One of the things I pride myself on is that I work hard to get ahead of many economic, market and other developments. I call this getting ahead of the curve.
By going through countless news and media sources as well as plugging through all sorts of data, I come to conclusions that current or developing conditions will support either support or hinder specific markets or industries as well as individual companies and investments.
This is way different from how many in the financial markets work, particularly in the popular financial guidance that inundates the media on any given day. Most tend to just get on board with a trend way past its early stages when the train has not only left the station but is well along its journey.
But this means that many of my ideas are ahead of their time and many of the companies and investments that I identify can take time to get noticed.
Of course, I do miss some curves and do also miss some of the beneficiaries now and again, but I want to bring to your attention several of the ideas that have worked and will continue to work even through market turmoil.
In the past few articles I’ve written for the Trade of the Day column, I’ve addressed the incredible success of tech stocks while suggesting their huge returns since March 23 may not last long term. But that isn’t entirely fair.
I did say, after all, that I’ve recommended tech stocks in my Profitable Investing newsletters, and one of the companies capitalizing on a profitable trend also happens to be one of the biggest names in tech.
Cloud & Technology
Cloud computing is a very hot topic in the markets. I read early this morning in BusinessWeek a comparison with the old dot-com market back in the 1990s. Back then, all it took to get noticed was to say that a company had a dot-com and everyone went full bull on their stock.
The same can be applied to the cloud with some caveats. Back in the dot-com days, financial folks had to come up with new metrics to make the case that a stock was credible. But in cloud computing, there are actual real sales, margins and profit data.
As I took over Profitable Investing a few years ago, I looked at Microsoft (NASDAQ:MSFT). Back then, the company was stuck in its old business model of selling units of software and was dependent on PC sales. Revenue growth was marginal.
But I saw that the company was making internal progress on moving away from unit sales to recurring sales from both subscriptions for software as well as its Azure cloud services. I got fully on board and did a compare and contrast with its peers locked into the old unit sales troubles, including Intel (NASDAQ:INTC) and Cisco (NASDAQ:CSCO).
Outside of Amazon (NASDAQ:AMZN), Microsoft has become the leading global software and cloud services company, generating huge gains in revenue from recurring sales. And the stock since then has returned 150.5% to date.
Microsoft Total Return — Source: Bloomberg Finance, L.P.
But as you can see in the total return graph, it took some time for the market to catch up with my call. When it did, though, it was off to the races.
Microsoft’s revenue continues to climb, with the trailing five years showing gains on a compound annual growth rate (CAGR) basis of 13.4%. On an intrinsic (book) value basis, the company has bolstered shareholder value by an average annual rate of 10.6% over the same five years.
As I’ve said in the past, technology investments are just one part of any strong portfolio. So, if tech stocks are going to be a small part of your investing strategy, pick the companies doing what tech firms do best. Microsoft is still an innovator in the cloud computing space, and it is still a great addition to your portfolio.
On the date of publication, Neil George did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Neil George was once an all-star bond trader, but now he works morning and night to steer readers away from traps — and into safe, top-performing income investments. Neil’s new income program is a cash-generating machine…one that can help you collect $208 every day the market’s open. Neil does not have any holdings in the securities mentioned above.