Why I'm Not Afraid of Predictions

In This Issue: Why I'm Not Afraid of Predictions   Strong Spending, Weak Sentiment The Essential Internet and "Net Neutrality" Winter is coming – and so is 2015 It's not too early to start thinking about next year. Research proves that companies launch new initiatives based on the calendar year. Just like you do. If you make your move now while it's early, you can get in on the ground floor of a triple-digit upside poised to take off in January. We're predicting that it will be our #1 stock of 2015. We've been right the last 3 years in a row – getting in early has less risk and is more profitable. Find out more here. Why I'm Not Afraid of Predictions 11/17/2014 By Jim Pearce Predictions are a dangerous business for stock analysts. The future is notorious for being uncertain, and most efforts at gazing into a "crystal ball" are met with disappointment and failure. But there's another way to think about the future when it comes to investing... Tomorrow's world is built on today's foundation, and so a proper assessment of a stock's core fundamentals usually plays out. I can't look into the future better than anyone else. But I can do a better job at finding value that's likely to last. That's why I'm not afraid of making predictions, because all of my market projections are based on underlying value. The Predictions I made on the MoneyShow In January the MoneyShow asked me to predict the best stock to buy for the rest of 2014. Requests like that are usually the stuff of nightmares for us in the stock business. But I had no trouble coming up with an answer. My partner at Smart Tech Investor, Leo Boeckl, had just run a stock screen using our proprietary models, and Apple came out with the best 12-month projected return – effectively "The Best Tech Stock to Own in 2014." I also recommended a short sell of Amazon, since it was the lowest-scoring stock on our screen. I'm pleased to say that our predictions were successful. Since then Apple's stock grew by 35%, and Amazon plummeted 27%. The folks at MoneyShow were so impressed that they asked me to do it again. So in August, I recommended a short sell of Netflix. Again my answer was based on the Smart Tech Investor system, and sure enough, less than two months later, Netflix dropped by more than 20%. So in October MoneyShow again asked me to supply their readers with a recommendation. After some research into the numbers, I found some troubling indicators that predicted doom for social media darling Twitter (NYSE:TWTR). I've never liked or recommended this stock, but I know that many investors – and even some of my readers – have bought it anyway. So I shared these concerns in my MoneyShow interview (and to my Smart Tech Investor readers), and recommended that anyone holding shares should get out right away. Eight days later Twitter suddenly dropped by 18%! It has continued to struggle since then. MoneyShow asked me how I knew all of this, but as I told them during that interview, I wish I could say I was really that smart... but the truth is that it's our system, and the way that it identifies value. Why Our System Works So Well Our stock-picking system is based on something we call the "BiQ", which stands for the Boeckl innogration Quotient, after my research partner, Leo Boeckl. It measures the extent to which a tech company possesses the necessary ingredients to become or remain a market leader. We then adjust the BiQ according to the extent to which a stock is trading above or below its peer group to produce the "STR," or Smart Tech Rating. So it wasn't hard for me to make my MoneyShow predictions: I simply recommended the companies with the highest STR scores as my "BUY" recommendations, and the lowest STR scores as "SELL." And that's the beauty of our system: it works in both up and down markets, and it can provide both buy and sell recommendations at any time. Our portfolios have done well – during the first half of 2014 our overall performance exceeded the NASDAQ Composite Index by 58%. The NASDAQ was positing record gains, and yet our system still outperformed it by a mile! Research into Practice... and Profits The past May I attended Investing Daily's annual Investing Summit in Alexandria, Virginia, where I gave a keynote address on evaluating tech stocks. Afterwards a man got my attention and introduced himself. He greeted me with a giant smile, and said that he had been among the very first readers of Smart Tech Investor. He went on to say that he had come all the way to Virginia just so that he could thank me personally: "I made over $150,000 on Western Digital, my biggest win of the year!" He was referring to my very first prediction for Smart Tech Investor, which I had announced at the previous conference a few months before the publication's official launch. I had recommended Western Digital (NSDQ:WDC), and the stock went on to double in 16 months. Then he asked: "So, please tell me, I must know... what's your pick for next year?" Looking ahead to 2015 Our predictions have proved to be so popular that we've decided to make them an annual feature of Smart Tech Investor. But starting now we're adding another detail to our plans... A few months ago I hired veteran tech journalist Rob DeFrancesco. Some readers will remember him from the 13 years he spent working for Louis Rukeyser's Wall Street. Others might recognize his name from his successful tech blogs. Rob has a special talent for assessing tech stocks. When he joined our staff in August, he told our Smart Tech Investor readers to buy Marketo (NSDQ:MKTO) and Paycom Software (NYSE:PAYC). We've just closed out both of those with respective returns of 14.7% and 34%, all in less than 90 days! I've asked Rob to lead the charge on a pick for 2015, and he came back with an impressive list of choices. He, Leo, and I combed through them, debated, picked, debated again – and have finally arrived at what we think is a fantastic pick for 2015. It's a mid-cap technology stock that's positioned for a breakout of double, perhaps even triple digits. It has underlying value that most investors haven't noticed – at least not yet – and so we're not afraid to predict that it will be a winner. We will be announcing the name, ticker symbol, market rationale, and buy price for this stock in the December issue of Smart Tech Investor. If you act now, you can join just in time to get all the details on this must-own tech stock. Our normal 90-day 100% money-back guarantee still applies, so you're not risking anything by taking a look. There are only a few days left before it's too late to get our pick for 2015 in time to maximize your profits, so please act now. This is one stock pick you don't want to miss – get our #1 prediction for 2015. Why We're Excited About 2015 We've spent weeks researching what I'm about to share with you. It's a stock that's indicating strong, triple-digit growth in the months ahead. We're not speculating. We're basing our prediction on underlying value that other investors have completely missed… at least, missed for the moment. They're going to catch on in the months ahead, sending the stock skyward. This is what we spend our days looking for – our last few picks earned 770% in 3 years, 200% in 16 months, and 110% in 3 months. Our #1 pick for 2015 is available right here. Strong Spending, Weak Sentiment 11/14/2014 By Ari Charney Despite weak consumer sentiment, Australians continue to spend. Until recently, Australian retail had been one of the few (and surprising) bright spots among the country's non-resource sectors. Indeed, retail sales growth had an unusually strong run during the six-month period that ended in January of this year. Thereafter, with the exception of a decline in May, retail sales continued to grow, albeit at a more sluggish pace. But in September, Australians opened their wallets and dumped the contents on the sales counter. According to the Australian Bureau of Statistics (ABS), retail sales rose by 1.2% that month, far surpassing economists' consensus forecast of a 0.3% increase and also well above August's 0.1% growth. Household goods retailing was the largest contributor to the rise, with sales up 4.1%. This strong performance was driven by a 9.2% jump in sales of electronic goods, which accounted for roughly half of the growth in retail sales in September, thanks in part to the release of Apple's iPhone 6. Consumers also dropped money on dining at cafes and restaurants, with sales in this category up 2%. Meanwhile, the Westpac-Melbourne Institute Index of Consumer Sentiment plumbed its lowest levels in three years. The question is what this seemingly conflicting data could portend for the upcoming Christmas season. Although consumer sentiment has risen slightly off its recent low, Westpac characterized November's result as disappointing, since it remains 12.5% below its level of a year ago. In fact, pessimists have outnumbered optimists for nine consecutive months, the longest stretch since the Global Financial Crisis. Part of this disconnect may be explained by consumers' assessment of their recent financial health versus expectations about their economic prospects over the coming year. While respondents' assessment of family finances fell by 4.2% from a year ago, their optimism about the next 12 months rose by 3.1%. In the near term, however, sentiment is stuck in the doldrums. And since the November survey is considered a leading indicator for the Christmas season, Westpac says these numbers could signal a dismal Christmas for retailers. For instance, when respondents were asked, "Do you think that you will spend less, about the same, or more on Christmas gifts compared to last year?," the results were: 38% "less," 50% "same," and 12% "more." That doesn't sound too bad until Westpac reveals that the net balance resulting from summing the "more" versus "less" categories is minus 26%, which it says is the worst showing since 2008. Australia's strong housing market could be the other explanation for the disconnect between rising sales and sapped sentiment. On the one hand, rising home prices are creating a wealth effect among consumers, while on the other hand there are fears that the country's housing bubble could be headed toward implosion. The survey asked consumers, "Whether now is a good time to buy a dwelling." While the responses showed modest near-term improvement, the overall result is still down by 13.3% from a year ago. And house price expectations are down 14.3% since last year. But more recent action on the ground suggests that disturbing sentiment may not necessarily translate into lower turnover during the Christmas selling season. Citi analyst Craig Woolford told The Sydney Morning Herald, "I think the platform is set for a pretty good Christmas; the run-rate of retail sales growth in September was quite encouraging and feedback on October from retailers suggests that things still remain quite healthy." And while Westpac is being a bit of a Scrooge about Christmas, it's more optimistic about the coming year. Indeed, Chief Economist Bill Evans believes that the wealth effect--Australians' wealth has been boosted by AUD1.6 trillion over the past three years due to gains in housing and retirement funds--should continue to boost consumer spending. Higher momentum in consumer spending could beget a virtuous economic cycle that leads to more job growth and further spending. Don't Freeze Your Assets in the Polar Vortex It's a tough time of year to be thinking about investments – coats and sweaters are mandatory, Santa has taken up residence in the mall, and a chilly stock market can't decide what it wants to do. Melt away all of that with this white-hot stock pick that will launch in January and keep climbing. We're predicting solid growth that you can ride all year. Come on in from the cold – it's warm inside. The Essential Internet and "Net Neutrality" 11/14/2014 By David Dittman Earlier this week, as I was doing some side-reading during breaks in my research and preparation for the November 2014 issue of Australian Edge, I came across a clever comic at TheOatmeal.com that purports to explain to Senator Ted Cruz, a Republican from Texas, what "net neutrality" is and why it's important. I actually tweeted a link to the entertaining illustration, generating several "huzzahs" from my left-leaning followers and friends on Twitter (NSDQ: TWTR) and Facebook (NSDQ: FB). Those folks most certainly agree with President Obama's position, detailed in a letter and a video posted on the White House website, that "the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act." Should the Federal Communications Commission follow this prescription, Internet Service Providers (ISP), including Comcast Corp (NSDQ: CMCSA), AT&T Inc (NYSE: T) and Verizon Communications Inc (NYSE: VZ) would be more heavily regulated, a la electric and water utilities. According to Mr. Obama, the change would acknowledge that "the Internet has become an essential part of everyday communication and everyday life." Mr. Obama's stance is an explicit rejection of proposed rules that the FCC unveiled earlier this year to allow "paid prioritization." This would permit content providers such as Twitter and Facebook as well as Google (NSDQ: GOOG), Amazon (NSDQ: AMZN) and Netflix (NSDQ: NFLX) to make deals with ISPs to get faster service to their websites--the "fast lane" we've heard so much about in recent months. These rules are still under consideration and have not been finalized. Mr. Obama's proposal calls for no paid prioritization, no blocking of any content that is not illegal, and no throttling of Internet services, where some customers have their Internet speeds artificially slowed down. The proposal also asks that any new rules include mobile broadband, which is already the primary access point for many users. Most public utilities are essentials for life. Of course water is essential; a human being literally cannot survive without it for more than three days. We could adapt to life without electricity, natural gas and sewage, but it would be a difficult transition. The public shares in the cost for delivery and maintenance of those services because there are network effects and positive quality-of-life effects from doing so. Whether the Internet fits with these other essentials is an interesting question. The FCC regulates the Internet because it emerged from telephone and cable companies. Telecommunications has been highly regulated since the 1930s, amid Franklin Delano Roosevelt's New Deal program to get us out of the Great Depression. FDR's effort descended from his fifth cousin Theodore Roosevelt's legacy of "trust busting." The principles that inform regulation of the Internet have their roots in laws set up for railroads in the late 1800s. But the Internet is vastly different from railroads, and it's vastly different from electricity, natural gas, water and sewage, services that have remained relatively static for more than a century. Wires have always delivered electricity. Pipes deliver gas and water to and take away wastewater from our homes. The bulk of innovation in those services happens at transfer points. (Of course "distributed generation" may drive a significant change in the way consumers get their power, but that's still a ways off.) It's hard to make the same sort of generalizations about the Internet; the pace of technological change is what separates it from traditional utilities, and it's impossible to say right now that the way we access it now is the way we'll access it 10 years from now. Note that the FCC, as Chairman Tom Wheeler and the president have made clear, is not under Mr. Obama's thumb. The agency does not answer to the White House. Mr. Cruz, perhaps the most vocal of Mr. Obama's congressional antagonists and a probable competitor for the GOP's 2016 presidential nomination, labeled the current White House occupant's "net neutrality" policy "Obamacare for the Internet," adding that "the Internet should not operate at the speed of government." I don't buy the whole analogy; I think there were serious problems with the US health care system, primarily high costs and only fair-to-middling outcomes, among other gross inefficiencies. At the same time, after delving a little deeper into the issue this week, it's clear to me that I and other proponents of "net neutrality" harbored misconceptions about the issue. As open-source networking software developer Dave Taht explained in a June 23, 2014, piece for Wired.com by Robert McMillan, "Most of the points of the debate are artificial, distracting, and based on an incorrect mental model on how the internet works." In short, the "fast lane" already exists, and it's been around for years. My sense of how the Internet works is old-school, formed in the late 1990s when it was easy to understand. The way it worked then was important, and it provided a foundation for rapid development. But no longer does Google send stuff into a massive "Internet backbone" of cables and data centers before it streams onto my device via Comcast or Verizon. Rather, Google, Facebook, and Netflix already have direct connections to big ISPs such as Comcast and Verizon, with dedicated computer servers located inside their networks. These are known as "peering connections" and "content delivery servers." According to DeepField Networks CEO Craig Labovitz, whose company tracks how other companies build internet infrastructure, "Fast lane is how the internet is built today." Tim Wu, who coined the term net neutrality, said "The fast lane is not a literal truth. But it's a sense that you should have a fair shot." And the real issue when it comes to giving up-and-coming companies that fair shot, be it for entrepreneurs starting new content or retail ventures to which the Internet is pretty essential or for potential new ISPs. Existing government regulation and the current technology created the circumstances for a virtual triopoly enjoyed by Comcast, AT&T and Verizon. If the internet is classified as a utility, then what incentives do companies or providers have to make it faster and better? And what economic incentives are there for new competitors to enter and try and win market share? Net neutrality isn't about the Internet itself. It's about access to the Internet. "The last mile," where people connect to the cables and data centers, is uncompetitive. Big content providers are silent on the issue of net neutrality because they can afford to pay for bandwidth, while smaller players can't. And speed is essential for online retailers, as delays of even fractions of seconds can lead to dropped revenue for startups. If it takes a long time to make a purchase, browse, bring up web pages and pay it becomes frustrating to shop in your armchair. Having good speed is critical for startups. The issue the FCC, Mr. Obama and Congress should probably be addressing is the fact that virtually every web company has little choice but to go through the dominant ISPs. And that may give them too much freedom to decide how much companies must pay for fast speeds. This article originally appeared in the Utility & Income column. Never miss an issue. Sign up to receive Utility & Income by email. 4 ways to profit from the New Tech Wave A new technology wave is rolling through cyberspace. It will change every facet of our lives. Many companies won't survive. But the wave will usher in a new round of winners. We're at the tipping point right now! Smart companies have already spent $399 billion on this technology. But in the next 4 years, spending will DOUBLE! These 4 'next wave' profit winners are where the smart investors will be for massive gains. The rest will miss it. Details here. You are receiving this email at benjamart.ss.stock@blogger.com as part of your subscription to Investing Daily's Stocks To Watch, published by Investing Daily. To ensure delivery directly to your inbox, please add postoffice@investingdaily.com to your address book today. Email Preferences | About Us | Premium Services | Contact Us | Privacy Policy Copyright 2014 Investing Daily. All rights reserved. Investing Daily, a division of Capitol Information Group, Inc. 7600A Leesburg Pike West Building, Suite 300 Falls Church, VA 22043-2004 U.S.A.