Hi Claire - I'm just about ready.
Thanks for joining us today, Chris.
Let's start off with a question about your Apple column today. As an investor, should I worry that I may have missed the boat by not buying Apple years ago? How much higher do you think it can go?
I hate to make stock price predictions in the short term, but I've said before I think Apple will be the first trillion dollar company.
Have investors missed the boat? This is the kind of question that stops people from buying great companies.
They get caught up in fear. If you watched Apple rise from $20 to $120 it would be easy to say the same thing.
Now, that isn't to say it's a guaranteed win. It's clearly not. Tech investing (and all investing) comes with plenty of risk.
What tech trends are you most interested in right now?
Mobile computing, wireless 4G deployments (LTE technology), cloud computing and cloud storage. Also OTT, or "over the top" video (think Netflix). I cut my cable last year.
Also, I might add this: Tech trends can be very good for the winners, but they can also be very bad for the losers, so if people are comfortable shorting stocks, it can be quite profitable to pick companies on the losing end of a tech trend.
I cut my cable this year too and I'm enjoying the savings.
We'll get back to your comment about shorting in a few minutes. First we'll get to a question from a reader.
Ok - good question. To me a growth stock is one where the underlying company is growing faster than the economy. I'm no macro-economist so I won't delve deeply into GDP numbers and such, but 10% growth or higher seems to make sense for me to consider a growth stock. However ...
What do we measure? Earnings? Revenue? Unit sales? I think you have to measure something that will inevitably translate into earnings. Keep in mind growing companies (especially fast growing companies) will often not see strong cash flow early on. They're investing to be even bigger. So I might look at Netflix and measure growth based on subscribers, or revenue. Not earnings.
Apple is much larger and more mature. Earnings matter there. If their earnings growth slowed, they'd get creamed by the market.
In the long term it's ALL about earnings growth. Just a question of where a company is on its path to generating those earnings.
Netflix stock has been pounded after some recent earnings reports. Where do you think its growth potential lies?
Good question - the reason I included it is because it was pounded. Last year it seemed too expensive to me. It's a perfect example of a company investing in much more growth. So we're not going to see the earninngs (EPS). Wall Street hates it when stuff like this happens. They want immediate earnings growth.
What kind of time frame do you look at when you consider a stock's growth potential? How long do you tend to hold on?
Think about the next decade of video. You and I, Claire, have both cut the cable cord. This is a giant trend that will take multiple years. Netflix is investing in being a leader globally. It's not a one or two year project. I'm expecting to hold the stock for many many years.
It all depends on the reasons for buying. If my reason, as in the case of Netflix or Amazon, is to watch a big industry trend play out, then I'm talking about a long time. 10+ years.
If I'm looking at a stock like Sprint, which is going through a business transition, I'm talking about less time. Maybe 1-3 years.
Here's a question from a reader, Vijay.
One thing you'll never see me doing (or at least almost never) is buying because I think next quarter will be "huge". To me that is gambling.
Vijay - I'm going to let Warren Buffet answer that one. "I have long felt that the only value of stock forecasters is to make fortune tellers look good."
I don't think timing the market is an effective strategy. Buy quality and HOLD quality for a long time. Sell when your reasons for buying are no longer true. When you bought, what was the reason?
Keep in mind I am gently poking fun at myself here too. I was a tech analyst for about 11 years and published one year targets on stocks. It always seemed silly for a guy who takes much longer views on stocks.
When you actively trade, you pay more taxes on your gains. You have less money to reinvest.
Yes - I loved his article and video. He made some excellent points about investing. Everyone should read his stuff.
Chris, you're somewhat famous for advocating for RIM over the years, long after it was cool, and even when most analysts turned against it. Here's another question from a reader.
Yup, I was mostly bullish on RIM from 2000 through to the huge decline.
RIM is still deeply interesting to me. You'll find me writing on Crackberry.com about it regularly. I can't call it a growth stock, so it was a non starter for this model portfolio. It definitely falls more into the deep value camp if you believe they can save themselves.
I have been wrong on this before, so keep this in mind ... but I don't think they are past the point of no return. 78 million users, a very strongly improved developer ecosystem, and a very encouraging new OS hitting the market soon. If they didn't have the developers + users they'd be toast. Like Palm was.
If they do manage to get BB10 out to market and show a path towards growth again, I'll consider it for my model portfolio.
In the mean time, the financial results (rear view mirror) will be a disaster for another 2 quarters, minimum.
Speaking of RIM... What's the difference between a growth and a value stock? Surely they have some overlap?
You can follow Chris's Strategy Lab contributions on his Globe Investor growth investing blog. In his column today, he explains why he's a fan of Apple and even at $700, he considers the stock cheap.
