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EMERGING TECHSFourth Quarter 2013

Tech StockThe Bull & Bear's

Tech StockReportReportINSIDE...Tech Stocks That Should Grow No Matter WhatMorgan Stanley is out with a report on 40 “secular growth” stocks expected to grow independent of business cycle fluctuations.

...Page 3Secure a Richer Retirement With the Company Making the Products That Surround Your LifeAlmost all of the products from companies like Apple, Sony, GE, LG and Toshiba wouldn’t exist in their current forms without this company.

...Page 4How to Invest in Tech Without Losing Your ShirtWith the swift pace of technological change, it feels like there must be money to be made.

...5Ten Chip Stocks Under $10Circuit makers serve largely separate niches from cell phones to game consoles to cameras and other devices.

...Page 18Get Used to Stock Trading SnafusTechnology-driven trading snafus are starting to add up for the nation’s stock markets.

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Tech Stock Report's Investment Newsletter DigestThe world’s most successful investment experts and analysts give their Top Stock Picks for the Technology Sector, focusing on high growth technology stocks as well as such technology staples as Amazon, Apple, Best Buy, eBay, Facebook, Google, Hewlett-Packard, Microsoft & Samsung.

...Page 6

By Graham PupoThe Complete Investor

When Facebook had its much hyped public debut in May 2012, it seemed unrealistic that a com-pany with a modest $669 million in 2011 profits was valued at $104 billion – surpassinge v e n g i a n t G o o g l e ’ s ( G O O G ) (Growth Port-folio) debut. Many doubted if Face-book ever could leverage the site’s 1 billion active users into significant ad revenues and earnings. Reflecting these concerns, the shares fizzle, hitting a low in Sep-tember before stabilizing at 425 to $30 in following quarters.

In late July, however, Facebook answered critics when it posted stronger-than-expected results for 2013’s second quarter. Revenues rose 61 percent to $1.6 billion, and per-share earnings grew 44 percent to $0.13. The shares topped $38 for the first time since the IPO.

The improved quality of its desktop advertising, which drew new advertisers to the site, was one factor. Going forward, profits could be further boosted by Facebook’s plans to sell space for 15-second, TV-style ads – though there’s concern these could annoy users,

causing usage rates to drop.But for both Facebook and

Google, the real key to future prof-itability and stock market gains lies in the rapidly growing mobile arena. Facebook has struggled to monetize this area, but in the second

quarter, mo-bile-generat-ed revenues leapt from $374 million to $656 mil-lion. Clearly Facebook is headed in the

right direction.S t i l l , b e t w e e n

Facebook and Google, we’re sticking with

Google, which seems better positioned to make deeper inroads in the critical mobile market. In it second quarter, Google generated $12 billion in advertising revenues. While $8.8 billion came from ads on its primary Google Web site and affiliate sites like YouTube, Google and was no slouch in the mobile market, where it is expected to account for 56 percent of global advertising revenue for 2013.

As consumers increasingly access content through smartphones and tablets, Google’s ability to continue to sell mobile products will be crucial. Google seems up to the task. Currently some 1.5 million Android phones are activated daily, while Google Chrome, the company’s web

Continued on page 14

Facebook vs. Google:We still like Google

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TECH STOCK REPORT

Steven PerlbergBusiness Insider

Morgan Stanley is out with a new report on “secular growth” stocks. That is, 40 stocks that are expected to grow independent of the fluctuations of the business cycle.

Tech stocks make up 40% of the list, playing into “Cloud, Social, Mobile, and Big Data themes.” The next most common stock is retail at 18% featuring restaurants, online retailers, and performance apparel.

Morgan Stanley analysts believe that the names selected for this report can grow strongly even if the global economy grows more slowly than our current, below-trend GDP forecasts,” according to the report.

Note: The EPS growth is the projected compound annual growth rate (CAGR) from 2012-2015, the PE estimates are based on 2013 Morgan Stanley research expectations, and the PEG ratio refers to the price-earnings to growth ratio which is an indicator of the stock’s valuation. Growth stocks with lower PEGs are generally considered cheaper.

Here are a few tech companies that made the list:

Amazon.com (AMZN). EPS growth: NM. PE 2013: 662.7. PEG ratio: NA. “We expect Amazon to benefit from the continued shift of consumer spending to online/mobile from traditional brick-and-mortar retail,” writes Morgan Stanley’s Scott Devitt.

C o g n i z a n t Te c h n o l o g y Solutions (CTSH). EPS growth: 17.8%. PE 2013: 20.5. PEG ratio: 1.2. Cognizant is a “strong player in a fast-growing industry that benefits from increasing global demand for high- quality, lower-cost IT services from outside providers,” according to Morgan Stanley’s Katy Huberty.

Tech Stocks That Should Grow No Matter What

Facebook (FB). EPS growth: 40.0%. PE 2013: 67.0. PEG ratio: 1.7. Morgan Stanley’s Scott Devitt believes that Facebook’s attempt to compete for TV ad budgets will mean “substantial upside potential to video revenue.”

FMC Technologies (FTI). EPS growth: 22.5%. PE 2013: 25.3. PEG ratio: 1.1. FMC will benefit from “accelerated growth in subsea services” and growth in deepwater oilfield development, according to Morgan Stanley’s Ole Slorer.

Google (GOOG). EPS growth: 13.5%. PE 2013: 18.3. PEG ratio: 1.4. Google has YouTube to thank for its projection. “We project that YouTube could generate gross revenue of $20 billion and operating income of $5 billion,” writes Morgan Stanley’s Scott Devitt.

LinkedIn (LNKD). EPS growth: 74.8%. PE 2013: 141.8. PEG ratio: 1.9. “We believe LinkedIn’s substantial opportunities in recruiting, marketing, and sales should enable it to outpace its peers in top-line growth over the next several years,” writes Devitt.

Palo Alto Networks (PANW). EPS growth: 42.4%. PE 2013: 209.9. PEG ratio: 5.0. “We find PANW well-positioned to sustain a 30%+ cash flow CAGR through C2015,” writes Morgan Stanley’s Keith Weiss.

Pandora (P). EPS growth: NM. PE 2013: 808.7. PEG ratio: NA. “We think Pandora’s best-in-class streaming music service should help it disproportionately benefit from the shift in listening from broadcast to digital channels,” writes Morgan Stanley’s Scott Devitt.

QLIK Technologies (QLIK). EPS growth: 49.2%. PE 2013: 99.4. PEG ratio: 2.0. Rising demand for data discovery and QLIK’s upcoming QlikView Next release should broaden its enterprise appeal and drive sustained 20%-

plus growth through C2014,” according to Morgan Stanley’s Keith Weiss.

S B A C o m m u n i c a t i o n s (SBAC). EPS growth: NM. PE 2013: 149.5. PEG ratio: NA. The wireless tower operator “is a key beneficiary of the boom in wireless data traffic which is driving carriers to invest aggressively in their networks,” writes Morgan Stanley’s Simon Flannery.

ServiceNow (NOW). EPS growth: NM. PE 2013: NM (2014 estimate: 409.3). PEG ratio: NA. “We see NOW as one of the best growth stories in software, with room for upside as new sales hires become productive,” according to Morgan Stanley’s Jennifer Lowe.

Splunk (SPLK). EPS growth: NM. PE 2013: NM (2014 estimate: 338.6). PEG ratio: NA. “The log data platform story should continue to develop apace, with Splunk seeing larger deals as it scales in the enterprise while the apps strategy drives use-case expansion and further user adoption,” writes Morgan Stanley’s Keith Weiss.

Tableau Software (DATA). EPS growth: 8.1%. PE 2013: NM. PEG ratio: NA. “Expanding the use of a powerful analytics and visualization solution outside of the traditional business intelligence user base opens a very large market opportunity for Tableau,” writes Morgan Stanley’s Keith Weiss.

Yelp (YELP). EPS growth: NM. PE 2013: 404.2. PEG ratio: NA. “We believe Yelp’s service facilitates both local business discovery and real-time demand fulfillment, on the back of a growing shift from the traditional yellow page industry to online directory services,” writes Morgan Stanley’s Jordan Monahan.

Source: Business Insider. See the rest of Morgan Stanley’s 40 Picks at the Busines Insider, www.BusinessInsider.com.

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http://www.BusinessInsider.com


TECH STOCK REPORT

By Neil GeorgeLifetime Income Report

Take a look around you. No matter where you are, chances are that you’re within feet of something that wouldn’t work if it weren’t for the company I want to share with you today.

In fact, almost all of the products from companies like Apple, Sony, GE, LG and Toshiba wouldn’t exist in their current forms without this company.

It’s a big player. And it’s going nowhere but up. Even its name stands for “big” and “eternal.”

Those words could also stand for its sales, which have seen double-digit growth for years and years. Or its margins on those sales, which also expand double digits each year. Or its revenues, running at nearly a quarter trillion dollars a year.

Most importantly, “big” and “eternal” could refer to its stock market returns. Over the past 30 years, this company has delivered an average annual return of over 22.1% – for a total return of 39,000%

It’s come a long, long way from its humble beginnings as a noodle-maker.

I’ll share that fascinating story in a second. But first I need to warn you – there isn’t much of a dividend here.

Don’t let that deter you from pick ing up as many shares as you can, however. This company is the living definition of a Long Hauler. That is, it has proven it can go the distance, bringing you reliable capital gains to supplement gains from dividends.

And that’s very important, even if you’re the most die-hard income investor. Let me briefly explain why…

In It for the Long HaulThe Lifetime Income Report

portfolio has three groups – Cash Cows, Long Haulers and Nibblers.

These aren’t just a handy way of breaking up the portfolio. In fact, you can apply this model to all of your stocks, considering what each of your stocks, bonds and other investments is supposed to do for your retirement portfolio.

Cash Cows form the founda-tion. These a r e i n -vestments that have p r o v e n themselves to be able to stick through all sorts of economic and market trials, all while helping you pile up bigger dividends.

Nibblers are the farm team. Until they prove themselves, you should just buy a few shares or “nibble” on them as we see how they pan out.

Then, of course, are the Long Haulers. This is a small group, because it’s tough for most stocks to make the cut.

First, they need to be industry leaders demonstrating “proven growth.” That’s more than just a company that’s selling and earning more. No, to demonstrate proven growth, a company’s stock price must be consistently moving higher – showing that the stock market recognizes and is rewarding the company’s successes.

Notice I haven’t said a thing about dividends. While I like to see a Long Hauler paying dividends, it’s not a requirement. Instead, I want the stock’s growth to offset inflation risks. This way, Long Haulers work hand in hand with your Cash Cows.

So now that you know why the Long Haulers are important – despite having relatively lower dividends – let me introduce you to the perfect example of one that belongs in your portfolio.

Three StarsThe company’s name will

almost certainly be familiar to you:

Korean electronics giant Samsung (SSNLF).

I t w a s f o u n d e d b y L e e Byung-Chull in 1938. The name literally means “Three Stars.” In Ko-

rea, “three” c o n n o t e s something big and pow-erful. “Star”

equates to something eter-

nal. Therefore, Samsung means “big and eternal.”

So it’s a little funny that the company started out trading green groceries as well as making and selling noodles. But from those humble beginnings – under Mr. Lee and subsequent management – the company rapidly expanded into multiple profitable product lines.

In 1970, it shifted into the technological world, manufacturing Korea’s first black-and-white television. Things only got better from there, and now the company dominates the global market for consumer and business electronic goods and components.

Today, its products are broken down into four core business l ines: Digital Media, LCD, Semiconductors and Telecom Equipment.

Digital Media includes its computer and related products, ranging from ultra-light laptops to its latest Galaxy tablets that use Google’s Android and Microsoft’s Windows 8.

This group also includes televisions, a niche it absolutely dominates. In fact, it’s so far ahead of its peers in this arena that many of the original makers of flat-screen televisions have completely given up trying to compete with Samsung. Instead, companies like Sony and Sharp simply outsource to Samsung to manufacture their products.

The d iv is ion rounds out its expan sive products with

Secure a Richer Retirement With the CompanyMaking the Products That Surround Your Life



TECH STOCK REPORT

entertainment – devices ranging from DVD players, game terminals and other digital devices – to household appliances, like the latest nanotechnology wash ing machines and dryers.

Last year, Samsung sold over $18 billion worth of these goods and has been expanding sales over the past three challenging economic years by nearly 7%.

The LCD division makes the dis-plays for not only its own phones and flat screens, but also for nearly everybody else’s products, including those of Apple, Sony, LG, HTC, etc. Essentially, there’s a good chance there’s at least one screen near you that came from Samsung. So while this is the smallest division, it’s also important because it plugs into the other groups.

The Semiconductor chips business unit is the second largest. Its sales climb by double digits year after year – even as its competitors have seen sales slides over the past few years. Again, you’d be hard-pressed to find a smartphone, tablet or even a modern toaster that doesn’t have a Samsung chip inside it.

Telecom Equipment is the behemoth of Samsung. With the rest of the nearly quarter of a trillion dollars in its annual sales, this division has been ramping up sales by an average annual rate of over 40.3%

The Telecom group includes industrial equipment for network companies. Of course, it also includes the most ubiquitous phones on the planet, the Galaxy smartphones. The company is No. 1 in both overall phone sales and smartphone sales. And while Apple is struggling with innovative new products in a post-Steve Jobs world, Samsung keeps ratcheting up new innovations. Not only is its new Galaxy smartphone about to be released, but the company also introduced a “smart watch,” which links to your phone.

The key to Samsung’s success is that it has both sides of every market that it operates in. On the primary side, it brings out its own product lines that quickly gain

wide demand. And the other side, every one of

its competitors – including Apple – can’t bring out a single device or product without at least one or more of Samsung’s components, from screens to chips.

It literally has a lock on getting a piece of nearly every electronic product everywhere on the planet. And all of this is backed up by a stellar balance sheet.

A Great Balance Sheet and Still a Bargain

Samsung has lots of cash coming in. So much that its current and quick ratios — which measure the amount of cash and liquid securities on hand against near-term liabilities – are running as high as nearly 2 times.

Meanwhile, its debt is only 2.3% of its overall assets. That means it can continue to fund any and all of its product development pretty much without any bankers or bond salesmen for the foreseeable future.

It also means that when some of its products do stumble in the market – which happens to even the best companies – it’s no big deal. The company can sustain itself almost indefinitely, given its balance sheet and credit conditions.

And as I mentioned, the stock has shown tremendous growth… but that doesn’t mean the stock isn’t a bargain!

Consider how it compares using one of the most basic stock valuations: price-to-sales. This ratio takes the stock value of the company and measures it against its total sales. It tells us whether a company’s stock is measuring up year after year – or if it is being overhyped and overbought

Samsung is consistently valued worldwide by investors at or a bit

above 1 times trailing sales. And with its sales climbing over the past several years by an average of 16%, the double-digit average annual gains for the past 30 years prove out.

Moreover, compared with peers, it’s a downright bargain. The average price-to-sales for the S&P technology index is running at over 2.5 times. So with a 1.2 price-to-sales ratio, it’s cheaper than its lesser performing but more expensive peers.

Now, as I noted above, it doesn’t pay a big dividend. It

currently runs at less than 1%. But unlike its peers in the technology markets that just h o a r d t h e c a s h without delivering gains, Samsung’s history of attaining “proven growth” earns it a spot as a new Long Hauler.

A n d o n e l a s t thing….

Don’t Let Your Broker Tell

You NoSamsung trades

over the counter in the United States. Don’t be spooked by this — and don’t be bullied by your broker. You need to

just tell them to get the shares for you, since there

are market makers the world over moving millions of shares a day.

The last letter in the trading symbol is “F.” This signifies that the shares are foreign shares, not depositary shares. So you’re going to own shares in the actual Korean company.

But it also means that each share has a higher denomination, since that’s the convention for the Korean market. Each share is currently trading around $1,075. So if you can buy only a few shares, do so. The denomination doesn’t mean anything — it’s only the stock’s price. And as I noted, that’s a bargain price compared with peers.

Continued on page 14



TECH STOCK REPORT

Tech Stock Strategies

INVESTOR ADVISORY SERVICE711 W. 13 Mile Rd., Madison Heights, MI 48071. Monthly, 1 year, $399. E-subscription, $299. www.iclub.com/IAS.

eBay: A long-term growth playDouglas Gerlach: “We introduced eBay Inc.

(Nasdaq: EBAY) to this newsletter in late 2006, and we had to wait a long time for the stock to live up to our expectations. After five years of mostly average performance, shares finally caught fire in 2012, gaining 70%. Value-conscious investors might consider a stock too hot to touch after a run like that, but eBay has spent 2013 consolidating its gains, and we think it may be a good time for investors to revisit this long-term growth play.

Perhaps eBay isn’t as cheap as it once was, but bargains are hard to come by right now in the market. We think eBay can safely grow into its current valuation by increasing revenue at a mid-teens pace while also expanding its profit margins. Investors might be surprised how much punch is still left in this stock.

E-commerce remains a good growth market, and while eBay’s Marketplaces division has lagged e-commerce’s overall rate of growth for years, it still managed 10% growth in the most recent fiscal quarter. The franchise is steady in North America, and expanding nicely in overseas markets. We smiled when the executive in charge of emerging markets expansion called her initiative “incredibly well-funded” in an interview this year. Comments like that make it clear that eBay still has plenty of runway for future revenue growth and margin expansion. We think 8%-10% is about the growth rate investors should expect from the Marketplaces division in the long run, with the potential for better margins when the company eventually focuses on efficiency ahead of growth-at-all-costs.

eBay also owns PayPal, a payments platform that many analysts believe represents more than half the value of the combined company. The payments industry has good growth prospects and high profit margins. Scale is all-important, and the industry’s substantial barriers to entry make it hard for newcomers ever to catch a foothold. Technology powerhouse Google has tried repeatedly to push into payments, without much success so far. If eBay’s eponymous commerce platform is sometimes considered average in the e-commerce world, PayPal is a potential jewel of the payments world.

PayPal grew up somewhat on the fringes of the payments industry, but a recent push into retailers’ physical stores seems finally to have put it on the radar of larger players, including big banks and

credit card processors like Visa and MasterCard. PayPal has a complicated relationship with these competitors because it drives significant payments volume through their platforms, while also offering its own alternative way for shoppers to pay. PayPal claims it wants to be as neutral as possible, serving as the “digital wallet” that helps consumers juggle various bank accounts and payment options. eBay CEO John Donahoe sees a future where consumers no longer need to carry any cash or cards with them because they have unfettered access to their money digitally. If security hurdles can be overcome, we don’t think the idea is far-fetched.

Growth at PayPal is running at about 20% right now, which might be hard to sustain unless the physical point-of-sale initiative takes off. PayPal has sacrificed a lot of potential margin in its hunt for offline growth. If it starts to get some traction, the upside could be pretty explosive.

Investors may also want to keep a close eye on a small consumer credit service hidden within PayPal called Bill Me Later (BML). We have always seen BML as a sort of hobby for PayPal, but things may be getting a little more serious, as the company recently partnered with Alliance Data Systems to issue BML credit products.

We think eBay can earn $2.36 in 2013, lending shares a forward P/E of about 23. For a projected low price, we multiply that estimate by a low P/E of 16.8 for a product of 37. Our projected high price of 110 is based on EPS of $4.36 and a P/E of 25. Our upside/downside ratio is 3.3 to 1. eBay does not pay a dividend. Visit the company’s website at www.ebayinc.com.”

***************

SMALLCAP INFORMER, 711 W. 13 Mile Rd., Madison Heights, MI 48071. 1 year, $299. Online subscription, $199. Includes Updates. Limited time offer.

Open Text Corp: Systems to build a cohesive EIM strategy

Douglas Gerlach: “The astounding growth of information globally has made it increasingly important for businesses to manage their content and data. Before 2003, the estimated amount of content generated worldwide totaled 5 exabytes, according to Google’s Eric Schmidt. In 2011 the world was creating 5 exabytes every two days.

Open Text Corporation (Nasdaq: OTEX; TSX: OTC), Canada’s largest software company with fiscal 2013 revenues of almost $1.4 billion, helps companies leverage their information. This market is called enterprise information management.

Management believes the company has about 10% of the total EIM market, with revenues for the most recent fiscal year at $1.4 billion. The market can be broken down into the following components:

• Customer experience management: management


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TECH STOCK REPORT

of Web content, customer communication, media, social communities, portals and mobile apps

Enterprise content management: management of content, records and email; archiving; legacy decommissioning; learning management and accreditation; and content-centric applications

• nformation exchange: fax and document distribution, cloud-based file sharing, capture and recognition, managed file transfer and data integration

• Discovery: search, content analytics, semantic navigation and auto-classification

• Business process management: dynamic case management, high-volume imaging, strategic business planning and modeling and process-centric applications

Customer support revenues account for about half of Open Text’s sales. In fiscal 2013 (ended June 30), license revenues represented more than 20% of sales; professional service/other, over 18%; and cloud services, almost 13%. Unsurprisingly, licenses provided the most gross margin at 94%, followed by customer support (84%), cloud services (58%) and professional services/other (22%). Overseas business accounted for 47% of sales.

The company’s organic growth is supplemented significantly by acquisitions. OTEX acquired three firms in fiscal 2013, two U.K.-based businesses in the $19 million-$20 million range each and EasyLink Services, a Georgia-based firm that provides cloud-based electronic messaging and business integration services. The latter acquisition cost $342.3 million.

Open Text provides related products and services to a diverse customer base, including ConocoPhillips, Visa, AAA, Owens Corning, NBC, Burger King and Transamerica. No customer accounts for more than 10% of revenues. The company does have a close relationship with SAP, including designing products that help customers manage content from SAP systems. Open Text also has a strategic alliance with Microsoft and has developed solutions for SAP rival Oracle.

Growth AnalysisManagement believes the EIM market will grow

10% annually through 2016, with enterprise content management experiencing a 10% growth rate between 2011 and 2016; business process management should increase by over 7% annually, while the customer experience management, information exchange and discovery markets are projected to grow in at least the low double digits.

Open Text’s historical sales growth is 18%, but we don’t see this continuing over the next five years. We see 10% growth for Open Text as very attainable over the next five years, fueled by continued acquisitions that will help the company expand its cloud services. Also driving the growth for Open Text will be mobile and social media products and services. This won’t go unnoticed, however, as Open Text competes with large companies such as IBM, EMC, Hewlett-Packard and Adobe (as well as with partners Oracle and Microsoft

in certain markets).Long-term earnings have grown 32%, though the

rate since 2008 has been closer to 22%. We’re assuming an increase in margins from international expansion being offset somewhat by increased competition from giants such as Oracle. Tax rates should increase as well. All told, with 10% sales growth we’re looking at 11.5% annual EPS gains. That’s an OK rate for a company of Open Text’s size.

Quality AnalysisOpen Text has a strong history of consistent pre-

tax margins. In the latest fiscal year, the company earned 14.8% per dollar of sales, higher than the five-year average of 13.8%. The company should be able to maintain these margins and even expand them somewhat over the next several years.

Return on equity tells a similar story. The latest annual figure, 11.1%, exceeds the five-year average of 10.3%. ROE has steadily increased since 2007, when it was only 4.1%. Debt as a percent of capital has been fairly steady and is currently around 30%, though total debt has exceeded $500 million during the past two years compared with $282 million in 2009. We favor companies with less debt, but we also believe Open Text’s level is manageable.

Valuation AnalysisGrowth often isn’t cheap, and it isn’t in Open Text’s

case, either. The annual high P/E exceeded 30 until the most recent year. We believe the current P/E of almost 30 is going to be the average high for the next five years. With an estimated high EPS of $4.33, that puts the forecasted high price at just under $130.

For the low price, we feel the low derived by multiplying the low P/E and the low EPS – about $50 – is a little low. We selected a potential low price of $59.75, which is 20% below the current price.

The resulting risk-reward ratio is 3.7 to 1, which is above our 3 to 1 minimum though by no means a spectacular buy.”

***************

NATES NOTESP.O. Box 667, Healdsburg, CA 95448. Monthly, 1 year, $289. www.NotWallStreet.com.

Pounding the table for AppleNate Pile: “I believe the new phones and pricing

strategy unveiled by Apple (AAPL) are nowhere near as “awful” as many of the analysts have been claiming they are… and though time may prove me wrong, I am more than happy to put the newsletter’s performance record on the line by adding even more shares to both our Portfolios in response to how the story is unfolding. Will other smart phone makers continue to find success? Absolutely. Does this mean Apple can’t still prosper? Absolutely not. And perhaps more importantly, Apple’s “ecosystem” only appears to be getting stronger as the industry matures and growth becomes harder to find. AAPL is now considered a strong buy under $425 and a buy under $500.”


http://www.NotWallStreet.com


TECH STOCK REPORT

PEARSON INVESTMENT LETTERpublished for clients of Pearson Capital, Inc.P.O. Box 3739, Apollo Beach, FL 33572. Monthly, 1 year, $150.

Owning real valueDonald Pearson: “Today anything you buy should

be purchased with value being the key component. Always prioritize this and you go far on the road to prosperity. Whenever anyone purchases at the supermarket the first thing checked is what is on sale this week. Car shopping, and everything else we purchase, is carefully researched too. I don’t know of anyone purchasing a home or a business who doesn’t check carefully, and even make offers for less than the asking price. Simply said, we are all trying to get what we want and need at the lowest price possible. Whether we’re going to live in it, drive it, wear it, eat it, or invest in it. As I say so often, “value is king.”

When making investments for one’s personal portfolio, this strategy will take you a long way in meeting your immediate and long range goals. It doesn’t matter if you are older pursuing income, younger pursuing growth, or somewhere in-between seeking a happy medium. Rather than purchase a handful of mutual funds, where the money is being made first by the fund charging about 6%, either build your own portfolio or have someone like us do it for you. Today this can be done with time, research, and dedication. Warren Buffett’s strategy and success is exactly the same as what my father, Walter Pearson, dedicated himself, to 55 years ago. Invest the time, do the work, and seek out value.

Cognizant Technology Solutions Corporation (Nasdaq: CTSH; $73.16) is a provider of custom information technology, consulting and business process outsourcing services. The Company is engaged in Business, Process, Operations and Information Technology Consulting, Application Development and Systems Integration, Enterprise Information Management (EIM), Application Testing, Application Maintenance, Information Technology Infrastructure Services, and Business and Knowledge Process Outsourcing, or BPO and KPO. The Company operates in four segments: Financial Services; Healthcare; Manufacturing, Retail and Logistics, and Other, which includes communications, information, media and entertainment, and high technology. Institutional Holdings: 1767.

EMC Corporation (NYSE: EMC; $26.85), and its subsidiaries develop, deliver and support the Information Technology (IT) industry’s range of information infrastructure and virtual infrastructure technologies, solutions and services. The Company manages its business in two broad categories: EMC Information Infrastructure and VMware Virtual Infrastructure. EMC Information Infrastructure provides a foundation for organizations to store, manage, protect, analyze and secure ever-increasing quantities of information, improve business agility, lower cost of ownership and enhance their competitive advantage within traditional data centers, virtual

data centers and cloud-based IT infrastructures. Its EMC Information Infrastructure business consists of three segments: Information Storage, Information Intelligence and RSA Information Security. In July 2013, the Company’s RSA security division acquired Aveksa Inc. Institutional Holdings: 2761.

Microsoft Corp. (Nasdaq: MSFT; $32.70) is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers. It operates in five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD). The Company’ products include operating systems for personal computers (PCs), servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools. In July 2012, Comcast Corp. acquired the Company’s 50% stake in MSNBC.com. In October 2012, it acquired PhoneFactor Inc. On July 18, 2012, it acquired Yammer, Inc. Effective March 19, 2013, it acquired Netbreeze GmbH. Institutional Holdings: 4915.

QUALCOMM Inc. (Qualcomm) (Nasdaq: QCOM; $66.27), incorporated on August 15, 1991, is engaged in design, manufacture, have manufactured on its behalf and market digital communications products and services based on code division multiple access (CDMA), Orthogonal Frequency Division Multiplexing (OFDMA) and other technologies. The Company operates in four segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); Qualcomm Wireless & Internet (QWI), and Qualcomm Strategic Initiatives (QSI). The Company develops and supply integrated circuits and system software based on CDMA, OFDMA and other technologies for uses in voice and data communications, networking, application processing, multimedia and global positioning system products. In November 2012, the Company acquired certain assets of EPOS Development, Ltd. (EPOS). Effective July 4, 2013, Bharti Airtel Ltd raised its interest to 51% from 49% by acquiring a 2% interest in Qualcomm India Pvt Ltd, from Qualcomm Inc. Institutional Holdings: 3472.

Editor’s Note: Pearson Capital, Inc. is a private money management firm with over 50 years of investment experience. For more information visit www.PearsonCapitalInc.com.

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TECH STOCK REPORT

11% are held by insiders and 40% by institutions. The stock rose 28% over our recommendation (1.60) and pulled back on top of support, where we would Add/Buy in the 1.75/1.85 area for a 1st target of 4.50-5.00, as PLNR leads the way in the expected wide adoption of 4K resolution displays.

PLNR has been transitioning its focus, strategic direction and resources to target the larger and faster-growing market for digital signage display. PLNR offers the most comprehensive line of professional touch displays utilizing its exclusive ERO™ protective glass surface and proven multi-touch technology in the industry, ranging from 15-in. desktop, point of sale and kiosk displays all the way up to 300-in., multi-touch video wall displays. PLNR’s pioneering efforts in video and technology resulted in them being one of the world’s foremost authorities on 4K. Ultimate target 7-8.”

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INVESTINGDAILY.COM, a free website maintained by KCI Publishing, 7600A Leesburg Pike, West Bldg., Ste. 300, Falls Church, VA 22043.

Amazon reboots the KindleChad Fraser: “Amazon.com (NasdaqGS: AMZN)

released the latest iteration of its Kindle Fire tablet computer Sept. 25th.

Called the Kindle Fire HDX, the device comes in seven- or 8.9-inch screen sizes and features higher resolution than the previous models.

It also sports a Qualcomm (NasdaqGS: QCOMM) 2.2-GHz Snapdragon 800 processor, which is the fastest chip in any tablet, providing three times the processing power of the previous version.

The device’s main strength comes from its close integration with Amazon’s vast collection of content, such as movies, books and music. For example, the HDX’s enhanced X-Ray feature lets users see the names of songs playing in the background of the film they’re watching and instantly buy them from Amazon.

In a move to attract more new tablet users, the company has introduced the Mayday button, which quickly connects the user to tech support, where an expert can personally guide them through any of the tablet’s features. This support is available 24 hours a day, seven days a week, and is free.

“You shouldn’t have to be afraid of your device,” said CEO Jeff Bezos.

In addition to the new HDX models, the company cut the price on the Kindle Fire HD, which will now be its entry-level tablet. The HD will have 8 gigabytes of memory – compared to the previous version’s 16 – but it will cost just $139, down from $199. The seven-inch HDX will start at $239 and will ship October 15, while the 8.9-inch starts at $379 and will go on sale on November 7.

Aiming for a Bigger Slice of a Growing Market

According to research firm NPD, 17% of all tablets

THE KONLIN LETTER, 5 Water Rd., Rocky Point, NY 11778. Monthly, 1 year, $95. www.konlin.com.

Planar Systems: One of the world’s foremost authorities on 4K

Konrad Kuhn: “The electronic specialty display industry is driven by the proliferation of display products, from both the increase in functionality in “smart” devices and the availability and versatility of LCD flat panel displays at increasingly lower costs; the ongoing need for system providers and integrators to rely on display experts to provide customized solutions; and from market growth for targeted marketing and messaging to consumers using digital signage in a variety of form factors in both indoor and outdoor applications.

Founded in ’83, Planar Systems, Inc. (Nasdaq: PLNR; $1.80) is a global leader in display and digital signage technology, providing premier solutions for the world’s most demanding environments. Retailers, educational institutions, government agencies, businesses, utilities, energy firms, and home theater enthusiasts all depend on PLNR to provide superior performance when image experience is of the highest importance. Products include display components, completed displays, and display solutions and systems based on a variety of flat panel and front-and-rear-projection technologies.

PLNR’s video walls, large format LCD displays, interactive touch screen monitors and many other solutions are used by the world’s leading organizations, in applications ranging from digital signage to simulation, and from interactive kiosks to the large-scale data visualization. PLNR recently added multi-touch, multi-user capabilities to its breakthrough Planar® UltraRes™ Series 4K LCD display product line, with stunning 4K image clarity. Touch integration has been the number one consumer request since PLNR introduced the Planar® UltraRes™ Series o 84-in., ultra HD displays. In commercial, academic and government settings, there is a large and growing volume of ultra-high definition computer and video visual information with people making critical decisions based on that information. PLNR’s UltraRes™ 84-inc. displays are used in the energy, geospatial, engineering and design, architecture, aerospace, control room, collaborative conference room, medical imaging, science and digital signage, among others.

Sales for FY’12 decline 8% to $171.4 mil., with a loss of (.81) per share. Sales for 1st 9 mos. of FY’13 decline 16% to $121.1 mil., with a net loss of (.31) per shave vs. (.58) for the same period in the prior year. The decrease in sales was primarily from the sale of assets and liabilities related to EL’s product line in the Q1’13. PLNR is financially sound, with a current ratio of 2.1:1 and working capital of $34.1 mil., of which $13.4 mil. is in cash. Of the 21,300,283 shares outstanding,


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TECH STOCK REPORT

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sold in the U.S. between May and July were Kindles. The iPad accounted for 48%, and 8% came from Samsung’s (OTC: SSNLF) Galaxy line.

Around the world, NPD says 470,000 Kindles were shipped during the period, down 59% from a year earlier. (However, the company tends to make most of its sales around the holidays, leading Business Insider to dub it the “fruitcake of tablets.) Apple shipped 14.6 million iPads, down 17%, while Samsung unit sales jumped 539%, to 10.8 million.

The Kindle Fire HD’s low price and Amazon’s focus on new users through features like Mayday on the HDX put it in a good position to increase sales as the tablet market continues to grow. Market research firm IDC recently lowered its tablet sales forecast for 2013, partly due to rising competition from smartphones with bigger screens, but it still sees sales volumes hitting 407 million units in 2017, up from an expected 227.4 million this year.

Tablet Strategy Is Classic Amazon

In an October 2012 article, Investing Daily’s Jim Fink referred to Amazon as the “Teflon stock,” a reference to Ronald Reagan, who was known as the “Teflon president,” because bad news just never seemed to stick to him. In the same way, investors seem to rally behind Amazon’s shares, regardless of the fundamentals.

“Some stocks are impossible to analyze or predict because investors are so enamored by the ‘story,’” wrote Fink. “Silly things like a company’s profits have no bearing on the stock price. Amazon.com is one such stock.”

A recent example is the company’s second quarter earnings report, which it released on July 25. Sales rose 22.4%, to $15.70 billion, but Amazon lost $7 million, or $0.02 a share, compared to a profit of $7 million, or $0.01 a share, a year earlier. That was well short of the Street’s expectation of $0.06 a share.

Revenue has always mattered to Amazon more than profits, but the company also fell short of expectations there – though only very narrowly –coming in just shy of the consensus forecast of $15.73 billion.

The result? Amazon’s stock jumped 2.8% in the following day’s trading, to close at $312.01. It moved lower in August and September, but it’s now back around $312.

Nonetheless, it’s hard to argue with the company’s success. As Fink points out, it survived the dot-com bubble of the early 2000s and paid off its $2-billion debt in 2009. It’s also the 11th-biggest retailer in the U.S. by sales, just behind Wal-Mart (NYSE: WMT) and ahead of Best Buy (NYSE: BBY).

It is also taking a run at Netflix (NasdaqGS: NFLX) with its Amazon Prime service. In typical Amazon style, it is undercutting its main competitor on price, offering Amazon Prime for $79 a year, or $6.58 a month, compared to Netflix’s fee of $7.99. In addition to unlimited viewing of Amazon’s over 41,000

movies and TV shows, Prime members get two-day shipping on all their purchases and one Kindle book to borrow for free each month from the Kindle Owners’ Lending Library.

The stock up 342% in the past five years, and investors expect that rise to continue, going by Amazon’s high forward P/E ratio of 110.9.

Another Way to Profit From TabletsAs we’ve written in previous Investing Daily

articles, there are other ways to profit from the rising popularity of tablets than through Amazon, Apple or other manufacturers. For example, you could look to component makers like Qualcomm (NasdaqGS: QCOM), which makes the Snapdragon processor in the Kindle Fire HDX, as well as chips for Samsung and Apple mobile devices.

The company operates through three divisions: Qualcomm CDMA Technologies, which supplies over 63% of the company’s sales, designs and sells chipsets for a variety of devices. Qualcomm Technology Licensing (33% of sales) provides licenses and rights to use some of the company’s intellectual property, and the Qualcomm Wireless Initiative (4%) provides development and other services to transport and logistics companies, wireless network operators and governments.

As we wrote in a recent Spotlight article on the company for our Personal Finance newsletter, Qualcomm does face some challenges. For example, it is highly dependent on the CDMA Technologies segment for sales, and it’s facing rising competition from chip giant Intel (NasdaqGS: INTC), which is moving into the mobile market to offset falling PC sales.

However, the company is still the market leader, and management expects sales of devices that use Qualcomm’s chips to grow by more than 20% annually over the next few years as more consumers upgrade to smartphones from regular cellphones.”

Editor’s Note: Chad Fraser is a contributor to InvestingDaily.com, an online service of KCI Investing. To sign up for free reports and E-mail alerts visit www.InvestingDaily.com.



http://www.InvestingDaily.com


TECH STOCK REPORT

LOOKING FORWARD, published for clients of Friess Associates and Brandywine Funds shareholders, P.O. Box 576, Jackson, WY 83001.

Priceline could be going placesChris Aregood: “With online transactions

accounting for almost half of U.S. bookings, growth prospects remain bright for companies driving the travel business’s continued migration to the Internet. Online penetration stands at 40 percent in Europe, and 25 percent in the Asia-Pacific and Latin American regions, making the opportunity even more ample overseas. Given the way Priceline is positioned to accommodate the global growth, we believe the company could be going places.

The Priceline Group (Nasdaq: PCLN) is the world’s second largest online travel agency. It operates the travel websites priceline.com, Booking.com, rentalcars.com, Agoda.com and, as of May 21, Kayak.com. The company’s services, including hotel room reservations, airline ticketing, car rentals and vacation packages, are offered on a stated-price retail basis and through a demand-driven system called “Name Your Own Price.”

In all, Priceline provides online travel services in more than 180 countries and territories. The company’s sites handle about one out of every five travel bookings made online. Revenue grew 21 percent to $5.5 billion in the 12 months through March.

Priceline derives most of its profits selling hotel rooms in Europe through Booking.com, which is making inroads in the U.S. thanks to advertising support. The Asia-Pacific region, which Priceline specifically targets with Agoda.com, represents an especially appealing opportunity. Despite

significantly lower penetration, online travel in the region already rivals the individual U.S. and European markets.

The Friess Associates team spoke to Chief Executive Jeff Boyd about costs related to bringing customers from their first click to their final purchase. Priceline’s acquisition of Kayak adds meta-search capabilities to the company’s offerings. Meta-search aggregates results for users to compare on Kayak.com rather than immediately redirecting users to customer sites, reducing costs related to additional clicks.

Priceline grew earnings per share 35 percent in the March quarter, exceeding the consensus estimate by 9 percent. Revenue grew 26 percent to $1.3 billion.”

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HENDERSHOT INVESTMENTS11321 Trenton Ct., Bristow, VA 20136. 1 year, 4 issues, $50. www.hendershotinvestments.com.

Investors should google GoogleIngrid Hendershot: “Google (GOOG: $870.21)

is a global technology leader focused on improving the ways people connect with information. Google’s innovations in web search and advertising have made its website a top Internet property and its brand one of the most recognized in the world. Google generates revenue primarily by delivering relevant, cost-effective online advertising. Google also provides operating systems, enterprise and hardware products.

Strong Global BrandAfter the first web page was created in 1990,

Stanford University graduate students, Larry Page and Sergey Brin, built a search engine in their dorm

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TECH STOCK REPORT

room that used links to determine the importance of individual web pages. They named their search engine Google, a play on the word, googol, which is the mathematical expression for a 1 followed by 100 zeroes. The name reflects the immense volume of information that exists and Google’s mission to organize the world’s information and make it universally accessible and useful.

Google’s strong global brand is one of the most recognized in the world as the number of people who use Google’s service every day is in the hundreds of millions with Google’s services available in nearly every country and more than 100 languages. Search results are no longer just web pages. They include images, videos, books, maps and more. In 2006, Google acquired YouTube, which lets billions of people watch and share original videos and professional content.

With searches increasingly coming from mobile devices, Google developed Android, a mobile operating system that allows open interoperation across carriers and manufacturers. To enable faster searches, Google launched a new web browser called Google Chrome, which makes it easier for folks to use their favorite Google products like Google Maps, Gmail, Google Calendar, Google Docs and Google Translate. Google’s recently acquired Motorola Mobile business is focused on mobile wireless devices and related products and services.

Outstanding GrowthThanks to the growth of the digital economy and

the shift of consumers and advertisers from offline to online, Google has generated outstanding growth. Over the last five years, sales and net income have compounded at 23% and 26% annual growth rates, respectively. During the latest quarter, Google’s revenues rose 19% to $14.1 billion.

Robust Cash FlowsGoogle generates robust cash flows with free

cash flow compounding at a fiery 50% annual rate over the last decade with cash topping $54 billion as of 6/30/13. Backing out this massive cash stash from its market capitalization, Google is trading for 16 times expected 2013 EPS of about $44 per share. In addition to investing aggressively in newer businesses, Google uses cash for acquisitions to help fuel future growth. Long- term investors should google Google, a HI-quality company with a strong global brand, outstanding growth and robust cash flows. Buy.”

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KAPITALL WIRE, a division of Kapitall, Inc. 241 Centre St., New York, NY 10013. www.Kapitall.com.

HP Chromebook 14: More than just a pretty shell to these stocks

Chris Lau: Hewlett-Packard (HPQ) provided a sneak preview of its Chromebook 14 at recent the Intel Developer Forum. Powered by an Intel (INTC)

Haswell processor, the device will be a mere $299.99.This could be a worrisome development for

companies like Microsoft (MSFT). Microsoft is relying on the traditional upgrade cycle towards Windows 8.1, but budget mobile laptops like the Chromebook have the potential to impact sales this time around.

Chromebook 14 SpecsTo speed up the booting up sequence, the storage

will have a 16GB solid-state disk.• Solid-state drives (SSDs) generally reduce the

time it takes to start up a system.• Windows XP and 7 both benefit from SSD.• HP recognized the performance benefit by

including one.Though 16GB could be filled up quickly, the

Chromebook will include 100GB of cloud storage on Google (GOOG) Drive for two years. And HP’s Chromebook 14 features a 14 inch screen, running Google’s Chrome OS.

Google can also benefit from Chromebook sales since it would encourage users to store data on the search giant’s cloud, as opposed to Microsoft’s Skydrive, DropBox, or any other competing cloud storage offering.

Investing IdeasIntel, Google and HP may all be eagerly anticipating

Chromebook 14 sales. Both Google and Intel shares are up overall in the last six months, and strong interest for the colorful Chromebook 14 devices could help renew investor interest in HP shares:

HP also has the lowest forward P/E at 6, compared to 12 for Intel and 23 for Google.

On the flip side, Microsoft could face weak Windows 8/8.1 sales if the Chromebook 14 is successful. For now, some investors may be bullish on the stock considering CEO Steve Balmer is set to retire. The Xbox One, coming out on November 22, could also be a bullish event – the console is the first refresh since 2005.”

Editor’s Note: Kapitall Wire offers free cutting edge investing ideas, lively commentary and timely analysis of companies enhanced by interactive tools. And the Investing 101 section breaks complex concepts down to their basics, offering education to novices that doubles as a refresher course for more seasoned investors. Kapitall Wire is a division of Kapitall Inc. For more information visit www.kapitall.com.

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TECH STOCK REPORT

THE LYKE REPORT. P.O. Box 290, Glenview, IL 60025, 1 year, 12 issues, $89www.lykepublications.net.

Canadian digital trashJohn Lyke: “Anyone who has watched Law and

Order knows that the police, both here in Canada and in the U.S., do not need a warrant to rifle through someone’s curbside recycling bin. This is because that person has abandoned their privacy interest in the contents of the bin. Does the same hold true for items in someone’s computer desktop recycling bin?

Apparently not, according to the B.C. Court of Appeal in R. v. McNeice, 2013 BCCA 98. While putting something by the curb in the real world indicates an abandonment of a privacy interest, the B.C. Court of Appeal has held that doing the same thing in the virtual world is (emphasis added) “consistent with an intent to conceal, and thus to maintain a privacy interest”.”

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WYATT INVESTMENT RESEARCH65 Railroad St., P.O. Box 790, Richmond, VT 05477.

Facebook at $50; how far will it rise?Chris Preston: “Three months ago Facebook

(Nasdaq: FB) was a cautionary tale. Now it’s one of the fastest rising stocks on the market.

Shares of the social network have more than doubled in the last three months, sparked by a late-July earnings report that beat Wall Street estimates and revealed the company’s growing mobile advertising presence.

Prior to that report, Facebook shares were trading at $26.50 – 30% below their $38 IPO price when the stock debuted in May 2012. This morning they opened above $50 for the first time ever.

How high can Facebook go? The P/E suggests it’s ex-tremely overcooked. The stock currently trades at 223 times trailing earnings. Even the forward P/E is high, at 52.

But social media stocks are notorious for their high valuations. LinkedIn (NYSE: LNKD), which is essentially Facebook for the professional world, is trading at a preposterous 952 times earnings. That’s nothing new. Its P/E has been in the stratosphere for years. And yet the stock continues to rise higher, doubling in the last year and rising 213% in the last two years.

LinkedIn is proof that ridiculous valuations aren’t roadblocks to continued share price appreciation – at least not when it comes to social media stocks. That’s why at least one analyst among the 35 listed on Yahoo! Finance has a target price of $60. Most, however, think the stock’s already overcooked.

The average price target is $46.28, or 7% below its current price. But if Facebook beats third-quarter earnings estimates by 36% the way it did last quarter, then the stock may still have plenty of room to rise.”

Editor’s Note: Chris Preston is an Investment Reporter for Wyatt Investment Research, www.wyattresearch.com, who examines the financial markets and provides actionable investment ideas to individual investors.

Continued from page 1

browser available on both desktops and mobile devices, continues to win market share with over 750 million downloads.

A key difference between Google and Facebook is that consumers use Google to search foe things they want to buy. Thus Google users are more dispose on click on sponsored links. This explains why marketers pay generously for access to Google’s marketing space. Facebook users, by contrast, are notoriously disdainful of ads.

As the mobile market keeps expanding in the numbers of mobile devices sold and the amount of time consumers spend on them, both Facebook and Google will need to keep working to leverage their established reputations and high user volume rates to this growth. The challenge will be to do this without sacrificing the quality of user experience, which could open the door to smaller competitors. For now we think Google still has the edge and is the better investment.

Editor’s Note: Graham Pupo is a contributor to The Complete Investor, P.O. Box 248, Williamsport, PA 17703, 1 year, 12 issues, $199. The Complete Investor has won the prestigious first-place award as the best investment/financial newsletter published in 2012 as rated by SIPA (Specialized Information Publishers Asso-ciation. For more information on this award-winning newsletter and a money-saving offer plus two free Investment Forecasts visit www.completeinvestor.com.

Facebook vs. Google

Continued from page 5 Action to take: Buy Samsung Electronics

(SSNLF) under $1,400 as a Long Hauler.Editor’s Note: Neil George is the editor of Lifetime

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TECH STOCK REPORT

By Ed BowsherMoneyWeek

Investing in technology can be very alluring.

For starters, there’s the dream of making a massive profit on just one investment. If you can spot a tech giant of tomorrow when it’s still a minnow, it can make you rich. If you had invested $1,000 in Microsoft shares in 1985, they would now be worth $450,000. And that’s not including dividends.

Sure, most of us won’t ever make quite such a lucrative call. But with the pace of technological change moving so quickly, it feels like there must be money to be made.

On the other hand, tech investing can be very risky. It’s all too easy to end up with a portfolio stuffed full of rubbish stocks that have either gone bust, or have long since failed to live up to their early promise. I’ve done it myself.

So here are three tips on how to avoid the biggest pitfalls.

Why Tech Investors Need to Look Beyond Britain

Firstly, if you want to be a successful tech investor, you have to look beyond the UK. We do have some decent tech companies – chip designer Imagination Technologies (LSE: IMG) is my favourite – but the biggest and most successful businesses are elsewhere.

Above all, that means the US. Silicon Valley is the still the world’s technology hub and you’ll find many more great tech businesses in other parts of the US, especially the North East.

Secondly, don’t ignore the giants of the sector. It’s easy to look at established tech businesses and assume there’s no point in joining the party now. Surely the big profits have already been made?

But I think that’s a big mistake. Look at Apple. It’s true that the company has fallen on tougher times since the death of founder

Steve Jobs. But it’s also easy to forget that just three years ago, its shares were trading at $290 a throw. Now they’re around $470 and have been much higher.

The iPhone had been on the market for three years by September 2010, so you hardly needed to be a brilliant diviner of tech trends to spot that Apple shares had potential at that point. So investing in tech giants when they’re already giants can still make you a good profit.

Which raises the question: which giants should you invest in right now?

My favourite tech giant is Google (Nasdaq: GOOG). At $900 a pop, the company has a $300bn market cap and is trading on a price/earnings (P/E) ratio of 26. So it doesn’t look cheap at first glance.

However, Google also has a $50bn cash pile and profits are growing fast. It has achieved a dominant position in web advertising that’s hard to challenge. What’s more, Google is also investing in several ‘moon-shot’ technologies such as self-driving cars or ‘wi-fi balloons.’ So with Google, you can own a tech giant today, and there’s a small chance you’ll profit from new technological breakthroughs tomorrow.

I’m also a fan of Amazon (Nasdaq: AMZN). Yes, it looks very expensive on traditional valuation metrics – a P/E of over 100 is always going to look scary. But Amazon has never looked cheap. And in its favour, the company has a successful track record of aggressively reinvesting any cash it generates and growing extremely fast as a result. Amazon has also perfected the art of inflicting serious damage on any rivals via very aggressive pricing.

As for Qualcomm (Nasdaq: QCOM), I think it’s a great way to play the smartphone boom. You could spend days agonising over whether Apple can successfully maintain its chunky margins or

you could just take the simple approach and go for Qualcomm. The company des igns and manufactures a wide range of products and technologies that are all related to the mobile world in which we now live. And it’s held by several leading technology funds.

This is One Sector Where Fund Managers Can Earn Their KeepThat brings me onto my final tip

– Investing in a technology fund is well worth considering.

Because technology is by its nature complex, this is an area where active fund managers can add value. Perhaps more importantly, a fund is a good way to diversify your exposure (and thus reduce the risks) across a range of stocks in the sector.

I’ll highlight two tech funds in particular. The MFM Techinvest technology fund has an outstanding track record and has beaten all its rival tech funds over the last five years and one year too.

The Polar Capital Technology Trust (LSE: PCT) is also worth a look thanks to its experienced management team. It currently trades at a discount to its net asset value of around – 7%, so in effect you are getting £1-worth of assets for 93p.

One final point: I’ve put a lot of emphasis on reducing risk by investing in tech giants and tech funds, but I’m not ruling out all investments in smaller fry. Once you have a core portfolio in funds or giants, you can afford to take more risk on the edge with some younger companies or brand new technologies.

I think all long-term investors should have a sizeable allocation to tech stocks in their portfolio. After all, it’s an area where growth is almost inevitable – and that will remain true regardless of what economic turbu-lence we see in the next few years.

Editor’s Note: Readers can sign up for the free daily e-Mail, Money Morning published by MoneyWeek.com, which offers a market summary, investment opportunities and insights, economic and political developments affecting your wealth. Sign up at www.moneyweek.com.

How to Invest in Tech Without Losing Your Shirt


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TECH STOCK REPORT

DTS8 Coffee – A Coffee Company DTS8 Coffee Co. Ltd. Licensed to Roast and Sell

“Don Manuel®” Brand Premium Colombian Coffee in China Market; Targeting U.S. Market with Green Bean Arabica Coffee Grown in China DTS8 Coffee Company Ltd

(OTC BB: BKCT) is a growing purveyor of fresh artisan roasted, gourmet coffee. DTS8 roasts, markets and sells superior quality roasted coffee in China, one of the world’s fastest growing coffee markets. DTS8 is well positioned to participate in the growth of the Chinese coffee market.

“We are excited about our continued annual revenue growth. It is a strong endorsement of DTS8 Coffee’s brand and business strategies as a marketer and distributor of fresh artisan roasted gourmet coffee,” says DTS8 President and CEO Sean Tan. “We are now working on increasing revenue and lowering costs to improve profitability from our overall operations.”

DTS8 Coffee Fiscal 2013

Operations ReviewDTS8 coffees are well regarded

by Chinese consumers for their uniqueness, consistency and special flavor characteristics. This has resulted in year-over-year revenue increases. Revenues for the fiscal year ending April 2013 increased for $253,790, from $220,421 reported in 2012 and $43,074 reported in 2011 – representing three consecutive years of growth.

“China is an emerging market for gourmet coffee and demand is growing.” says Tan. “Increasing disposable income among the young urban population and adoption of the affluent lifestyle, are key drivers behind the growing demand for premium fresh roasted coffees like Don Manuel®, an upscale quality product in United States.”

Don Manuel® coffee is artisan

roasted by DTS8 under strict standards, ensuring that every cup offers a rich, full bodied coffee with chocolate flavours, sweet-toned syrupy notes, and a smooth, clean finish.

Successful initiatives in a number of areas are resulting in improved efficiencies and new product offerings.

DTS8 has an exclusive license from Coffee Holdings Co. Ltd (Nasdaq: JVA) to roast, market and sell, their Don Manuel® brand of 100% Colombian coffee in China as well as in Taiwan, Thailand, Vietnam, Cambodia , Laos , Philippines, Myanmar, Indonesia, East Timor, Hong Kong, Macau, Malaysia, Singapore and Brunei. Subsequent to the initial launch in Shanghai the brand will be introduced in other cities like Beijing.

Most recently, the Don Manuel® brand of 100% Colombian coffee was introduced for sale in the Shanghai market at the 6th Annual Maple Leaf Ball, hosted by the Canadian Chamber of Commerce at the Grand Hyatt hotel in Shanghai, China.

DTS8 has successfully completed moving its roasting operations to Nanxun Town in Huzhou District, Zhejiang Province. DTS8 is the only coffee roaster operating in Nanxun Town, where it holds a QS license, valid for three years. Nanxun Town is strategically located within a couple of hours drive to Shanghai, as well as to Suzhou, Wuxi, Hangzhou, Ningbo, and Anhui provinces providing easy access to new sales opportunities and future growth.

New coffee product offerings and improving efficiencies will lead DTS8 to realize increased revenues through the balance of the current fiscal year.

Green Bean Sales as New Revenue StreamDTS8 has devoted considerable

time and resources on meetings and discussions with coffee plantation owners, farmers and exporters in Simao, Jinghong, Xishuangbanna, Mangshi and Baoshan regions of Yunnan Province.

S i g n i f i c a n t l y, D T S 8 i s developing a marketing and sales plan for the introduction of coffee grown in Yunnan Province into the wholesale green bean market of the United States. The company expects this new revenue stream to materialize during the current fiscal year.

According to the International Coffee Organization’s green bean import data, the United States imported approximately 23 million 60-kilogram bags of coffee during the 2012 season – between 20% and 25% of the world’s annual green bean production.

The green bean coffee crop produced in Yunnan Province is mainly the Catimor varietal of Arabica coffee. Overall annual production is projected to be in the range of eight hundred thousand (800,000) to one million (1,000,000), sixty-kilogram bags of coffee.

DTS8, with its unique flavor and superior quality Yunnan coffee, intends to progressively position this new product offering to capture a share of the United States coffee market through aggressive sales to coffee retailers, roasters, wholesalers, distributors and importers.

DTS8 Coffee’s Market Strategies

DTS8’s market strategy remains to grow in a controlled manner by developing and enhancing



TECH STOCK REPORT

DTS8 COFFEE COMPANY, LTD.

OTC QB: BKCTContact: Doug Thomas

Investor Relations1685 H Street, Suite 405 Blaine, WA, 98230-5110Phone: 775-360- 3031

E-Mail: [email protected] Web Site: www.dts8coffee.com

Shares Outstanding: 26.27 million

Active Float: 7.6 million52 Week Trading Range: Hi: $0.50 Low: $0.14

Disclaimer: This material is for distribution only under such circumstances as may be permitted by applicable law. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. References made to third parties are based on information obtained from sources believed to be reliable but are not guaranteed as being accurate. Recipients should not regard it as a substitute for the exercise of their own judgment. The opinions and recommendations are those of the writers and are not necessary endorsed by The Bull & Bear Financial Report. Any opinions expressed in this material are subject to change without notice and The Bull and Bear Financial Report is not under any obligation to update or keep current the information contained herein. All information is correct at the time of publication, additional information may be available upon request. The company featured has paid The Bull & Bear Financial Report a fee to provide an investor awareness program. Management of the company has approved and signed off as “approved for public dissemination” all statements made herein. The directors and employees of The Bull & Bear Financial Report do not own any stock in the securities referred to in this report. The information contained herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding expected continual growth of the featured company and/or industry. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the publisher notes that statements contained herein that look forward in time, which includes everything other than historical information, involve risks and uncertainties that may affect the company’s actual results, developments, and business decisions to differ materially from those contemplated by any forward-looking statements. Factors that could cause actual results to differ include the size and growth of the market for the company’s products or services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. The Bull & Bear Financial Report is not a registered investment advisor or affiliated with any brokerage or financial company.

both its brand image and quality reputation. The combination of DTS8’s own brands, Don Manuel® and Yunnan coffee, provides a differentiated coffee positioning based on superior quality. Strategic expansion into select channels of distribution in different geographic territories creates significant opportunities for growth. DTS8’s commitment to quality and service establishes a high degree of repeat business and customer loyalty.

DTS8 Coffee’s Growth Strategies

Significant growth opportunities exist for DTS8 in the distribution channels in China, Southeast Asian and U.S. markets.

In September 2013, DTS8 began market ing premium quality, Arabica green beans, grown in Yunnan, China, in the North American market. These Catimor variety coffees are from plantations located in the Simao, Jinghong, Xishuangbanna, Mangshi and Baoshan regions of Yunnan Province, and are grown in rich volcanic soils at altitudes ranging from 1,000 to 1,800 meters.

“The addition of the increasingly popular Yunnan green coffee beans to our product mix creates another revenue stream with lucrative potential,” says Tan. “We are working closely with coffee roasters and wholesalers. Yunnan coffee is used by Starbucks in its South of the Clouds brand of roasted coffee blend. Nestlé is also using Yunnan coffee in their products.”

DTS8 expects a significant portion of future revenue will

be derived from increasing distribution channels expanding existing customers, and pursuing new retailers, specialty gourmet food stores, online, hotel, office and restaurant accounts.

DTS8 Coffee’s Competitive Advantage

DTS8 Coffee’s management team, all experienced Canadian businessmen, spent six years de-veloping business relationships in China and now is integrated into the Shanghai coffee culture – giv-ing DTS8 an advantage in reaching new coffee consumers in other parts of China as well as in other

targeted geographic areas.In April 2012, DTS8 acquired

Hong Kong-based DTS8 Holdings Co., Ltd., for $4 million. DTS8 Holdings sells its signature coffees and other blends through its wholly owned operating subsidiary DTS8 Coffee (Shanghai) Ltd. In March 2013, DTS8 completed the addition of new roasting and offices facilities in Huzhou, Zhejiang Province, China.

DTS8’s sales office is located in Shanghai which comprises the largest concentration of premium coffee consumers in China. DTS8’s roasting facility is now located in Huzhou, a relatively short distance away. Localized operations provide DTS8 with a significant service advantage over foreign competitors with only satellite operations in China.

Investment Considerations

DTS8 expects to sustain controlled growth, increased revenues, through targeted marketing and sales efforts to meet the forecasted overall growth of the demand for coffee in China, the Pacific Rim and now in the United States.

“We anticipate an exciting future in expanding our Don Manuel® 100% Colombian and Yunnan green bean coffees to new markets,” says Tan. “We bel ieve that through DTS8 Coffee’s innate experience in these markets they will be able to introduce this premium coffee to a host of new coffee drinkers which will, in the long run, create an enormous loyal customer base for our brand.”


mailto:[email protected]

http://www.dts8coffee.com


TECH STOCK REPORT

By George Putnam, IIIThe Turnaround Letter

Technology investors used to say “When Intel sneezes, the semiconductor sector catches a cold.” While it is still true that many chip stocks still more or less follow Intel’s lead, there are now so many niche uses for integrated circuits (which is the more modern name for what used to be called semiconductors) that Intel’s value as a bellwether has become questionable. Intel’s performance is closely tied to the personal computer market while other circuit makers serve largely separate niches from cell phones to game consoles to cameras and other devices.

Nonethe less , in an otherwise very healthy market, Intel has been sneezing quite a lot recently, with its stock down about 8% since the beginning of 2012 compared to a 30% gain for the S&P 500. As a result, many of the other chip stocks have been suffering as well.

We don’t know enough about the tech sector to predict when the malaise in the chip makers will fade (and even those who claim such expertise rarely get it right). What we do know is that when the sector comes back into favor, these stocks can perform very well.

Each of the ten stocks discussed below has a targeted niche (with some overlap). But they all have a few things in common: their stocks are below $10 and well off their highs of recent years; they have reasonable barriers-to-entry to their niche; and they have solid balance sheets and liquidity. We believe these characteristics give these stocks strong rebound potential.

While we are on the subject of chip stocks, we still like Cypress Semiconductor (CY), which we recommended last January. It

Ten Chip Stocks Under $10just doesn’t make the list because its stock is trading above 10. But we are still attracted to its growth potential and its 3.7% dividend yield.

Atmel (ATML) is a leading producer of microcontrollers, and it is targeting touch controllers/sensors for use in mobile devices. The firm’s maXTouch product enables touch screen applications while its XSense line

improves screen displays. If you believe that better displays coupled with touch screens represent the wave of the future, then Atmel has appeal.

Entropic Communications’ (ENTR) products have helped how traditional broadcast and streaming video is securely d e l i v e r e d , p r o c e s s e d a n d distributed into and throughout the home. It sells to most video service providers including Comcast, DIRECTV, OCN (China), UPC (Netherlands) and Verizon. Entropic has been cutting costs recently, including a planned 10% headcount reduction. The balance sheet shows cash equal to 29% of the share price, and there’s been a smattering of insider buying recently.

FormFactor (FORM) makes wafer probe cards that are used to test integrated circuit functioning. FormFactor suffered when the market moved beyond DRAM devices, one of its strengths. The

company is expanding in the developing market for mobile devices via its 2012 MicroProbe acquisition. In the latest quarter, operations generated positive cash flow for the first time since the fourth quarter of 2007.

Integrated Device Technol-ogy (IDTI) has built a leadership position in mixed-signal semi-conductors that incorporate both digital and analog capabilities

on the same chip. These are used in computing products as well as consumer applications in gaming, digital TV and smartphones. The company’s CEO has just stepped down. Following several quarters of losses, expectations are for a return to profitability this quarter. A strong bal-ance sheet will help the next CEO develop new op-portunities.

Lattice Semiconduc-tor (LSCC) has been a leader in programmable logic devices (PLDs) since

its 2002 purchase of Agere Sys-tems. Lattice’s products are well established in the communications market as well as industrial and general computing markets. Man-agement is now seeking a stronger presence in the consumer market by targeting mobile computing and smartphones.

LSI (LSI) designs storage (about 80% of sales) and networking (16%) chips. The company has a growing presence in the market for flash memory, chips that retain data even when power is switched off. Management expects the flash market to grow by 30% in each of the next few years. Ongoing issues in the PC segment will be a near-term drag, but the company is well positioned for the long term, bolstered by substantial R&D spending.

Micrel (MCRL) designs analog and mixed-signal products that are used in a wide variety of mobile computing devices. Among other

Continued on next page



TECH STOCK REPORT

Continued from previous page

uses, its devices play a critical role in managing power consumption. Revenues declined last quarter, but operations were solidly profitable, and the firm’s book-to-bill ratio is over 1.0. In the latest quarter, Micrel repurchased 469,000 shares and raised the dividend.

RF Micro Devices (RFMD) makes radio frequency products used in a wide range of wireless communications, from mobile phones to defense applications. Major customers include Apple and Samsung. As the industry inevitably marches toward more complex technologies the company is finding growing demand for its products. The 2012 acquisition of Amalfi’s entry-level smartphone technology should help expand operations in China.

Silicon Image (SIMG) develops connectivity and interface products that have helped bring High Definition content to the mobile consumer electronics and personal computer markets. With the burgeoning growth in smartphones and tablets, management has identified the mobile market is its fastest growing opportunity. Nearly 31% of 2012 revenues were dedicated to R&D.

TriQuint Semiconductor (TQNT) designs and manufacturers products used in radio frequency/i n t e r m e d i a t e f r e q u e n c y applications. Mobile accounts for about two thirds of revenues followed by the network and defense/aerospace markets. The company’s strength is in making filters that differentiate the myriad signal that mobile devices need to recognize. TriQuint is one of two manufacturers in that niche, which has relatively strong barriers to entry. Recent results surprised analysts, and management raised expectations for coming quarters.

Editor’s Note: George Putnam, III is editor of The Turnaround Letter, 1212 Hancock St., Ste. LL-15, Quincy, MA 02169, 1 year, 12 issues, $195. The Turnaround Letter provides insight into potential turnaround situations and recommends stock purchases that have potential for large and/or imminent increases. Visit www.TurnaroundLetter.com.

By Anne Kates SmithKiplinger’s Money Power

As if investors didn’t have plenty to worry about already, technology-driven trading snafus are starting to add up for the nation’s stock markets. Nasdaq’s recent three-hour shutdown, due to a software flaw, halted trading in the exchange’s 3,300 listed securities, including Apple, Google and Facebook. The so-called flash freeze followed last spring’s #HashCrash, when the Dow Jones industrial average plunged 144 points in two minutes after hackers posted a fake tweet about an explosion in the White House. And that followed the nearly $1 trillion plunge in 2010, known as the flash crash, that was tied to one investor’s flawed trading algorithm.

Cyber crime, too, is a major worry. In a recent survey, some 53 percent of the world’s securities exchanges said they had suffered a cyber attack in the past year. Attacks so far have been aimed at disruption rather than financial gain. Still, 89 percent of exchanges surveyed agreed that cyber crime poses a systemwide risk to world securities markets.

Are tech-driven disruptions, whether malicious or accidental, an inevitable part of modern life? Or are they an indication that markets – and regulators – have failed to keep pace with lightning-fast technology?

The more complex the system, the more parts that can break, says Georgetown University finance professor James Angel. But, he adds, “everyone is breathing down the exchanges’ necks” to reduce the risk of such malfunctions. Earlier this year, the Securities and Exchange Commission proposed rules that would compel exchanges, trading systems,

clearing agencies and others to develop, test and maintain their systems to make sure that certain technological standards are met. A summer cyber-security exercise called Quantum Dawn 2 tested the industry’s capability to respond to a cyber attack.

Still , critics contend that the markets have become too fragmented and too fast-paced. There are now 13 separate exchanges and some 50 so-called dark pools (trading venues for institutional orders, which are unavailable to the public), and each has different technology, operating speeds, order types and rules, says Sal Arnuk, of brokerage Themis Trading. “There’s no way you can eliminate the chance of failure in such a complex mousetrap.”

But although the recent debacles can undermine confidence, they shouldn’t loom large for most individual investors, says Larry Tabb, of the Tabb Group, a financial-markets research firm. The markets operate efficiently most of the time, and investors with a long-term perspective shouldn’t be tremendously concerned about short-lived derailments. Still, to play it safe, make trades using limit orders, which allow you to buy or sell securities at a specific price or better.

Editor’s Note: Anne Kates Smith is a senior editor at Kiplinger’s Personal Finance magazine.

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TECH STOCK REPORT

By Jeff BertolucciKiplinger’s Money Power

Security experts tell us to create long, complex passwords (think numerals and symbols) for every online account. But how are we supposed to remember all of those mind-numbing character strings?

Enter software that manages your passwords for you. These programs allow you to store your passwords in one file by creating one ultra-secure master password to serve as the portal to all your other user names and passwords.

Here are three of our favorites:• Dashlane. This is an excellent

choice for the password-challenged. Not only is it highly secure, but it’s also a breeze to use. Dashlane (www.dashlane.com) is a free download for Windows and Mac PCs and most smartphones and tablets. Enter a master password (be sure to remember it because Dashlane doesn’t save it) and the app automatically encrypts your passwords and other private information using military-grade AES-256 encryption, which has never been hacked. Dashlane impor ts new and ex i s t ing

passwords from your Web browser into its “vault”; the program can remember your shipping and credit card information, as well as auto-fill online checkout screens.

Dashlane also works within your Web browser to monitor your online activities. When you log in to your online email, for instance, Dashlane pops up and asks whether it should save your user name and password. Plus, it rates the strength of your existing passwords (and tells you if they should be changed), and it generates strong passwords for new sites that you join. If you signed up for two-step verification using Google Authenticator (you need a code generated by an app in addition to your password), you may continue to use it.

• LastPass. This is anothertop-notch free password manager. Like Dashlane, LastPass (www.lastpass.com) prompts you to create a master password, integrates with the browser, detects when you log in to password-protected sites and asks whether you want it to remember log-in information. It also generates strong passwords for new sites and auto-fills credit card and shipping information. Unlike Dashlane, however, LastPass doesn’t rate the strength of existing passwords.

LastPass stores your data online, which lets you access your credit card numbers from any Web browser. (The downside: You may be uncomfortable with having your sensitive personal data stored in the cloud.) The app also supports Google Authenticator.

• Keeper. If all you wantis a free password manager a n d l i t t l e m o r e , K e e p e r (www.keepersecurity.com) is appealing. Like its competitors, the app uses bulletproof AES-2 5 6 e n c r y p t i o n . T h e a p p supports two-step verification, but it doesn’t rate the strength of your passwords.

Editor’s Note: Jeff Bertolucci is a freelance writer for Kiplinger’s Personal Finance magazine.

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