Author: Michael D

In the mid-90s, I worked for a company that sold software to many of the companies in the midst of the desktop internet revolution. As I would leave the sales calls, I would call my broker to buy stock in those very same companies. Unbeknownst to me at the time I was laying the groundwork for my investment premise today.

• Identify emerging trends as soon as possible: The build-out of the internet was a long term trend that would impact millions.
• Buy leading stocks in trend: As investment dollars poured into the internet, the leading companies’ stock exploded as they reaped the majority of the profits.
• Ride it as long as possible: Ride ’em as long as they are printing money.
• Jump off: When the trend stops going up move on.  Much easier said than done.

When Apple released the iPhone in 2007, I knew it was the beginning of something. I wanted my BlackBerry to be able to do what my golf partner could do with this iPhone. I also realized that I wasn’t the only one wanting that capability. Thus, I began investing in the smartphone revolution by buying stock in Apple, Research in Motion and Nokia. Over time I began adding stock of companies that supplied components to the device makers as well as companies speeding up access to the data and services desired by mobile users.

As important as it is to identify the leaders, it as important to understand the ones that will be disrupted. Some leading companies simply do not embrace change enough. Ken Olson is the computer industry’s poster child for this.  His quote in 1977 will live in infamy, “There is no reason for an individual to have a computer in his home.” Research in Motion is a company that I believe have hung on to their beliefs on mobile computing for too long.  Each day more people are seeing it in a similar light.

As my thoughts on mobile evolve, it is taking me to places not quite as simple as Apple vs. RIM.  In February, as it started becoming apparent that electronic wallets powered by Near Field Communications (NFC) chips may be the next big thing in mobile - I added NXP Semiconductor to my 8 Ballers of Mobile portfolio.  The ability to pay for things using a mobile phone is interesting, but security matters may slow its adoption.  I believe the ability to make local offers in context may take off faster.  Imagine chatting with a friend on Twitter about buying an iPad.  Then while on your way to the Apple store, you receive an offer from Best Buy for free a $25 iTunes card if you buy an iPad from them.  I believe that some serious bucks will be made at this intersection of mobile, social and cloud, but the question is how to play it through the stock market?

Big Data is a term often associated with this area.  I pinged a couple Twitter buddies about their favorite Big Data plays.  Salesforce.com, Oracle, IBM, EMC and NTAP were among the replies.  I was leaning more towards data integration company Informatica.   However, I got pretty pumped when I saw this interview about TIBCO and their 2 second advantage.

I love this comment by TIBCO’s CEO Vivek Ranadive,

In 20th century content was king.  In the 21th century context will be king.  We have so much data now, but the useful life of the data keeps coming down. And the amount of time that we have to do something about it is coming down even faster.

TIBCO’s software enables companies to process their data in context and faster (2 seconds before anyone else).  Many companies have warehouses chocked full of data, but processing it in real-time is a whole different ball game.  As you can imagine, TIBCO’s stock price is through the roof.  It closed at a 52 week high on Friday and is up 140% over the past year.  The company has also been subject to takeover rumors by HP.

I may be a little late to the game with TIBCO, but will be spending a lot of time trying to find other companies in this domain.  I bought a small starter position on Friday.

The 8 Ballers of Mobile portfolio is outperforming the S&P 500 15.8% vs. 4.9% YTD. Stocks are not equally weighted.  Since the 8 Baller portfolio has a maximum of eight stocks, under performers are constantly being pruned.  Combining this pruning strategy with the use of the 200DMA as a catastrophic stop – should minimize the loss of the gains when the music stops.

Disclosure: Currently long: ARM Holdings, NXP Semiconductor, Aruba Networks, TIBCO, Open Table, Sina Corporation, Apple. Positions may be sold at any time.

Transactions in 2011 include:

Buys: NXPI 2/1, ARMH 2/23, SINA 2/23, ARUN 2/23, TIBCO 4/15

Sells: FFIV 2/23, RVBD 4/1, QCOM 4/13

I can’t recall hearing the term “post PC” before Steve Jobs used it while unveiling the iPad2 in February.  However, a quick search led to a Steve Jobs quote at the D: All Things Digital conference in June 2010:

I’m trying to think of a good analogy. When we were an agrarian nation, all cars were trucks. But as people moved more towards urban centers, people started to get into cars. I think PCs are going to be like trucks. Less people will need them. And this transformation is going to make some people uneasy… because the PC has taken us a long way. They were amazing. But it changes. Vested interests are going to change. And, I think we’ve embarked on that change. Is it the iPad? Who knows? Will it be next year or five years? … We like to talk about the post-PC era, but when it really starts to happen, it’s uncomfortable.

I am certain that the term even pre-dates that usage, but what’s important is that we are at the dawn of a new computing era (Third Era Computing).

Serious dollars will be made by investing in the winners and by shorting or avoiding losers during this transition.  I have used this chart many times and absolutely love it.

I moved to Massachusetts when Digital Equipment Corp and Wang were fighting the transition of minicomputers to PCs.  Ken Olson, CEO of Digital Equipment, said “There is no reason for an individual to have a computer in his home.”  Oops.  Many are still suffering from that miss.

This past week visionaries from Microsoft and Dell made statements that would have made Ken Olson proud.

I don’t know whether the big screen tablet pad category is going to remain with us or not - Craig Mundie Microsoft’s Global Chief Research and Strategy Officer

Dell’s Global Head of Marketing, Andy Lark, stated that enterprises were not going to be jumping on iPad deployments since

an iPad with a keyboard, a mouse and a case [means] you’ll be at $1500 or $1600; that’s double of what you’re paying.

Joshua Schnell at Macgasm pointed out that a 16 GB Wi-Fi iPad 2, Apple Wireless Keyboard, iPad Dock and iPad 2 Smart Cover price out at US$666 before taxes. Where the extra $900 – $1000 comes into play is a mystery, unless Dell is selling thousand-dollar mice.  (TUAW).

As an investor I believe it’s important to find winners, but avoiding companies in denial is just as important.

Jim Balsillie, CEO of RIM, has been boasting about the Playbook for months.  In November, it was going be 3 to 4 times faster than the iPad (Tech Crunch). Six months later many are expecting it to be DOA (Wired).

My Companies In-Denial List:

• Microsoft
• Dell
• Research in Motion
• Nokia

Disclosure: I’m playing the post PC era thru Apple and other stocks in my 8-Ballers of Mobile Portfolio.