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The Big Banks Are Out with 2015 Stock market Predictions
Goldman Sachs Deutsche bank and Wells Fargo all project slower growth than the 11.5% the S&P 500 Index has experienced so far in 2014 citing the end of quantitative easing the prospect of rising interest rates and sluggish global economies.
Pessimistic as their expectations might seem none of these investment houses suggests abandoning equities entirely. That’s because they see few alternatives with bond yields so low. Also they believe good stock picking can yield superior results in an otherwise tepid environment for equities. More specifically David Bianco ’s chief equity strategist thinks secular growth sectors (like tech and health care) and dividend growth stocks will outperform in 2015. Sounds familiar.
In the November edition of BIG TECH we itemize nine factors including sector and dividend growth that need to be considered when picking stocks in 2015 a year in which we foresee a market stagnation even stronger than our compatriots at the big banks.
Crude Oil Takes Down Tesla
Tesla (TSLA) has tumbled over 20% since mid-September. Part of the reason is the pullback in oil prices which is seen as a negative for electric car companies.
But investors are making a mistake claims CNBC’s Phil LeBeau: “The truth of the matter is this is a luxury car company; right now it is not a play on gas prices.” Valuation would suggest otherwise.
Tesla trades at 10 times sales. The industry average for automakers is 0.5. Tesla’s market cap is $27 billion almost half that of Ford which sold more than 100 times as many vehicles in 2013. That lofty valuation is based partially on the expectation that Tesla’s lower-end models will make inroads in the mass market. And that depends on several factors including the price of oil. But we’re not so sure it will dampen interest that much. The environmental and technology crowds are both pretty fervent about their product choices. If economics were a factor for example there wouldn’t even be a Prius. Still while the cars might survive even with $30 oil the stock is still too pricey for our tastes.
If You Can’t Beat ‘Em Sue ‘Em
That’s what Cisco (CSCO) is doing to Arista Networks (ANET) claiming the company is infringing on several patents with its networking gear which focuses on high-speed switches aimed at financial institutions. Arista of course denies the claims accusing Cisco of resorting to tactics used many times before by incumbents to fend off emerging competitors. If that’s the case Cisco’s army of lawyers will be working overtime. That’s because a host of specialized networking companies are hot on its heels.
In the wireless networking space alone there are Ruckus (RKUS) Ubiquiti (UBNT) (ARUN) Meru Networks (MERU) and recent IPO Aerohive (HIVE). That’s just a sampling.
In core switches and routers it has big competitors like Juniper (JNPR) and China’s Huawei and dozens of smaller upstarts like (PANW) and F5 (FFIV).
At the edge of the network there’s Barracuda (CUDA) Riverbed (RVBD) and Fortinet (FTNT).
And that’s just naming the public companies nipping at Cisco’s heels. Despite the competition the company’s management has remained on the ball though. John Chambers and company have used techniques like this suit aggressive acquisitions and a steady stream of innovations (many of which were fast-follower programs like its Software Defined Networking strategy) to keep customers engaged—and more important margins high. Through all this Cisco has maintained a steady gross margin well over 60% much higher than the average competitor. Still it’s not as much higher as it once was:
Every Day an Average of 18 People Die Waiting for an Organ Donation
And at any given time the waiting lists for critical organ transplants are three to five times as long as the list of available organs. But there’s a solution in the works: bioprinting.
At the forefront of this cutting-edge technology is Organovo Holdings (ONVO) which has just joined forces with researchers from Yale University.
In the short term the team hopes to print transplantable tissue which could assist a failing organ possibly extending the life of a patient until a donated organ becomes available.
In the long term the goal is to actually create an entire organ by feeding a patient’s cells into a bioprinter that builds the organ layer by layer—kind of like an inkjet printer. And since the organ is made from a patient’s cells the likelihood of rejection is greatly reduced.
It could be a breakthrough in the field of science which would mean billions in sales for Organovo. And if that happens the stock would increase many times over. But we’re not recommending Organovo quite yet. At this point the technology is too undeveloped. But we’ll continue to track the bioprinting closely in the virtual pages ofCasey Extraordinary Technology.
How Many Smart Lightbulbs Does It Take to Screw in a Lightbulb
It was the hot new Silicon Valley startup that aimed to revolutionize the lighting industry: Switch creator of a liquid-filled LED bulb was heralded as an “incandescent killer” in a 2011 Wired cover story. But the bulb failed to live up to its billing. It’s too heavy too expensive and too poor in light quality claimed one customer. It leaked fluids too.Not surprisingly sales never materialized. And now Switch has closed up shop reports Forbes.
Of course the vision of the smart lightbulb didn’t begin and end with Switch. There’s the Kickstarter-funded LIFX.Wired featured that company too.
Meanwhile the LED market is forging ahead. The latest projections call for $25.7 billion in global LED lighting shipment value in 2015 increasing 30% from 2014. And here are the potential beneficiaries according to Edison Investment Research.
Turn Your Arm into a Smartphone!
Just strap it on shake your wrist and a display pops up. It works just like a tablet or smartphone.
Pretty slick right But here’s the thing: the product doesn’t exist. No prototype. Nothing. It’s merely some nifty special effects to illustrate the concept.
Still the creators are raising money. However like many others before them (such as smart-lightbulb company LIFX mentioned earlier) they’re eschewing venture capital and looking for “donations” instead. If you like their vision you can give anything from €1 up to their goal of €1 million. What do you get in return Nothing. Nada. Zilch. No equity not even early access product.
According to their website 3263 people have pitched in… but we suspect that’s a fiction like the video and the whole thing’s nothing more than a scam. That’s because the company is raising the money with a PayPal “donate” button on its own website. No third party to verify that the numbers are real. No agreement binding the owners to do anything at all in exchange for the money not even making a good-faith effort. Not to mention the bipolar vision that started with an app (yet to be delivered) to keep your messaging secret only to get this grafted on later. To us the whole thing smells fishy.
Then again so does most crowdfunding. We’ve already seen the first lawsuit against Kickstarter for allowing a company to raise a bunch of money and then walk off with it doing nothing in return. Just wait until the first $100-billion company does that—those early donors will come back looking for some remuneration I bet. The lawyers are going to have a field day with all of this over the next few years that’s for sure.
Fan or not of crowdfunding you ought to give HELP FUND MY ROBOT ARMY!!! and Other Improbable Crowdfunding Projects a read. It’s one of the funnier compilations of short stories I’ve read in years.
Carl’s Crazy Projections Are Maybe Not So Crazy After All
In October activist investor Carl Icahn sent a letter to Apple (AAPL) CEO Tim Cook calling for the repurchase of an additional $100 billion in stock. Icahn’s reasoning went like this: the Street is seriously underestimating ’s growth prospects. Consequently earnings are being underestimated and shares are being undervalued. And while shares are undervalued they should be repurchased.
In arriving at his conclusion Icahn estimated that ’s smartphone segment would grow by 30% in 2015 and another 7% in 2016. Even with the smashing success of the iPhone 6 most analysts thought these projections looked optimistic if not starry-eyed.
Now however comes a report leaked from sources in Asia’s smartphone supply chain that Apple is planning to introduce a small phone in the second half of 2015. Just a rumor Perhaps. On the other hand it might be the “budget” iPhone for less affluent consumers in developing markets that observers have been speculating about for years. If that’s the case Carl’s sales estimates might turn out to be not so ridiculously optimistic after all.
Bits and Bytes
First we’d be completely remiss if we didn’t update you on Uber. Maybe you heard
- Then Portland banned it. Really Portland Home of organic everything and the self-proclaimed weirdest people in the country. Uber launched there anyway ignoring the city government. Good for the company.
- And… you get the point. We could go on. But while Uber’s facing a lot of challenges happy users isn’t one of them. So don’t count it out just yet.
Siri’s coming to your desktop. Or wait I mean Cortana. Windows 10 appears to be ahead of again puttingMicrosoft’s (MSFT) more powerful virtual assistant on the desktop as well as the phone. France Italy Germany and Spain just got Cortana too. Cool.
Of course don’t confuse it with Torque Microsoft’s answer to OK Google (GOOG) only on Android. Sigh.
Two is better than one—at least that’s what Yota Devices is banking on with its new YotaPhone 2. The Android handset has two displays including an always-on e-ink screen located on the back of the phone intended for basic functions like texting. The e-ink display can run two continuous days from a single charge extending battery life like crazy. $600 will get you the contract-free version about the same as an iPhone. It remains to be seen if we’ll see this one at carriers though.
In that emerging-market cellphone battle we talked about last week things have gone protectionist. Now upstart Xiaomi (XIAOMZ:CH) from China which holds the number-one spot at home ahead of even Samsung and has been banned in India.
People can’t seem to get enough of 3D printing… nor can companies. Just a few of the latest developments:
- UK’s Royal Mail is testing the 3D-printing waters with a new service that allows businesses and consumers to have their own 3D-printed products produced at a central London delivery office. The products can then be either collected from the delivery center or mailed to clients.
In an interesting balance of giving in and fighting back open-source code hoster GitHub is letting Russia have its way with company accounts. But it’s posting the requests in one of its famous public repositories so interested citizens can see just what the government’s asking for.
Another retailer has been hacked. This time it was risqué clothes purveyor Bebe.
Speaking of hackers Reuters says North Korea has 1800 of them on staff. No wonder they were able to take down . Though how many people does the NSA employ to listen in on cellphones Glass houses. North Korea denied the claims against it of course. Then it demanded kill the movie that makes fun of it…
The other week we were talking about how Macs aren’t as secure as once thought. Same with Linux which has been rooted for years it ends up.
All this government involvement on the Web has freedoms being clamped down too. According to Freedom House36 of 65 countries decreased rights for their citizens online this year.
An icon has passed. Ralph Baer the inventor of home video gaming died at 92.
Obama comes out pro Net neutrality a point added to his excellent comedic performance on The Colbert Report(maybe his next career will be Oprah’s replacement) while Merkel goes the other way.
56.1% of Google’s display ads never showed up to end users. That means a lot of advertisers are wasting a lot of money on the Web. sells its own ads mostly on a click basis so it has all the incentive in the world to embellish that number. Nonetheless even at half that it’s still a scary count for advertisers still relying on the old-fashioned newspaper model of ad buys. Those guys padded their numbers like crazy too of course so maybe it’s nothing new to ad buyers.
Yahoo’s (YHOO) Marissa Mayer continues to copy everything she can from the playbook she ran back at . First she steals away Firefox’s default search setting. Now Yahoo’s going after software developers with a suite of mobile app tools. This the same day as Google’s own finally went gold.
Amazon (AMZN) is chasing the long-dead business models of the ‘90s again. First it was groceries online. This time it’s going for 1-hour delivery in New York City.
Big Pharma is flush with cash and you know what that means… acquisitions. The latest comes from Merck (MRK) which just purchased Cubist Pharmaceuticals (CBST) a maker of drugs to treat dangerous bacteria and superbugs. Merck paid $8.4 billion which is $2 to $3 billion too much according to Leerink Partners analyst Seamus Fernandez. At around eight times sales the bid does seem a bit high given Cubist’s projected growth.
To close it out let me add two fantastic “long reads” to the pile on top of ROBOT ARMY:
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