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Can’t-Miss Trends: Tech Investing Special Report, Part I

There are sweeping changes afoot -- don't miss the signs

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The Nasdaq outperformed other indices in 2012, gaining 15.9% over the year compared to 7.3% for the Dow and 13.4% for the S&P 500, a number that would have been much larger if not for Apple’s (NASDAQ:AAPL) meltdown in the final months of the year. Still, the fact that the tech-heavy index did so well — despite its star stock’s stumble and gaffes like the Facebook (NASDAQ:FB) IPO — shows that not only was the stock market alive and well in 2012, but tech investing was a leading way to capitalize on this growth.

In 2013, the stock market has the potential to outperform 2012. However, even the big winners from last year aren’t necessarily a slam dunk for investors looking for a growth stock.

Popularity and sales numbers don’t necessarily translate directly into stock price. There are many variables in play that can impact the value of a technology company’s stock. Some of these — overall sales trends, for example — we can track and account for. Others, such as consumer acceptance of a key product, can be a bit tougher. Then there are the wildcards that can completely disrupt things. These can be anything from a game-changing product release (think about what happened when Apple suddenly stormed the smartphone market in 2007 with the iPhone) to a natural disaster that knocks out a key manufacturing facility or component supplier.

We can’t predict all of these variables, but tech rumor sites and consumer demand help to provide hints on some of the potential product releases. Being informed about a company’s operations can go a long way toward assessing how it might be impacted by something like a natural disaster. Staying on top of all the trends and rumors, separating the possible from the unlikely, analyzing financial results and anticipating the outcome of disruptive events before everyone else figures it out is key to coming out ahead in tech investing.

To help you make an informed decision about which technology companies could see real stock price growth, we’ve put together this guide to tech investing in 2013. Today we’ll cover 10 trends to watch for in 2013; tomorrow will be key growth markets and potential disruptors; and Friday we’ll cover specific companies and stock outlooks.

Key Technology Trends

Trends shouldn’t catch anyone by surprise — the very nature of the term indicates that this is something we’ve seen developing. However, trends are important in terms of helping to identify what companies might be hot (if they happen to be in position to take advantage of a growing trend). On the other hand, misreading a trend can result in a company’s stock taking a dive, with years of playing catch-up.

For example, Blackberry (NASDAQ:BBRY) was a smartphone pioneer that failed to see the trend toward consumer adoption of the devices and paid a steep price, with its stock tanking 96% in four years as it was left behind by the iPhone and Android smartphones that non-corporate users preferred. Samsung (PINK:SSNLF) saw a trend toward customers looking for either a bigger smartphone or smaller tablet and introduced the Galaxy Note, a 5.3-inch device that competitors mocked … until Samsung sold 10 million of them.

Here are 10 technology trends we’re closely watching in 2013:

1. Next-Generation Video Game Consoles

This is a launch year for a new generation of home video game consoles (the last time all the manufacturers released new versions was 2005/2006). Nintendo (PINK:NTDOY) was first with Wii U in late 2012, Sony (NYSE:SNE) has announced the PS4 and Microsoft (NASDAQ:MSFT) is expected to announce the next Xbox on May 21.

The Wii U was another gamble on a new controller scheme by Nintendo, adopting a tablet-like pad that can be used with games or to play games standalone from a different room. The system has been a disaster, reportedly selling just 57,000 units in the U.S. in January. Both Sony and Microsoft have a lot riding on their next-generation releases; the PS3 has sold roughly 77 million units for Sony while the Xbox 360 is nearing 76 million for Microsoft.

Besides staving off the threat of casual gaming on smartphones and tablets, the next-gen video game consoles represent a bridgehead to owning the living room — they can be used to deliver video content and drive TV sales.

2. Smartphone Battles

Apple has ruled the smartphone arena for the past four or five years. Its iPhone has been the standard other manufacturers copied and the top-selling smartphone (even though Google’s (NASDAQ:GOOG) Android has a higher overall platform marketshare). But beginning last year with the Galaxy S III, Samsung has been challenging the iPhone and has begun to set trends that even Apple has been forced to follow, such as incorporating a bigger display in the iPhone 5. More manufacturers are abandoning the low-margin middle-of-the-road smartphone for premium devices, hoping to take a chunk out of Apple’s and Samsung’s control of high-margin devices.

As all this is going on, Microsoft and Blackberry will be battling it out for the all-important third place in mobile platform marketshare. Drop below third place, and you get lumped in with the “other” platforms — and risk being dropped from store shelves by wireless carriers.

Article printed from InvestorPlace Media,

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