Are investors fearful right now? I'm not really sure. Yes, the Dow has been pummeled in the last few months -- gotta love October -- but it's still up around 8% for the year. The economy seems to be humming along. Unemployment is low. Inflation is nowhere to be seen, at least not meaningful inflation. And while the Fed has been raising rates, they're hardly doing it with a lot of enthusiasm. The biggest risks seem to be Trump's trade war with China, a right now issue, which is the kind of issue people notice, and the spiraling US debt, which is a long term issue and not the kind people worry about very much. So the big question is, how much of a hit to our economy will the trade war be? I've heard some people say it will negate the tax cut. I guess that's possible. But the truth is, as with so many other things financial, no one knows for sure.
Here's my take on today's market: I think investors are certainly feeling skittish, especially with regard to richly valued stocks, but I don't think they're all ready to do the proverbial Wall Street self-defenestration.
As for me, I'm always a pushmepullyou investor: doom and gloom on one end and irrational exuberance on the other, with exuberance usually being the stronger of the two, for the simple reason that it feels better to be optimistic and, candidly, I don't know anything about short-selling, save for the fact it can make you really rich or really poor really fast. (Note: I should learn more about how to short stuff, because I'm leaving out half of what it means to invest if I'm only betting on what might go up.)
So... what have I found amidst the bones, blood and gristle of Mr. Market's killing field? A few things, namely:
Talend (TLND), a company that specializes in simplifying the process of identifying and integrating the right data sets for data scientists, so they can perform a bit of insight-generating alchemy. Sounds highly complexified -- and it is -- but from my perch at Dell I see the need for this kind of thing as akin to water in the desert, as the world moves toward (caution, jargon ahead!) a data economy. Given the richness of the opportunity, TLND is not the only game in town, but they seem like a good bet for three reasons: 1) as I already pointed out, technologies that help unlock the value of data have blindingly bright future; 2) TLND has been recommended by the Motley Fool Stock Advisor, which I have subscribed to since day one and trust, and is in Gartner's Magic Quadrant for Data Integration Tools and 3) TLND's price recently dropped about 40% in just a few days, following an earnings report. Reason number three might sound like a red flag but to me it's the opposite. TLND was, as they say, priced for perfection, so while the the company actually beat its guidance, when TLND guided below expectations for the current quarter, everybody panicked. Yes, it could fall further but over the next three to five years, I expect Talend to more than double. Fingers crossed.
Arista Networks (ANET), makes software defined networking gear, which sounds geeky and nerdy and tech-bro-ish -- and it is all those things -- but here's my English Major definition of of what software defined means: the software tells the hardware what it is. Yes, that's WAY oversimplified and obviously software can't tell a laptop it's a fire hydrant and expect any good to come from it, but the magic of software defined computer gear is that it separates the high value stuff (software) from the commodity stuff (hardware). So Arista can buy the highest performance commodity hardware, de-commodify it through software and then sell it for a handsome margin. Pretty nice business model. Why did I buy it now? Well, like TLND, ANET is way below it's high in August of ~$300 and now sells for around ~$240. Also like TLND, ANET's last quarter exceeded expectations but guidance was cautious. Could it fall further? Sure. But over the long term, ANET is the future of networking and I see $$$ signs ahead!
To raise money for TLND and ANET, I sold Activision and 3D Systems, both of which I still believe in but don't really fit my growth strategy (more on my strategy in a later post).
No comments:
Post a Comment