running as high as
nearly 2 times.
Meanwhile, its
debt is only 2.3% of
its overall assets.
That means it can
continue to fund any
and all of its product
development pretty
much without any
bankers or bond
salesmen for the
foreseeable future.
It also means that
when some of its
products do stumble
in the market – which
happens to even the best
companies – it’s no big deal. The
company can sustain itself almost
indefinitely, given its balance sheet
and credit conditions.
And as I mentioned, the stock
has shown tremendous growth…
but that doesn’t mean the stock
isn’t a bargain!
Consider how it compares
using one of the most basic stock
valuations: price-to-sales. This
ratio takes the stock value of the
company and measures it against
its total sales. It tells us whether
a company’s stock is measuring up
year after year – or if it is being
overhyped and overbought
Samsung is consistently valued
worldwide by investors at or a bit
above 1 times trailing sales. And
with its sales climbing over the
past several years by an average
of 16%, the double-digit average
annual gains for the past 30 years
prove out.
Moreover, compared with peers,
it’s a downright bargain. The
average price-to-sales for the S&P
technology index is running at
over 2.5 times. So with a 1.2 priceto-sales ratio, it’s cheaper than
its lesser performing but more
expensive peers.
Now, as I noted above, it doesn’t
pay a big dividend. It
currently runs at less
than 1%. But unlike its
peers in the technology
markets that just
hoard the cash
without delivering
gains, Samsung’s
history of attaining
“proven growth” earns
it a spot as a new Long
Hauler.
And one last
thing….
Don’t Let Your
Broker Tell
You No
Samsung trades
over the counter in
the United States.
Don’t be spooked
by this — and don’t
be bullied by your
broker. You need to
just tell them to get the
shares for you, since there
are market makers the world over
moving millions of shares a day.
The last letter in the trading
symbol is “F.” This signifies that
the shares are foreign shares, not
depositary shares. So you’re going
to own shares in the actual Korean
company.
But it also means that each
share has a higher denomination,
since that’s the convention for the
Korean market. Each share is
currently trading around $1,075.
So if you can buy only a few shares,
do so. The denomination doesn’t
mean anything — it’s only the
stock’s price. And as I noted, that’s a
bargain price compared with peers.
Continued on page 14
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 6
Tech Stock Strategies
INVESTOR ADVISORY SERVICE
711 W. 13 Mile Rd., Madison Heights, MI 48071.
Monthly, 1 year, $399. E-subscription, $299.
www.iclub.com/IAS.
eBay: A long-term growth play
Douglas Gerlach: “We introduced eBay Inc.
(Nasdaq: EBAY) to this newsletter in late 2006,
and we had to wait a long time for the stock to live
up to our expectations. After five years of mostly
average performance, shares finally caught fire in
2012, gaining 70%. Value-conscious investors might
consider a stock too hot to touch after a run like that,
but eBay has spent 2013 consolidating its gains, and
we think it may be a good time for investors to revisit
this long-term growth play.
Perhaps eBay isn’t as cheap as it once was, but
bargains are hard to come by right now in the market.
We think eBay can safely grow into its current
valuation by increasing revenue at a mid-teens pace
while also expanding its profit margins. Investors
might be surprised how much punch is still left in
this stock.
E-commerce remains a good growth market,
and while eBay’s Marketplaces division has lagged
e-commerce’s overall rate of growth for years, it
still managed 10% growth in the most recent fiscal
quarter. The franchise is steady in North America,
and expanding nicely in overseas markets. We smiled
when the executive in charge of emerging markets
expansion called her initiative “incredibly wellfunded” in an interview this year. Comments like that
make it clear that eBay still has plenty of runway
for future revenue growth and margin expansion.
We think 8%-10% is about the growth rate investors
should expect from the Marketplaces division in the
long run, with the potential for better margins when
the company eventually focuses on efficiency ahead
of growth-at-all-costs.
eBay also owns PayPal, a payments platform that
many analysts believe represents more than half
the value of the combined company. The payments
industry has good growth prospects and high profit
margins. Scale is all-important, and the industry’s
substantial barriers to entry make it hard for
newcomers ever to catch a foothold. Technology
powerhouse Google has tried repeatedly to push
into payments, without much success so far. If
eBay’s eponymous commerce platform is sometimes
considered average in the e-commerce world, PayPal
is a potential jewel of the payments world.
PayPal grew up somewhat on the fringes of the
payments industry, but a recent push into retailers’
physical stores seems finally to have put it on the
radar of larger players, including big banks and
credit card processors like Visa and MasterCard.
PayPal has a complicated relationship with these
competitors because it drives significant payments
volume through their platforms, while also offering
its own alternative way for shoppers to pay. PayPal
claims it wants to be as neutral as possible, serving
as the “digital wallet” that helps consumers juggle
various bank accounts and payment options. eBay
CEO John Donahoe sees a future where consumers
no longer need to carry any cash or cards with them
because they have unfettered access to their money
digitally. If security hurdles can be overcome, we don’t
think the idea is far-fetched.
Growth at PayPal is running at about 20% right
now, which might be hard to sustain unless the
physical point-of-sale initiative takes off. PayPal
has sacrificed a lot of potential margin in its hunt for
offline growth. If it starts to get some traction, the
upside could be pretty explosive.
Investors may also want to keep a close eye on a
small consumer credit service hidden within PayPal
called Bill Me Later (BML). We have always seen
BML as a sort of hobby for PayPal, but things may be
getting a little more serious, as the company recently
partnered with Alliance Data Systems to issue BML
credit products.
We think eBay can earn $2.36 in 2013, lending
shares a forward P/E of about 23. For a projected
low price, we multiply that estimate by a low P/E of
16.8 for a product of 37. Our projected high price of
110 is based on EPS of $4.36 and a P/E of 25. Our
upside/downside ratio is 3.3 to 1. eBay does not pay
a dividend. Visit the company’s website at www.
ebayinc.com.”
***************
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Madison Heights, MI 48071. 1 year, $299.
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Open Text Corp: Systems to
build a cohesive EIM strategy
Douglas Gerlach: “The astounding growth of
information globally has made it increasingly
important for businesses to manage their content and
data. Before 2003, the estimated amount of content
generated worldwide totaled 5 exabytes, according to
Google’s Eric Schmidt. In 2011 the world was creating
5 exabytes every two days.
Open Text Corporation (Nasdaq: OTEX; TSX:
OTC), Canada’s largest software company with fiscal
2013 revenues of almost $1.4 billion, helps companies
leverage their information. This market is called
enterprise information management.
Management believes the company has about 10%
of the total EIM market, with revenues for the most
recent fiscal year at $1.4 billion. The market can be
broken down into the following components:
• Customer experience management: management
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
of Web content, customer communication, media,
social communities, portals and mobile apps
Enterprise content management: management
of content, records and email; archiving; legacy
decommissioning; learning management and
accreditation; and content-centric applications
• nformation exchange: fax and document
distribution, cloud-based file sharing, capture
and recognition, managed file transfer and data
integration
• Discovery: search, content analytics, semantic
navigation and auto-classification
• Business process management: dynamic
case management, high-volume imaging, strategic
business planning and modeling and process-centric
applications
Customer support revenues account for about
half of Open Text’s sales. In fiscal 2013 (ended June
30), license revenues represented more than 20%
of sales; professional service/other, over 18%; and
cloud services, almost 13%. Unsurprisingly, licenses
provided the most gross margin at 94%, followed by
customer support (84%), cloud services (58%) and
professional services/other (22%). Overseas business
accounted for 47% of sales.
The company’s organic growth is supplemented
significantly by acquisitions. OTEX acquired three
firms in fiscal 2013, two U.K.-based businesses in
the $19 million-$20 million range each and EasyLink
Services, a Georgia-based firm that provides cloudbased electronic messaging and business integration
services. The latter acquisition cost $342.3 million.
Open Text provides related products and services
to a diverse customer base, including ConocoPhillips,
Visa, AAA, Owens Corning, NBC, Burger King and
Transamerica. No customer accounts for more than
10% of revenues. The company does have a close
relationship with SAP, including designing products
that help customers manage content from SAP
systems. Open Text also has a strategic alliance with
Microsoft and has developed solutions for SAP rival
Oracle.
Growth Analysis
Management believes the EIM market will grow
10% annually through 2016, with enterprise content
management experiencing a 10% growth rate between
2011 and 2016; business process management should
increase by over 7% annually, while the customer
experience management, information exchange and
discovery markets are projected to grow in at least
the low double digits.
Open Text’s historical sales growth is 18%, but we
don’t see this continuing over the next five years. We
see 10% growth for Open Text as very attainable over
the next five years, fueled by continued acquisitions
that will help the company expand its cloud services.
Also driving the growth for Open Text will be mobile
and social media products and services. This won’t go
unnoticed, however, as Open Text competes with large
companies such as IBM, EMC, Hewlett-Packard and
Adobe (as well as with partners Oracle and Microsoft
Page 7
in certain markets).
Long-term earnings have grown 32%, though the
rate since 2008 has been closer to 22%. We’re assuming
an increase in margins from international expansion
being offset somewhat by increased competition from
giants such as Oracle. Tax rates should increase as
well. All told, with 10% sales growth we’re looking
at 11.5% annual EPS gains. That’s an OK rate for a
company of Open Text’s size.
Quality Analysis
Open Text has a strong history of consistent pretax margins. In the latest fiscal year, the company
earned 14.8% per dollar of sales, higher than the
five-year average of 13.8%. The company should be
able to maintain these margins and even expand them
somewhat over the next several years.
Return on equity tells a similar story. The latest
annual figure, 11.1%, exceeds the five-year average of
10.3%. ROE has steadily increased since 2007, when
it was only 4.1%. Debt as a percent of capital has been
fairly steady and is currently around 30%, though
total debt has exceeded $500 million during the past
two years compared with $282 million in 2009. We
favor companies with less debt, but we also believe
Open Text’s level is manageable.
Valuation Analysis
Growth often isn’t cheap, and it isn’t in Open Text’s
case, either. The annual high P/E exceeded 30 until
the most recent year. We believe the current P/E of
almost 30 is going to be the average high for the next
five years. With an estimated high EPS of $4.33, that
puts the forecasted high price at just under $130.
For the low price, we feel the low derived by
multiplying the low P/E and the low EPS – about
$50 – is a little low. We selected a potential low price
of $59.75, which is 20% below the current price.
The resulting risk-reward ratio is 3.7 to 1, which
is above our 3 to 1 minimum though by no means a
spectacular buy.”
***************
NATES NOTES
P.O. Box 667, Healdsburg, CA 95448.
Monthly, 1 year, $289. www.NotWallStreet.com.
Pounding the table for Apple
Nate Pile: “I believe the new phones and pricing
strategy unveiled by Apple (AAPL) are nowhere near
as “awful” as many of the analysts have been claiming
they are… and though time may prove me wrong, I am
more than happy to put the newsletter’s performance
record on the line by adding even more shares to
both our Portfolios in response to how the story is
unfolding. Will other smart phone makers continue
to find success? Absolutely. Does this mean Apple
can’t still prosper? Absolutely not. And perhaps more
importantly, Apple’s “ecosystem” only appears to be
getting stronger as the industry matures and growth
becomes harder to find. AAPL is now considered a
strong buy under $425 and a buy under $500.”
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 8
PEARSON INVESTMENT LETTER
published for clients of Pearson Capital, Inc.
P.O. Box 3739, Apollo Beach, FL 33572.
Monthly, 1 year, $150.
Owning real value
Donald Pearson: “Today anything you buy should
be purchased with value being the key component.
Always prioritize this and you go far on the road
to prosperity. Whenever anyone purchases at the
supermarket the first thing checked is what is on
sale this week. Car shopping, and everything else we
purchase, is carefully researched too. I don’t know of
anyone purchasing a home or a business who doesn’t
check carefully, and even make offers for less than
the asking price. Simply said, we are all trying to get
what we want and need at the lowest price possible.
Whether we’re going to live in it, drive it, wear it, eat
it, or invest in it. As I say so often, “value is king.”
When making investments for one’s personal portfolio,
this strategy will take you a long way in meeting your
immediate and long range goals. It doesn’t matter if you
are older pursuing income, younger pursuing growth,
or somewhere in-between seeking a happy medium.
Rather than purchase a handful of mutual funds, where
the money is being made first by the fund charging about
6%, either build your own portfolio or have someone
like us do it for you. Today this can be done with time,
research, and dedication. Warren Buffett’s strategy and
success is exactly the same as what my father, Walter
Pearson, dedicated himself, to 55 years ago. Invest the
time, do the work, and seek out value.
Cognizant Technology Solutions Corporation
(Nasdaq: CTSH; $73.16) is a provider of custom
information technology, consulting and business process
outsourcing services. The Company is engaged in
Business, Process, Operations
and Information Technology
Consulting, Application Development and
Systems
Integration, Enterprise Information Management
(EIM), Application
Testing, Application Maintenance,
Information Technology Infrastructure Services, and
Business and Knowledge Process Outsourcing, or BPO
and KPO. The Company operates in four segments:
Financial Services; Healthcare; Manufacturing, Retail
and Logistics, and Other, which includes communications,
information, media and entertainment, and high
technology. Institutional Holdings: 1767.
EMC Corporation (NYSE: EMC; $26.85), and
its subsidiaries develop, deliver and support the
Information Technology (IT) industry’s range of
information infrastructure and virtual infrastructure
technologies, solutions and services. The Company
manages its business in two broad categories: EMC
Information Infrastructure and VMware Virtual
Infrastructure. EMC Information Infrastructure
provides a foundation for organizations to store,
manage, protect, analyze and secure ever-increasing
quantities of information, improve business agility,
lower cost of ownership and enhance their competitive
advantage within traditional data centers, virtual
data centers and cloud-based IT infrastructures. Its
EMC Information Infrastructure business consists
of three segments: Information Storage, Information
Intelligence and RSA Information Security. In July
2013, the Company’s RSA security division acquired
Aveksa Inc. Institutional Holdings: 2761.
Microsoft Corp. (Nasdaq: MSFT; $32.70) is engaged
in developing, licensing and supporting a range of software
products and services. The Company also designs and
sells hardware, and delivers online advertising to the
customers. It operates in five segments: Windows &
Windows Live Division (Windows Division), Server
and Tools, Online Services Division (OSD), Microsoft
Business Division (MBD), and Entertainment and
Devices Division (EDD). The Company’ products include
operating systems for personal computers (PCs), servers,
phones, and other intelligent devices; server applications
for distributed computing environments; productivity
applications; business solution applications; desktop and
server management tools. In July 2012, Comcast Corp.
acquired the Company’s 50% stake in MSNBC.com. In
October 2012, it acquired PhoneFactor Inc. On July 18,
2012, it acquired Yammer, Inc. Effective March 19, 2013,
it acquired Netbreeze GmbH. Institutional Holdings: 4915.
QUALCOMM Inc. (Qualcomm) (Nasdaq: QCOM;
$66.27), incorporated on August 15, 1991, is engaged
in design, manufacture, have manufactured on
its behalf and market digital communications
products and services based on code division multiple
access (CDMA), Orthogonal Frequency Division
Multiplexing (OFDMA) and other technologies. The
Company operates in four segments: Qualcomm
CDMA Technologies (QCT); Qualcomm Technology
Licensing (QTL); Qualcomm Wireless & Internet
(QWI), and Qualcomm Strategic Initiatives (QSI).
The Company develops and supply integrated circuits
and system software based on CDMA, OFDMA
and other technologies for uses in voice and data
communications, networking, application processing,
multimedia and global positioning system products. In
November 2012, the Company acquired certain assets
of EPOS Development, Ltd. (EPOS). Effective July 4,
2013, Bharti Airtel Ltd raised its interest to 51% from
49% by acquiring a 2% interest in Qualcomm India Pvt
Ltd, from Qualcomm Inc. Institutional Holdings: 3472.
Editor’s Note: Pearson Capital, Inc. is a private money
management firm with over 50 years of investment experience.
For more information visit www.PearsonCapitalInc.com.
The Bull & Bear
Financial Report
P.O. Box 917179, Longwood, FL 32791
Phone: 1-800-336-2855
Fax: (407) 682-6170
Editor: David J. Robinson
© Copyright 2013
The Bull & Bear's Tech Stock Report E-Letter. ­
Reproduction in whole or in part is strictly ­prohibited.
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
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Page 10
THE KONLIN LETTER, 5 Water Rd., Rocky
Point, NY 11778. Monthly, 1 year, $95.
www.konlin.com.
Planar Systems: One of the
world’s foremost authorities on 4K
Konrad Kuhn: “The electronic specialty display
industry is driven by the proliferation of display
products, from both the increase in functionality in
“smart” devices and the availability and versatility of
LCD flat panel displays at increasingly lower costs;
the ongoing need for system providers and integrators
to rely on display experts to provide customized
solutions; and from market growth for targeted
marketing and messaging to consumers using digital
signage in a variety of form factors in both indoor and
outdoor applications.
Founded in ’83, Planar Systems, Inc. (Nasdaq:
PLNR; $1.80) is a global leader in display and digital
signage technology, providing premier solutions
for the world’s most demanding environments.
Retailers, educational institutions, government
agencies, businesses, utilities, energy firms, and
home theater enthusiasts all depend on PLNR
to provide superior performance when image
experience is of the highest importance. Products
include display components, completed displays,
and display solutions and systems based on a
variety of flat panel and front-and-rear-projection
technologies.
PLNR’s video walls, large format LCD displays,
interactive touch screen monitors and many
other solutions are used by the world’s leading
organizations, in applications ranging from digital
signage to simulation, and from interactive kiosks
to the large-scale data visualization. PLNR recently
added multi-touch, multi-user capabilities to its
breakthrough Planar® UltraRes™ Series 4K LCD
display product line, with stunning 4K image
clarity. Touch integration has been the number one
consumer request since PLNR introduced the Planar®
UltraRes™ Series o 84-in., ultra HD displays. In
commercial, academic and government settings, there
is a large and growing volume of ultra-high definition
computer and video visual information with people
making critical decisions based on that information.
PLNR’s UltraRes™ 84-inc. displays are used in
the energy, geospatial, engineering and design,
architecture, aerospace, control room, collaborative
conference room, medical imaging, science and digital
signage, among others.
Sales for FY’12 decline 8% to $171.4 mil., with a loss
of (.81) per share. Sales for 1st 9 mos. of FY’13 decline
16% to $121.1 mil., with a net loss of (.31) per shave
vs. (.58) for the same period in the prior year. The
decrease in sales was primarily from the sale of assets
and liabilities related to EL’s product line in the Q1’13.
PLNR is financially sound, with a current ratio of
2.1:1 and working capital of $34.1 mil., of which $13.4
mil. is in cash. Of the 21,300,283 shares outstanding,
TECH STOCK REPORT
11% are held by insiders and 40% by institutions. The
stock rose 28% over our recommendation (1.60) and
pulled back on top of support, where we would Add/
Buy in the 1.75/1.85 area for a 1st target of 4.50-5.00,
as PLNR leads the way in the expected wide adoption
of 4K resolution displays.
PLNR has been transitioning its focus, strategic
direction and resources to target the larger and fastergrowing market for digital signage display. PLNR
offers the most comprehensive line of professional
touch displays utilizing its exclusive ERO™ protective
glass surface and proven multi-touch technology in
the industry, ranging from 15-in. desktop, point of sale
and kiosk displays all the way up to 300-in., multitouch video wall displays. PLNR’s pioneering efforts
in video and technology resulted in them being one
of the world’s foremost authorities on 4K. Ultimate
target 7-8.”
**************
INVESTINGDAILY.COM, a free website maintained
by KCI Publishing, 7600A Leesburg Pike, West
Bldg., Ste. 300, Falls Church, VA 22043.
Amazon reboots the Kindle
Chad Fraser: “Amazon.com (NasdaqGS: AMZN)
released the latest iteration of its Kindle Fire tablet
computer Sept. 25th.
Called the Kindle Fire HDX, the device comes in
seven- or 8.9-inch screen sizes and features higher
resolution than the previous models.
It also sports a Qualcomm (NasdaqGS: QCOMM)
2.2-GHz Snapdragon 800 processor, which is the
fastest chip in any tablet, providing three times the
processing power of the previous version.
The device’s main strength comes from its close
integration with Amazon’s vast collection of content,
such as movies, books and music. For example, the
HDX’s enhanced X-Ray feature lets users see the
names of songs playing in the background of the
film they’re watching and instantly buy them from
Amazon.
In a move to attract more new tablet users, the
company has introduced the Mayday button, which
quickly connects the user to tech support, where an
expert can personally guide them through any of the
tablet’s features. This support is available 24 hours
a day, seven days a week, and is free.
“You shouldn’t have to be afraid of your device,”
said CEO Jeff Bezos.
In addition to the new HDX models, the company
cut the price on the Kindle Fire HD, which will now be
its entry-level tablet. The HD will have 8 gigabytes of
memory – compared to the previous version’s 16 – but it
will cost just $139, down from $199. The seven-inch HDX
will start at $239 and will ship October 15, while the 8.9inch starts at $379 and will go on sale on November 7.
Aiming for a Bigger
Slice of a Growing Market
According to research firm NPD, 17% of all tablets
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
sold in the U.S. between May and July were Kindles.
The iPad accounted for 48%, and 8% came from
Samsung’s (OTC: SSNLF) Galaxy line.
Around the world, NPD says 470,000 Kindles were
shipped during the period, down 59% from a year
earlier. (However, the company tends to make most of
its sales around the holidays, leading Business Insider
to dub it the “fruitcake of tablets.) Apple shipped 14.6
million iPads, down 17%, while Samsung unit sales
jumped 539%, to 10.8 million.
The Kindle Fire HD’s low price and Amazon’s focus
on new users through features like Mayday on the
HDX put it in a good position to increase sales as the
tablet market continues to grow. Market research firm
IDC recently lowered its tablet sales forecast for 2013,
partly due to rising competition from smartphones
with bigger screens, but it still sees sales volumes
hitting 407 million units in 2017, up from an expected
227.4 million this year.
Tablet Strategy
Is Classic Amazon
In an October 2012 article, Investing Daily’s
Jim Fink referred to Amazon as the “Teflon stock,”
a reference to Ronald Reagan, who was known as
the “Teflon president,” because bad news just never
seemed to stick to him. In the same way, investors
seem to rally behind Amazon’s shares, regardless of
the fundamentals.
“Some stocks are impossible to analyze or predict
because investors are so enamored by the ‘story,’”
wrote Fink. “Silly things like a company’s profits
have no bearing on the stock price. Amazon.com is
one such stock.”
A recent example is the company’s second quarter
earnings report, which it released on July 25. Sales
rose 22.4%, to $15.70 billion, but Amazon lost $7
million, or $0.02 a share, compared to a profit of
$7 million, or $0.01 a share, a year earlier. That
was well short of the Street’s expectation of $0.06
a share.
Revenue has always mattered to Amazon more than
profits, but the company also fell short of expectations
there – though only very narrowly –coming in just shy
of the consensus forecast of $15.73 billion.
The result? Amazon’s stock jumped 2.8% in the
following day’s trading, to close at $312.01. It moved
lower in August and September, but it’s now back
around $312.
Nonetheless, it’s hard to argue with the company’s
success. As Fink points out, it survived the dot-com
bubble of the early 2000s and paid off its $2-billion
debt in 2009. It’s also the 11th-biggest retailer in the
U.S. by sales, just behind Wal-Mart (NYSE: WMT)
and ahead of Best Buy (NYSE: BBY).
It is also taking a run at Netflix (NasdaqGS:
NFLX) with its Amazon Prime service. In typical
Amazon style, it is undercutting its main competitor
on price, offering Amazon Prime for $79 a year, or
$6.58 a month, compared to Netflix’s fee of $7.99. In
addition to unlimited viewing of Amazon’s over 41,000
Page 11
movies and TV shows, Prime members get two-day
shipping on all their purchases and one Kindle book
to borrow for free each month from the Kindle Owners’
Lending Library.
The stock up 342% in the past five years, and
investors expect that rise to continue, going by
Amazon’s high forward P/E ratio of 110.9.
Another Way to Profit From Tablets
As we’ve written in previous Investing Daily
articles, there are other ways to profit from the rising
popularity of tablets than through Amazon, Apple or
other manufacturers. For example, you could look
to component makers like Qualcomm (NasdaqGS:
QCOM), which makes the Snapdragon processor in
the Kindle Fire HDX, as well as chips for Samsung
and Apple mobile devices.
The company operates through three divisions:
Qualcomm CDMA Technologies, which supplies over
63% of the company’s sales, designs and sells chipsets
for a variety of devices. Qualcomm Technology
Licensing (33% of sales) provides licenses and rights
to use some of the company’s intellectual property,
and the Qualcomm Wireless Initiative (4%) provides
development and other services to transport and
logistics companies, wireless network operators and
governments.
As we wrote in a recent Spotlight article on
the company for our Personal Finance newsletter,
Qualcomm does face some challenges. For example,
it is highly dependent on the CDMA Technologies
segment for sales, and it’s facing rising competition
from chip giant Intel (NasdaqGS: INTC), which is
moving into the mobile market to offset falling PC
sales.
However, the company is still the market leader,
and management expects sales of devices that use
Qualcomm’s chips to grow by more than 20% annually
over the next few years as more consumers upgrade
to smartphones from regular cellphones.”
Editor’s Note: Chad Fraser is a contributor to InvestingDaily.
com, an online service of KCI Investing. To sign up for free reports
and E-mail alerts visit www.InvestingDaily.com.
The KonLin Letter
Micro/Small-Caps
Buy - Sell • Technical
Fundamental Market Timing
www.konlin.com
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 12
LOOKING FORWARD, published for clients
of Friess Associates and Brandywine Funds
shareholders, P.O. Box 576, Jackson, WY 83001.
Priceline could be going places
Chris Aregood: “With online transactions
accounting for almost half of U.S. bookings, growth
prospects remain bright for companies driving the
travel business’s continued migration to the Internet.
Online penetration stands at 40 percent in Europe,
and 25 percent in the Asia-Pacific and Latin American
regions, making the opportunity even more ample
overseas. Given the way Priceline is positioned to
accommodate the global growth, we believe the
company could be going places.
The Priceline Group (Nasdaq: PCLN) is the
world’s second largest online travel agency. It
operates the travel websites priceline.com, Booking.
com, rentalcars.com, Agoda.com and, as of May 21,
Kayak.com. The company’s services, including hotel
room reservations, airline ticketing, car rentals and
vacation packages, are offered on a stated-price retail
basis and through a demand-driven system called
“Name Your Own Price.”
In all, Priceline provides online travel services
in more than 180 countries and territories. The
company’s sites handle about one out of every five
travel bookings made online. Revenue grew 21
percent to $5.5 billion in the 12 months through
March.
Priceline derives most of its profits selling hotel
rooms in Europe through Booking.com, which is
making inroads in the U.S. thanks to advertising
support. The Asia-Pacific region, which Priceline
specifically targets with Agoda.com, represents
an especially appealing opportunity. Despite
significantly lower penetration, online travel in
the region already rivals the individual U.S. and
European markets.
The Friess Associates team spoke to Chief
Executive Jeff Boyd about costs related to bringing
customers from their first click to their final purchase.
Priceline’s acquisition of Kayak adds meta-search
capabilities to the company’s offerings. Meta-search
aggregates results for users to compare on Kayak.
com rather than immediately redirecting users to
customer sites, reducing costs related to additional
clicks.
Priceline grew earnings per share 35 percent in the
March quarter, exceeding the consensus estimate by
9 percent. Revenue grew 26 percent to $1.3 billion.”
***************
HENDERSHOT INVESTMENTS
11321 Trenton Ct., Bristow, VA 20136.
1 year, 4 issues, $50.
www.hendershotinvestments.com.
Investors should google Google
Ingrid Hendershot: “Google (GOOG: $870.21)
is a global technology leader focused on improving
the ways people connect with information. Google’s
innovations in web search and advertising have
made its website a top Internet property and its
brand one of the most recognized in the world. Google
generates revenue primarily by delivering relevant,
cost-effective online advertising. Google also provides
operating systems, enterprise and hardware products.
Strong Global Brand
After the first web page was created in 1990,
Stanford University graduate students, Larry Page
and Sergey Brin, built a search engine in their dorm
INVESTOR RELATIONS PROGRAMS
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­ elations Programs for publicly
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TECH STOCK REPORT
room that used links to determine the importance
of individual web pages. They named their search
engine Google, a play on the word, googol, which
is the mathematical expression for a 1 followed by
100 zeroes. The name reflects the immense volume
of information that exists and Google’s mission
to organize the world’s information and make it
universally accessible and useful.
Google’s strong global brand is one of the most
recognized in the world as the number of people who
use Google’s service every day is in the hundreds
of millions with Google’s services available in
nearly every country and more than 100 languages.
Search results are no longer just web pages. They
include images, videos, books, maps and more. In
2006, Google acquired YouTube, which lets billions
of people watch and share original videos and
professional content.
With searches increasingly coming from mobile
devices, Google developed Android, a mobile operating
system that allows open interoperation across carriers
and manufacturers. To enable faster searches, Google
launched a new web browser called Google Chrome,
which makes it easier for folks to use their favorite Google
products like Google Maps, Gmail, Google Calendar,
Google Docs and Google Translate. Google’s recently
acquired Motorola Mobile business is focused on mobile
wireless devices and related products and services.
Outstanding Growth
Thanks to the growth of the digital economy and
the shift of consumers and advertisers from offline
to online, Google has generated outstanding growth.
Over the last five years, sales and net income have
compounded at 23% and 26% annual growth rates,
respectively. During the latest quarter, Google’s
revenues rose 19% to $14.1 billion.
Robust Cash Flows
Google generates robust cash flows with free
cash flow compounding at a fiery 50% annual rate
over the last decade with cash topping $54 billion
as of 6/30/13. Backing out this massive cash stash
from its market capitalization, Google is trading
for 16 times expected 2013 EPS of about $44 per
share. In addition to investing aggressively in newer
businesses, Google uses cash for acquisitions to help
fuel future growth. Long- term investors should
google Google, a HI-quality company with a strong
global brand, outstanding growth and robust cash
flows. Buy.”
***************
KAPITALL WIRE, a division of Kapitall, Inc.
241 Centre St., New York, NY 10013.
www.Kapitall.com.
HP Chromebook 14: More than
just a pretty shell to these stocks
Chris Lau: Hewlett-Packard (HPQ) provided a
sneak preview of its Chromebook 14 at recent the
Intel Developer Forum. Powered by an Intel (INTC)
Page 13
Haswell processor, the device will be a mere $299.99.
This could be a worrisome development for
companies like Microsoft (MSFT). Microsoft is
relying on the traditional upgrade cycle towards
Windows 8.1, but budget mobile laptops like the
Chromebook have the potential to impact sales this
time around.
Chromebook 14 Specs
To speed up the booting up sequence, the storage
will have a 16GB solid-state disk.
• Solid-state drives (SSDs) generally reduce the
time it takes to start up a system.
• Windows XP and 7 both benefit from SSD.
• HP recognized the performance benefit by
including one.
Though 16GB could be filled up quickly, the
Chromebook will include 100GB of cloud storage
on Google (GOOG) Drive for two years. And HP’s
Chromebook 14 features a 14 inch screen, running
Google’s Chrome OS.
Google can also benefit from Chromebook sales
since it would encourage users to store data on
the search giant’s cloud, as opposed to Microsoft’s
Skydrive, DropBox, or any other competing cloud
storage offering.
Investing Ideas
Intel, Google and HP may all be eagerly anticipating
Chromebook 14 sales. Both Google and Intel shares
are up overall in the last six months, and strong
interest for the colorful Chromebook 14 devices could
help renew investor interest in HP shares:
HP also has the lowest forward P/E at 6, compared
to 12 for Intel and 23 for Google.
On the flip side, Microsoft could face weak Windows
8/8.1 sales if the Chromebook 14 is successful. For
now, some investors may be bullish on the stock
considering CEO Steve Balmer is set to retire. The Xbox
One, coming out on November 22, could also be a bullish
event – the console is the first refresh since 2005.”
Editor’s Note: Kapitall Wire offers free cutting edge investing
ideas, lively commentary and timely analysis of companies
enhanced by interactive tools. And the Investing 101 section breaks
complex concepts down to their basics, offering education to novices
that doubles as a refresher course for more seasoned investors.
Kapitall Wire is a division of Kapitall Inc. For more information
visit www.kapitall.com.
Trade Small Caps
All US and CDN exchanges,
Nasdaq, OTCBB, Pink Sheets.
Also market making, Rule 144 sales, and Form 211’s
Small cap stocks since 1926. FINRA/SPIC
Pennaluna & Company
Coeur d’Alene Idaho • www.pennaluna.com
800-535-5329
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 14
THE LYKE REPORT. P.O. Box 290, Glenview, IL
60025, 1 year, 12 issues, $89
www.lykepublications.net.
Canadian digital trash
John Lyke: “Anyone who has watched Law and
Order knows that the police, both here in Canada
and in the U.S., do not need a warrant to rifle through
someone’s curbside recycling bin. This is because that
person has abandoned their privacy interest in the
contents of the bin. Does the same hold true for items
in someone’s computer desktop recycling bin?
Apparently not, according to the B.C. Court of
Appeal in R. v. McNeice, 2013 BCCA 98. While putting
something by the curb in the real world indicates an
abandonment of a privacy interest, the B.C. Court of
Appeal has held that doing the same thing in the virtual
world is (emphasis added) “consistent with an intent
to conceal, and thus to maintain a privacy interest”.”
**************
WYATT INVESTMENT RESEARCH
65 Railroad St., P.O. Box 790, Richmond, VT 05477.
Facebook at $50; how far will it rise?
Chris Preston: “Three months ago Facebook
(Nasdaq: FB) was a cautionary tale. Now it’s one of
the fastest rising stocks on the market.
Shares of the social network have more than doubled
in the last three months, sparked by a late-July earnings
report that beat Wall Street estimates and revealed the
company’s growing mobile advertising presence.
Prior to that report, Facebook shares were trading
at $26.50 – 30% below their $38 IPO price when the
stock debuted in May 2012. This morning they opened
above $50 for the first time ever.
How high can Facebook go? The P/E suggests it’s extremely overcooked. The stock currently trades at 223 times
trailing earnings. Even the forward P/E is high, at 52.
But social media stocks are notorious for their
high valuations. LinkedIn (NYSE: LNKD), which is
essentially Facebook for the professional world, is trading
at a preposterous 952 times earnings. That’s nothing new.
Its P/E has been in the stratosphere for years. And yet
the stock continues to rise higher, doubling in the last
year and rising 213% in the last two years.
LinkedIn is proof that ridiculous valuations aren’t
roadblocks to continued share price appreciation – at
least not when it comes to social media stocks. That’s
why at least one analyst among the 35 listed on Yahoo!
Finance has a target price of $60. Most, however,
think the stock’s already overcooked.
The average price target is $46.28, or 7% below
its current price. But if Facebook beats third-quarter
earnings estimates by 36% the way it did last quarter,
then the stock may still have plenty of room to rise.”
Editor’s Note: Chris Preston is an Investment Reporter
for Wyatt Investment Research, www.wyattresearch.com, who
examines the financial markets and provides actionable investment
ideas to individual investors.
Facebook vs. Google
Continued from page 1
browser available on both desktops and mobile
devices, continues to win market share with over 750
million downloads.
A key difference between Google and Facebook is
that consumers use Google to search foe things they
want to buy. Thus Google users are more dispose on
click on sponsored links. This explains why marketers
pay generously for access to Google’s marketing
space. Facebook users, by contrast, are notoriously
disdainful of ads.
As the mobile market keeps expanding in the
numbers of mobile devices sold and the amount of
time consumers spend on them, both Facebook and
Google will need to keep working to leverage their
established reputations and high user volume rates to
this growth. The challenge will be to do this without
sacrificing the quality of user experience, which
could open the door to smaller competitors. For now
we think Google still has the edge and is the better
investment.
Editor’s Note: Graham Pupo is a contributor to The Complete
Investor, P.O. Box 248, Williamsport, PA 17703, 1 year, 12 issues,
$199. The Complete Investor has won the prestigious first-place
award as the best investment/financial newsletter published in
2012 as rated by SIPA (Specialized Information Publishers Association. For more information on this award-winning newsletter
and a money-saving offer plus two free Investment Forecasts visit
www.completeinvestor.com.
Products Around Your Life
Continued from page 5
Action to take: Buy Samsung Electronics
(SSNLF) under $1,400 as a Long Hauler.
Editor’s Note: Neil George is the editor of Lifetime
Income Report and Income on Demand, dedicated
to finding Wall Street’s best yields. Lifetime Income
Report focuses on great investments offering the
biggest dividend payouts. It’s not just looking for
high yields. It’s looking for companies strong enough
to sustain those yields. They also share strategies
to reduce your taxes, pick up high-paying bargains,
and even find income opportunities outside the U.S.
Published by Agora Financial LLC, 808 St. Paul
Street, Baltimore, MD 21202, 1 year, 12 issues, $99. For
more information visit www.lifetimeincomereport.com.
Subscribe to
The Bull & Bear Financial Report
1-800-336-BULL
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 15
How to Invest in Tech
Without Losing Your Shirt
By Ed Bowsher
MoneyWeek
Investing in technology can be
very alluring.
For starters, there’s the dream
of making a massive profit on just
one investment. If you can spot a
tech giant of tomorrow when it’s
still a minnow, it can make you
rich. If you had invested $1,000
in Microsoft shares in 1985, they
would now be worth $450,000. And
that’s not including dividends.
Sure, most of us won’t ever make
quite such a lucrative call. But with
the pace of technological change
moving so quickly, it feels like there
must be money to be made.
On the other hand, tech
investing can be very risky. It’s all
too easy to end up with a portfolio
stuffed full of rubbish stocks that
have either gone bust, or have long
since failed to live up to their early
promise. I’ve done it myself.
So here are three tips on how to
avoid the biggest pitfalls.
Why Tech Investors Need
to Look Beyond Britain
Firstly, if you want to be a
successful tech investor, you have
to look beyond the UK. We do
have some decent tech companies
– chip designer Imagination
Technologies (LSE: IMG) is my
favourite – but the biggest and most
successful businesses are elsewhere.
Above all, that means the US.
Silicon Valley is the still the world’s
technology hub and you’ll find
many more great tech businesses
in other parts of the US, especially
the North East.
Secondly, don’t ignore the giants
of the sector. It’s easy to look at
established tech businesses and
assume there’s no point in joining
the party now. Surely the big
profits have already been made?
But I think that’s a big mistake.
Look at Apple. It’s true that the
company has fallen on tougher
times since the death of founder
Steve Jobs. But it’s also easy to
forget that just three years ago,
its shares were trading at $290 a
throw. Now they’re around $470
and have been much higher.
The iPhone had been on
the market for three years by
September 2010, so you hardly
needed to be a brilliant diviner
of tech trends to spot that Apple
shares had potential at that point.
So investing in tech giants when
they’re already giants can still
make you a good profit.
Which raises the question:
which giants should you invest in
right now?
My favourite tech giant is
Google (Nasdaq: GOOG). At $900
a pop, the company has a $300bn
market cap and is trading on a
price/earnings (P/E) ratio of 26. So
it doesn’t look cheap at first glance.
However, Google also has a $50bn
cash pile and profits are growing
fast. It has achieved a dominant
position in web advertising that’s
hard to challenge. What’s more,
Google is also investing in several
‘moon-shot’ technologies such as
self-driving cars or ‘wi-fi balloons.’ So
with Google, you can own a tech giant
today, and there’s a small chance
you’ll profit from new technological
breakthroughs tomorrow.
I’m also a fan of Amazon
(Nasdaq: AMZN). Yes, it looks very
expensive on traditional valuation
metrics – a P/E of over 100 is
always going to look scary. But
Amazon has never looked cheap.
And in its favour, the company
has a successful track record of
aggressively reinvesting any cash
it generates and growing extremely
fast as a result. Amazon has also
perfected the art of inflicting
serious damage on any rivals via
very aggressive pricing.
As for Qualcomm (Nasdaq:
QCOM), I think it’s a great way
to play the smartphone boom. You
could spend days agonising over
whether Apple can successfully
maintain its chunky margins or
you could just take the simple
approach and go for Qualcomm.
The company designs and
manufactures a wide range of
products and technologies that are
all related to the mobile world in
which we now live. And it’s held by
several leading technology funds.
This is One Sector
Where Fund Managers
Can Earn Their Keep
That brings me onto my final tip
– Investing in a technology fund is
well worth considering.
Because technology is by its
nature complex, this is an area
where active fund managers can add
value. Perhaps more importantly, a
fund is a good way to diversify your
exposure (and thus reduce the risks)
across a range of stocks in the sector.
I’ll highlight two tech funds in
particular. The MFM Techinvest
technology fund has an outstanding
track record and has beaten all its
rival tech funds over the last five
years and one year too.
The Polar Capital Technology
Trust (LSE: PCT) is also worth
a look thanks to its experienced
management team. It currently
trades at a discount to its net asset
value of around – 7%, so in effect you
are getting £1-worth of assets for 93p.
One final point: I’ve put a lot
of emphasis on reducing risk by
investing in tech giants and tech
funds, but I’m not ruling out all
investments in smaller fry. Once you
have a core portfolio in funds or giants,
you can afford to take more risk on the
edge with some younger companies or
brand new technologies.
I think all long-term investors
should have a sizeable allocation to
tech stocks in their portfolio. After all,
it’s an area where growth is almost
inevitable – and that will remain true
regardless of what economic turbulence we see in the next few years.
Editor’s Note: Readers can sign up for the
free daily e-Mail, Money Morning published by
MoneyWeek.com, which offers a market summary,
investment opportunities and insights, economic
and political developments affecting your wealth.
Sign up at www.moneyweek.com.
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 16
DTS8 Coffee – A Coffee Company
DTS8 Coffee Co. Ltd. Licensed to Roast and Sell
“Don Manuel®” Brand Premium Colombian Coffee in China Market;
Targeting U.S. Market with Green Bean Arabica Coffee Grown in China
DTS8 Coffee Company Ltd
(OTC BB: BKCT) is a growing
purveyor of fresh artisan roasted,
gourmet coffee. DTS8 roasts,
markets and sells superior quality
roasted coffee in China, one of
the world’s fastest growing coffee
markets. DTS8 is well positioned
to participate in the growth of the
Chinese coffee market.
“We are excited about our
continued annual revenue growth.
It is a strong endorsement of
DTS8 Coffee’s brand and business
strategies as a marketer and
distributor of fresh artisan
roasted gourmet coffee,” says
DTS8 President and CEO Sean
Tan. “We are now working on
increasing revenue and lowering
costs to improve profitability from
our overall operations.”
DTS8 Coffee
Fiscal 2013
Operations Review
DTS8 coffees are well regarded
by Chinese consumers for their
uniqueness, consistency and
special flavor characteristics.
This has resulted in year-overyear revenue increases. Revenues
for the fiscal year ending April
2013 increased for $253,790,
from $220,421 reported in 2012
and $43,074 reported in 2011 –
representing three consecutive
years of growth.
“China is an emerging market
for gourmet coffee and demand is
growing.” says Tan. “Increasing
disposable income among the
young urban population and
adoption of the affluent lifestyle,
are key drivers behind the growing
demand for premium fresh roasted
coffees like Don Manuel ® , an
upscale quality product in United
States.”
Don Manuel® coffee is artisan
roasted by DTS8 under strict
standards, ensuring that every
cup offers a rich, full bodied coffee
with chocolate flavours, sweettoned syrupy notes, and a smooth,
clean finish.
Successful initiatives in a
number of areas are resulting in
improved efficiencies and new
product offerings.
DTS8 has an exclusive license
from Coffee Holdings Co. Ltd
(Nasdaq: JVA) to roast, market
and sell, their Don Manuel® brand
of 100% Colombian coffee in China
as well as in Taiwan, Thailand,
Vi e t n a m , C a m b o d i a , L a o s ,
Philippines, Myanmar, Indonesia,
East Timor, Hong Kong, Macau,
Malaysia, Singapore and Brunei.
Subsequent to the initial launch
in Shanghai the brand will be
introduced in other cities like
Beijing.
Most recently, the Don Manuel®
brand of 100% Colombian coffee
was introduced for sale in the
Shanghai market at the 6th
Annual Maple Leaf Ball, hosted
by the Canadian Chamber of
Commerce at the Grand Hyatt
hotel in Shanghai, China.
DTS8 has successfully completed
moving its roasting operations to
Nanxun Town in Huzhou District,
Zhejiang Province. DTS8 is the
only coffee roaster operating in
Nanxun Town, where it holds a
QS license, valid for three years.
Nanxun Town is strategically
located within a couple of hours
drive to Shanghai, as well as to
Suzhou, Wuxi, Hangzhou, Ningbo,
and Anhui provinces providing easy
access to new sales opportunities
and future growth.
New coffee product offerings
and improving efficiencies will lead
DTS8 to realize increased revenues
through the balance of the current
fiscal year.
Green Bean Sales as
New Revenue Stream
DTS8 has devoted considerable
time and resources on meetings and
discussions with coffee plantation
owners, farmers and exporters in
Simao, Jinghong, Xishuangbanna,
Mangshi and Baoshan regions of
Yunnan Province.
S i g n i f i c a n t l y, D T S 8 i s
developing a marketing and sales
plan for the introduction of coffee
grown in Yunnan Province into
the wholesale green bean market
of the United States. The company
expects this new revenue stream
to materialize during the current
fiscal year.
According to the International
Coffee Organization’s green bean
import data, the United States
imported approximately 23 million
60-kilogram bags of coffee during
the 2012 season – between 20%
and 25% of the world’s annual
green bean production.
The green bean coffee crop
produced in Yunnan Province
is mainly the Catimor varietal of
Arabica coffee. Overall annual
production is projected to be
in the range of eight hundred
thousand (800,000) to one million
(1,000,000), sixty-kilogram bags
of coffee.
DTS8, with its unique flavor
and superior quality Yunnan
coffee, intends to progressively
position this new product offering
to capture a share of the United
States coffee market through
aggressive sales to coffee retailers,
roasters, wholesalers, distributors
and importers.
DTS8 Coffee’s
Market Strategies
DTS8’s market strategy remains
to grow in a controlled manner
by developing and enhancing
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
both its brand image and quality
reputation. The combination
of DTS8’s own brands, Don
Manuel ® and Yunnan coffee,
provides a differentiated coffee
positioning based on superior
quality. Strategic expansion into
select channels of distribution in
different geographic territories
creates significant opportunities
for growth. DTS8’s commitment
to quality and service establishes
a high degree of repeat business
and customer loyalty.
DTS8 Coffee’s
Growth Strategies
Significant growth opportunities
exist for DTS8 in the distribution
channels in China, Southeast
Asian and U.S. markets.
In September 2013, DTS8
began marketing premium
quality, Arabica green beans,
grown in Yunnan, China, in the
North American market. These
Catimor variety coffees are
from plantations located in the
Simao, Jinghong, Xishuangbanna,
Mangshi and Baoshan regions
of Yunnan Province, and are
grown in rich volcanic soils at
altitudes ranging from 1,000 to
1,800 meters.
“The addition of the increasingly
popular Yunnan green coffee beans
to our product mix creates another
revenue stream with lucrative
potential,” says Tan. “We are
working closely with coffee roasters
and wholesalers. Yunnan coffee is
used by Starbucks in its South of
the Clouds brand of roasted coffee
blend. Nestlé is also using Yunnan
coffee in their products.”
DTS8 expects a significant
portion of future revenue will
Page 17
be derived from increasing
distribution channels expanding
existing customers, and pursuing
new retailers, specialty gourmet
food stores, online, hotel, office and
restaurant accounts.
DTS8 Coffee’s
Competitive Advantage
DTS8 Coffee’s management
team, all experienced Canadian
businessmen, spent six years developing business relationships in
China and now is integrated into
the Shanghai coffee culture – giving DTS8 an advantage in reaching
new coffee consumers in other
parts of China as well as in other
targeted geographic areas.
In April 2012, DTS8 acquired
Hong Kong-based DTS8 Holdings
Co., Ltd., for $4 million. DTS8
Holdings sells its signature coffees
and other blends through its
wholly owned operating subsidiary
DTS8 Coffee (Shanghai) Ltd. In
March 2013, DTS8 completed the
addition of new roasting and offices
facilities in Huzhou, Zhejiang
Province, China.
DTS8’s sales office is located
in Shanghai which comprises the
largest concentration of premium
coffee consumers in China. DTS8’s
roasting facility is now located in
Huzhou, a relatively short distance
away. Localized operations provide
DTS8 with a significant service
advantage over foreign competitors
with only satellite operations in
China.
Investment
Considerations
DTS8 COFFEE
COMPANY, LTD.
OTC QB: BKCT
Contact: Doug Thomas
Investor Relations
1685 H Street, Suite 405
Blaine, WA, 98230-5110
Phone: 775-360- 3031
E-Mail: [email protected]
Web Site: www.dts8coffee.com
Shares Outstanding: 26.27
million
Active Float: 7.6 million
52 Week Trading Range:
Hi: $0.50 Low: $0.14
DTS8 expects to sustain controlled
growth, increased revenues, through
targeted marketing and sales efforts
to meet the forecasted overall growth
of the demand for coffee in China, the
Pacific Rim and now in the United
States.
“We anticipate an exciting
future in expanding our Don
Manuel ® 100% Colombian and
Yunnan green bean coffees to
new markets,” says Tan. “We
believe that through DTS8
Coffee’s innate experience in
these markets they will be able
to introduce this premium coffee
to a host of new coffee drinkers
which will, in the long run, create
an enormous loyal customer base
for our brand.”
Disclaimer: This material is for distribution only under such circumstances as may be permitted by applicable law. It has no regard to the specific investment objectives,
financial situation or particular needs of any recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any
securities or related financial instruments. References made to third parties are based on information obtained from sources believed to be reliable but are not guaranteed as
being accurate. Recipients should not regard it as a substitute for the exercise of their own judgment. The opinions and recommendations are those of the writers and are not
necessary endorsed by The Bull & Bear Financial Report. Any opinions expressed in this material are subject to change without notice and The Bull and Bear Financial Report is
not under any obligation to update or keep current the information contained herein. All information is correct at the time of publication, additional information may be available
upon request. The company featured has paid The Bull & Bear Financial Report a fee to provide an investor awareness program. Management of the company has approved
and signed off as “approved for public dissemination” all statements made herein. The directors and employees of The Bull & Bear Financial Report do not own any stock in the
securities referred to in this report. The information contained herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934, including statements regarding expected continual growth of the featured company and/or industry. In accordance
with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the publisher notes that statements contained herein that look forward in time, which
includes everything other than historical information, involve risks and uncertainties that may affect the company’s actual results, developments, and business decisions to
differ materially from those contemplated by any forward-looking statements. Factors that could cause actual results to differ include the size and growth of the market for the
company’s products or services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. The Bull & Bear Financial Report
is not a registered investment advisor or affiliated with any brokerage or financial company.
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Page 18
Ten Chip Stocks Under $10
By George Putnam, III
The Turnaround Letter
Technology investors used
to say “When Intel sneezes, the
semiconductor sector catches a
cold.” While it is still true that
many chip stocks still more or
less follow Intel’s lead, there
are now so many niche uses for
integrated circuits (which is the
more modern name for what used
to be called semiconductors) that
Intel’s value as a bellwether has
become questionable. Intel’s
performance is closely tied to
the personal computer market
while other circuit makers
serve largely separate niches
from cell phones to game
consoles to cameras and
other devices.
Nonetheless, in an
otherwise very healthy
market, Intel has been
sneezing quite a lot
recently, with its stock
down about 8% since
the beginning of 2012
compared to a 30% gain for the
S&P 500. As a result, many of
the other chip stocks have been
suffering as well.
We don’t know enough about
the tech sector to predict when the
malaise in the chip makers will
fade (and even those who claim
such expertise rarely get it right).
What we do know is that when the
sector comes back into favor, these
stocks can perform very well.
Each of the ten stocks discussed
below has a targeted niche (with
some overlap). But they all have
a few things in common: their
stocks are below $10 and well off
their highs of recent years; they
have reasonable barriers-to-entry
to their niche; and they have
solid balance sheets and liquidity.
We believe these characteristics
give these stocks strong rebound
potential.
While we are on the subject of
chip stocks, we still like Cypress
Semiconductor (CY), which we
recommended last January. It
just doesn’t make the list because
its stock is trading above 10. But
we are still attracted to its growth
potential and its 3.7% dividend
yield.
Atmel (ATML) is a leading
producer of microcontrollers, and
it is targeting touch controllers/
sensors for use in mobile devices.
The firm’s maXTouch product
enables touch screen applications
while its XSense line
improves screen displays. If you
believe that better displays coupled
with touch screens represent the
wave of the future, then Atmel
has appeal.
Entropic Communications’
(ENTR) products have helped
how traditional broadcast and
streaming video is securely
delivered, processed and
distributed into and throughout
the home. It sells to most video
service providers including
Comcast, DIRECTV, OCN (China),
UPC (Netherlands) and Verizon.
Entropic has been cutting costs
recently, including a planned 10%
headcount reduction. The balance
sheet shows cash equal to 29% of
the share price, and there’s been
a smattering of insider buying
recently.
FormFactor (FORM) makes
wafer probe cards that are used to
test integrated circuit functioning.
FormFactor suffered when the
market moved beyond DRAM
devices, one of its strengths. The
company is expanding in the
developing market for mobile
devices via its 2012 MicroProbe
acquisition. In the latest quarter,
operations generated positive cash
flow for the first time since the
fourth quarter of 2007.
Integrated Device Technology (IDTI) has built a leadership
position in mixed-signal semiconductors that incorporate both
digital and analog capabilities
on the same chip. These are
used in computing products as
well as consumer applications
in gaming, digital TV and
smartphones. The company’s
CEO has just stepped down.
Following several quarters
of losses, expectations are
for a return to profitability
this quarter. A strong balance sheet will help the
next CEO develop new opportunities.
Lattice Semiconductor (LSCC) has been a
leader in programmable
logic devices (PLDs) since
its 2002 purchase of Agere Systems. Lattice’s products are well
established in the communications
market as well as industrial and
general computing markets. Management is now seeking a stronger
presence in the consumer market
by targeting mobile computing and
smartphones.
LSI (LSI) designs storage (about
80% of sales) and networking (16%)
chips. The company has a growing
presence in the market for flash
memory, chips that retain data
even when power is switched off.
Management expects the flash
market to grow by 30% in each
of the next few years. Ongoing
issues in the PC segment will be a
near-term drag, but the company
is well positioned for the long term,
bolstered by substantial R&D
spending.
Micrel (MCRL) designs analog
and mixed-signal products that are
used in a wide variety of mobile
computing devices. Among other
Continued on next page
Published by The Bull & Bear Financial Report • © Fourth Quarter 2013 • www.TheBullandBear.com
TECH STOCK REPORT
Continued from previous page
uses, its devices play a critical role
in managing power consumption.
Revenues declined last quarter, but
operations were solidly profitable,
and the firm’s book-to-bill ratio
is over 1.0. In the latest quarter,
Micrel repurchased 469,000 shares
and raised the dividend.
RF Micro Devices (RFMD)
makes radio frequency products
used in a wide range of wireless
communications, from mobile
phones to defense applications.
Major customers include Apple
and Samsung. As the industry
inevitably marches toward more
complex technologies the company
is finding growing demand for its
products. The 2012 acquisition of
Amalfi’s entry-level smartphone
technology should help expand
operations in China.
Silicon Image (SIMG) develops
connectivity and interface products
that have helped bring High
Definition content to the mobile
consumer electronics and personal
computer markets. With the
burgeoning growth in smartphones
and tablets, management has
identified the mobile market is
its fastest growing opportunity.
Nearly 31% of 2012 revenues were
dedicated to R&D.
TriQuint Semiconductor
(TQNT) designs and manufacturers
products used in radio frequency/
intermediate frequency
applications. Mobile accounts
for about two thirds of revenues
followed by the network and
defense/aerospace markets. The
company’s strength is in making
filters that differentiate the myriad
signal that mobile devices need to
recognize. TriQuint is one of two
manufacturers in that niche, which
has relatively strong barriers to
entry. Recent results surprised
analysts, and management raised
expectations for coming quarters.
Editor’s Note: George Putnam, III
is editor of The Turnaround Letter, 1212
Hancock St., Ste. LL-15, Quincy, MA 02169,
1 year, 12 issues, $195. The Turnaround
Letter provides insight into potential
turnaround situations and recommends
stock purchases that have potential for
large and/or imminent increases. Visit
www.TurnaroundLetter.com.
Page 19
Get Used to Stock
Trading Snafus
By Anne Kates Smith
Kiplinger’s Money Power
As if investors didn’t have
plenty to worry about already,
technology-driven trading snafus
are starting to add up for the
nation’s stock markets. Nasdaq’s
recent three-hour shutdown,
due to a software flaw, halted
trading in the exchange’s 3,300
listed securities, including Apple,
Google and Facebook. The socalled flash freeze followed last
spring’s #HashCrash, when the
Dow Jones industrial average
plunged 144 points in two minutes
after hackers posted a fake tweet
about an explosion in the White
House. And that followed the
nearly $1 trillion plunge in 2010,
known as the flash crash, that
was tied to one investor’s flawed
trading algorithm.
Cyber crime, too, is a major
w o r r y. I n a r e c e n t s u r v e y,
some 53 percent of the world’s
securities exchanges said they
had suffered a cyber attack in
the past year. Attacks so far have
been aimed at disruption rather
than financial gain. Still, 89
percent of exchanges surveyed
agreed that cyber crime poses
a systemwide risk to world
securities markets.
Are tech-driven disruptions,
whether malicious or accidental,
an inevitable part of modern life?
Or are they an indication that
markets – and regulators – have
failed to keep pace with lightningfast technology?
The more complex the system,
the more parts that can break, says
Georgetown University finance
professor James Angel. But, he
adds, “everyone is breathing down
the exchanges’ necks” to reduce
the risk of such malfunctions.
Earlier this year, the Securities
and Exchange Commission
proposed rules that would compel
exchanges, trading systems,
clearing agencies and others to
develop, test and maintain their
systems to make sure that certain
technological standards are met.
A summer cyber-security exercise
called Quantum Dawn 2 tested the
industry’s capability to respond to
a cyber attack.
Still, critics contend that
the markets have become too
fragmented and too fast-paced.
There are now 13 separate
exchanges and some 50 so-called
dark pools (trading venues for
institutional orders, which are
unavailable to the public), and each
has different technology, operating
speeds, order types and rules, says
Sal Arnuk, of brokerage Themis
Trading. “There’s no way you can
eliminate the chance of failure in
such a complex mousetrap.”
But although the recent debacles
can undermine confidence, they
shouldn’t loom large for most
individual investors, says Larry
Tabb, of the Tabb Group, a
financial-markets research firm.
The markets operate efficiently
most of the time, and investors with
a long-term perspective shouldn’t
be tremendously concerned about
short-lived derailments. Still, to
play it safe, make trades using
limit orders, which allow you to
buy or sell securities at a specific
price or better.
Editor’s Note: Anne Kates Smith is
a senior editor at Kiplinger’s Personal
Finance magazine.
• ALL Stock Warrants Trading
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TECH STOCK REPORT
Page 20
How to Manage Your Passwords
By Jeff Bertolucci
Kiplinger’s Money Power
Security experts tell us to
create long, complex passwords
(think numerals and symbols) for
every online account. But how
are we supposed to remember all
of those mind-numbing character
strings?
Enter software that manages
your passwords for you. These
programs allow you to store your
passwords in one file by creating
one ultra-secure master password
to serve as the portal to all your
other user names and passwords.
Here are three of our favorites:
• Dashlane. This is an excellent
choice for the password-challenged.
Not only is it highly secure, but it’s
also a breeze to use. Dashlane
(www.dashlane.com) is a free
download for Windows and Mac
PCs and most smartphones and
tablets. Enter a master password
(be sure to remember it because
Dashlane doesn’t save it) and
the app automatically encrypts
your passwords and other private
information using military-grade
AES-256 encryption, which has
never been hacked. Dashlane
imports new and existing
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passwords from your Web browser
into its “vault”; the program can
remember your shipping and credit
card information, as well as autofill online checkout screens.
Dashlane also works within
your Web browser to monitor
your online activities. When
you log in to your online email,
for instance, Dashlane pops up
and asks whether it should save
your user name and password.
Plus, it rates the strength of your
existing passwords (and tells you
if they should be changed), and
it generates strong passwords
for new sites that you join. If you
signed up for two-step verification
using Google Authenticator (you
need a code generated by an app
in addition to your password), you
may continue to use it.
• LastPass. This is another
top-notch free password manager.
Like Dashlane, LastPass (www.
lastpass.com) prompts you to create
a master password, integrates with
the browser, detects when you
log in to password-protected sites
and asks whether you want it to
remember log-in information. It
also generates strong passwords
for new sites and auto-fills credit
card and shipping information.
U n l i k e D a s h l a n e , h o w e v e r,
LastPass doesn’t rate the strength
of existing passwords.
LastPass stores your data
online, which lets you access your
credit card numbers from any Web
browser. (The downside: You may
be uncomfortable with having your
sensitive personal data stored in
the cloud.) The app also supports
Google Authenticator.
• Keeper. If all you want
is a free password manager
and little more, Keeper
(www.keepersecurity.com) is
appealing. Like its competitors,
the app uses bulletproof AES256 encryption. The app
supports two-step verification,
but it doesn’t rate the strength
of your passwords.
Editor’s Note: Jeff Bertolucci is a
freelance writer for Kiplinger’s Personal
Finance magazine.
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The Most
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F
Dr. Ron Paul
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or nearly four decades, investors looking for
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The answers will be
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Established in 1974 to show investors how to buy
newly-legalized gold bullion, the New Orleans Con-
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investments that have quickly multiplied in price.
That’s especially true in the current environment of
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times over in value in the weeks after the conference.
This year, the New Orleans Conference will once
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Being held from November 10-13, 2013, the New Orleans Investment Conference is likely to be the most
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