MARKET OVERVIEW

Today marks the one month anniversary of the launch of Smart Tech Investor.  On that day the NASDAQ Composite Index closed at 4000.98, providing a handy benchmark for future calculations.  Last week it closed at 4,174.67 for a 4.3% gain, which annualized over an entire year works out to an increase of almost 50% compared to a total gain of 38% for all of 2013.  In other words, the past month has been approximately 30% more volatile than the past twelve months, perhaps indicative of an overreaction to short term expectations.

Of course, the past month happened to straddle the end of the calendar year, historically a time of above average price volatility due to a variety of factors including year-end tax loss/gain harvesting, portfolio manager “window dressing”, and heightened sensitivity to Christmas season sales performance.

In the weeks to come most companies will report quarterly results, as well as provide earnings guidance for the year to come.  If you want to capitalize on any surprises that may occur then you need to enter into your positions soon.  January is the month where the old Wall Street adage, “buy on the rumor, and sell on the news” is usually at its most extreme (and therefore, potentially profitable).

Many of our ‘Investments’ portfolio stocks have experienced changes in value greater than the overall market during the past month, which is to be expected given the nature of our proprietary formula for identifying tech stocks that are close to an intermediate term top or bottom.  In the Portfolio Update section below we summarize each of them, and our current advice.

We believe there will be several stocks experiencing significant changes in value later this month, and we want you to be ready to profit from them.  In next week’s monthly issue of Smart Tech Investor we will take an in-depth look at each of the recommendations in our ‘Equity Trades’ portfolio so you’ll know what to do.

 PORTFOLIO UPDATE

In addition to publishing statistical data on each of our ‘Investments’ portfolio stocks in the section below, here is a brief run down on where each of them stands at the start of 2014.

Apple (NasdaqGS: AAPL) has been on a slight downward trajectory over the past month, even though most of the news on it has been very good.  A deal with China Mobile to market its iPhone 5 series was finalized, while domestic sales of its iPhones, iPads, and MacPro have been strong.  Last month we identified Apple as the best tech stock to own in 2014 and we don’t see anything to dissuade us from that opinion.  Apple remains a buy up to $595.

CA Technologies (NasdaqGS: CA) has also been relatively quiet over the past month, slowly creeping up 5% in value while garnering very little media attention.  This is the kind of portfolio stock we really like, as it doesn’t take much excitement to push a $34 stock a lot higher.  CA is going to announce quarterly earnings after the market closes on January 21^st, so you may want to open your position in this stock prior to that date as we believe the news will be better than expected. CA is a solid buy up to $36.

Cisco Systems (Nasdaq: CSCO) declined steadily throughout the second half of 2013 before finding a floor at $20 on December 13^th, the first day we recommended it.  Since then it is up 10%, but still below our buy limit price of $24.  This morning Barron’s upgraded Cisco to a buy with a 20% upside target, in line with our expectations as well.

Intel Corp (NasdaqGS: INTC) is up 5% since we first recommended it last month, and has established a very solid trading pattern over the past six months.  We aren’t “chartists”, but a lot of traders are so it’s good to know that many of them should be piling in on this stock soon.  They love to see a recent trend of “higher highs” and “higher lows” which is exactly what Intel is providing.  However, Intel is rapidly approaching our buy limit of $26 so you’ll need to act fast if you want to get in before it becomes a ‘hold’.

Microsoft (NasdaqGS: MSFT) has been in a holding pattern recently as the market awaits the company’s announcement of its next CEO.  We think this is a very good time to be building a position in this stock, as once the new CEO is identified the stock could rapidly move to the upside once it becomes apparent that the company will have a coherent strategy for integration.  Continue to acquire Microsoft up to $42.

Oracle (NasdaqGS: ORCL) has shot up 14% since we first recommended it last month, putting it close to our buy limit of $39.  However, it remains an undervalued stock trading at 16 times TTM earnings, and future revenue from its investment in cloud computing should pay off handsomely later in 2014. 

Qualcomm (NasdaqGS: QCOM) has been relatively flat over the past month, up less than 2%.  The company will announce its fiscal first quarter results on January 29^th so there is still plenty of time to buy it before then. Like many companies strongly affected by government spending, Qualcomm’s fiscal year ends on September 30^th.  But going forward Qualcomm will increasingly be a pure play on private sector smartphone sales, where it has staked out a strong position in the rapidly growing Asian market.  Qualcomm is a buy up to $85.

Seagate Technologies (NasdaqGS: STX) and Western Digital (NasdaqGS: WDC) have been two of our two biggest winners thus far, up 17% and 8% respectively since we first recommended them a month ago.  Unfortunately that places both of them above their current buy limits, but we will reevaluate those limits later in 2014 as we get greater clarity on the rate of growth in market share for cloud storage each of them is gaining.

THE PORTFOLIOS

• Portfolio updated: Thursday, December 19th, 2013 12:45PM

• Portfolio updated: Thursday, December 19th, 2013 12:46PM

LEGEND:

BiQ = Boeckl Innograton Quotient.  It is a scale from 0 – 10 that reflects the extent to which a company possesses the critical elements of innogration, and includes a score for dividend yield (0 – 3), change in operating cash flow (0 – 3), and innogration strategy (0 – 4).

STR = Smart Tech Rating.  It is the BiQ adjusted by the ratio of a company’s forward twelve months earnings per share multiple (FTM) to the same ratio for its peer group.  For example, a company with a Biq of 5.0 is trading at a FTM of 30 versus an FTM of 15 for its peer group, so its BiQ score would be reduced by 50% (15/30) for an STR of 2.5.

Stop Loss is the price at which a stop loss order should be set to protect you from excess loss in the event a stock does not behave as we anticipate.  For a long or buy position a stop loss order would be set below the current price, and for a short or sell positon a stop loss would be set above the current price.