Monthly Archives: April 2014

Valuation of Early Stage SaaS Companies

evaluating early stage saas companies

When businesses operate in the cloud, how do you value them?

Valuation of Early Stage Software-as-a-Service (Saas) Companies isn’t easy. And with the carnage going on in high-growth internet names over the last couple months, the issue of effectively pricing early stage SaaS companies is ever-more pertinent.

So the question remains…

How can investors be confident what a SaaS company is worth, especially at an early stage?

SaaS companies present an interesting opportunity for investors because they are highly scalable and (in theory) SaaS investments present a very high growth opportunity. Plus most of their revenue is from recurring service agreements. That means high margins and high customer-retention which any intelligent investor would be happy to see.

On the other hand, if you overpay for a SaaS company and it doesn’t click with the end user then you are most certainly at risk. If SaaS companies are valued based on their future earnings you could risk permanent capital loss if multiples contract.

Luckily…

There are a number of great resources you can find from around the internet to help you value SaaS companies, even if they are in the very early stages. I’ll also share some ideas individual investors can use to try and evaluate what early stage SaaS companies are really worth.

Best Tools for Valuation of Early Stage SaaS Companies:

The nice thing about valuing early stage SaaS companies is that a lot of other smart people have already thought about this challenge. So rather than re-invent the wheel, let’s take a look at what they have to say…

  • Andy Vitus from ScaleVP.com has a nice Valuation Framework for Early Stage SaaS Companies. The bottom line seems to be that if you’re paying a lot for early stage SaaS companies you had better expect explosive growth to continue for an extended period of time. iMergeAdvisors has a nice update on the piece too.
  • DavidCummings.org has a quick breakdown on the factors driving SaaS valuation which should help get you oriented if you’re new to the space.
  • This article from Business In Vancouver gives some nice perspective on how the market has rewarded SaaS companies. But since publication 4 months ago a lot of these recurring revenue cloud computing businesses have taken a big hit. Nevertheless this article provides a nice look at how investors can think about private SaaS opportunities.

As you can see, there are plenty of people thinking long and hard about the valuation of early stage SaaS companies. So one potential solution (especially if you’re not an accredited investor) would be to zoom out and move to SaaS companies that have proven themselves beyond the early stages.

Other Tools For Valuation of SaaS Companies:

If you’re an individual investor looking for public market SaaS opportunities, there are an increasing number of ways to get exposure.

One easy way to get a lay of the land is to review this report on SaaS Valuation and Benchmarking from River City Capital Funds. The paper is a little long but it’s easy to read and provides some insight into public equity opportunities for interested SaaS investors. Additionally…

The article correctly points out that most of the value for publicly traded SaaS companies comes from confidence in their discounted cash flows. If you’re investing in companies it’s always important to know how the market is perceiving them. You can read more here on how investors value a stock. But in this case you had better be very confident in your ability to forecast future subscriber growth and retention.

Another thing to consider when valuing SaaS companies would be to conduct fundamental intra-industry analysis. By focusing on what public market investors are paying for comparable companies, you can start to understand what your SaaS investment opportunity is worth. In most cases, the SaaS company valuation has some degree of relativity. But with the recent momentum tech sell-off there might be some absolute value opportunities emerging as well.

So now that you’ve heard my take, what do you think is the best way to value early stage SaaS companies?

And By The Way: If you want to learn more about how to analyze individual and industry investment ideas I encourage you to download my free ebook below. You’ll also get weekly updates with free tips and tools on how to improve your approach to the stock market.

homebuilder stock recovery 2014

The Mysterious Case of Home Building Stocks in 2014

Home Building stocks are at an interesting point in 2014. It feels like they’ve been chopping sideways forever. And since 2007 they’ve been lagging the S&P-500.

See for yourself…

xhb vs spy 2007-2014

The home builder stocks got hit hard in the financial crisis and haven’t really recovered.

To further complicate the picture, the macro-economic and demographic headwinds seem at odds with the recent data coming out of individual home builders. Plus, home builders have been lingering for so many years, are they overdo to outperform?

Well, before jumping to any conclusions lets look at some facts…

Has the Housing Market Recovered in 2014?

There’s a lot of conflicting information about whether or not the home builder stocks have recovered. Just by looking at the graph above you can see they haven’t recaptured their prior highs.

And…

There are a lot of interesting data points about the state of the American housing market and the American economy at large in 2014. They aren’t exactly encouraging…

So as you can see by clicking on the links above, there are some serious headwinds to the housing market in 2014. And these top down arguments aren’t easy to ignore.

To further obfuscate the state of a 2014 housing recovery, let’s look at some technicals.

Home Building Index (XHB) Stock Charts:

The intermediate term weekly chart is actually looking relatively constructive. The weekly RSI leaves a little something to be desired. But it could be carving out a bullish cup-and-handle pattern. Take a look

xhb long term weekly chart

XHB might have been carving out a bottom over the last few years. But will it hold? (Click to Enlarge)

If we zoom in a little further, the picture is only complicated. XHB has failed to recapture recent highs.  And while home building stocks have failed to get moving, with lagging RSI, they aren’t totally at risk of falling off a cliff either.

xhb 1 year daily chart

XHB has failed to make moving after trying to break out on recent highs. (Click to enlarge)

One of the other interesting charts worth watching is that of the materials ETF, XLB. It stands to reason that if housing input costs are rising – the margins of home building companies will come under pressure. As you can see, that might be a real concern…

xlb materials long term weekly chart 2014

Rising material prices might be another challenge for new home sales. (Click to Enlarge)

But before getting overtly bearish on the market for housing stocks in 2014, let’s take a quick look at the results from some of the leading home builder companies in 2014.

PulteGroup and DR Horton both reported strong earnings last week. Both companies also had an increase in net new home sales compared to the same time last year. Were the disappointing housing data points in March really just the result of bad weather?

It’s hard to say. But the positive commentary from housing executives might offer room to be optimistic.

Housing market conditions remain favorable,” said Donald R. Horton, CEO of DR Horton. His counterpart at PulteGroup echoed this optimism. “We continue to believe housing is in the early stages of a multiyear recovery benefiting from low interest rates, low inventory and continued relative affordability of homes, and with consumers looking for well-located houses and displaying a clear willingness to invest in those features they value most,” said Richard J. Dugas.

Motley Fool

And from the PHM quarterly report

PulteGroup has gotten off to a strong start in 2014, with first quarter results showing gains resulting from our efforts to drive better pricing, operating margins and pretax earnings in support of higher returns on invested capital,” said Richard J. Dugas, Jr., PulteGroup Chairman, President and CEO.  “Our first quarter gross margin of 23.8% is up 580 basis points over last year and 60 basis points over the prior quarter, marking our ninth consecutive quarter of gross margin expansion.”

Housing is a huge part of the economy. But for now I would say the jury is still out on the mysterious case of the home builders recovery in 2014. Stay tuned…

And By The Way: If you’re looking for more information on how to analyze the stock market and improve your investment decision making you might enjoy my free eBook below. You’ll also get weekly updates and tools for helping you improve your investment ideas.

short screen stock fail gaap

Example of GAAP Stock Screen Shortcoming

I love stock screens. They’re a great way to save time on your investing research. But one of the biggest shortcomings of stock screens is that they use Generally Accepted Accounting Principles (GAAP).

Now keep in mind…

I’ve written before about what happens when stock screens go wrong. But this GAAP shortcoming of stock screeners can be especially costly. It can also make you miss out on a ton of opportunity. So what’s the GAAP shortcoming all about?

GAAP Stock Screen Shortcoming Explained:

While you obviously need accounting standards to compare companies, the world is a complex place. And sometimes the standards don’t accurately reflect what’s actually going on at the company.

This can work in both negative and positive ways and it’s just something investors should be aware of.  So…

In the example below you’ll see an example of how GAAP stock screens might have cause you to miss an investment opportunity.

UTHR GAAP Stock Screen Shortcoming Explained:

One company that I came across recently was United Healthcare (NASDAQ:UTHR). But this company didn’t appear on most of my value stock screens because it has a P/E of almost 30.

But despite the high price to earnings ratio, UTHR is yielding quite a bit of free cash flows. And revenue are really starting to climb while share count has decreased over the last few years. One red flag is the recent UTHR insider selling. But otherwise the company looks to have a strong record of revenue growth.

Take a look at the key stats from Morningstar for yourself…

UTHR key stats GAAP

UTHR has strong revenue and free cash flow grow. But what’s wrong with the earnings?

UTHR looks to be growing. But in the last year the EPS has dropped in half.  This is why it’s not showing up on my favorite stock screens. But what’s this earnings anomaly all about?

I think it’s worth investigating a little further.

In taking a look at the latest UTHR conference call, management is quick to address their EPS shortfall.  You’ll want to dig in a little further. But this seems pretty plausible when taken in context with the revenue growth…

If you’re taking a look at the financial results, you’ll notice that the GAAP earnings per share showed a loss for the year. However, this is simply an artefact of the accounting treatment for the share tracking awards which we issued to our employees in lieu of equity-based stock compensation or restricted shares. These types of share tracking awards are required by the accounting rules to be mark-to-market every quarter.

And continuing on the theme of this being our best year ever, in 2013 and in the fourth quarter in particular, our stock price soared to its highest level ever bringing our market cap to over $5 billion. So as a consequence of this very great news in terms of the growth in our stock price and our market cap, we are obligated by the accounting rules to mark-to-market the share tracking awards and that results in a inflated value for those awards and inflated expense and hence the GAAP loss whereas the actual Company’s performance is best demonstrated in our opinion by the non-GAAP earnings of over $0.5 billion.

Martine A. Rothblatt – UTHR Chairman and Chief Executive Officer

So as you can see in the statement above, it looks like there is a legitimate reason for the high PE ratio. Of course you’ll want to do more of your own due diligence to see if UTHR is the right investment for you. And I’m not recommending it one way or the other.

But this should illustrate the GAAP short comings of stock screeners, right?

And  By The Way: If you want to learn a little more about how to analyze stock ideas and find hidden stock market profits I encourage you to download my free eBook below. You’ll get interesting insight and easy to follow tips to help you make smarter stock market decisions.

Trendvesting Introduction

Guest Post: Introduction to Trendvesting

Trendvesting.wordpress.com is a blog that focuses on the relationships between stocks and keyword search trends in an attempt to identify particular industries and stocks that are primed for growth. Subscribe today to gain access to unique analysis of stocks and macroeconomic indicators that will bring value to your existing stock analysis approach.

Google Trends has been in existence for a number of years albeit under different names. The platform is mostly used by Internet marketers to isolate keywords to focus websites around in an attempt to boost website traffic. The more popular a keyword, the greater the cost to have your website/blog listed as the first result when someone searches that particular keyword.

As long as you have an Internet connection and access to Google, you can access Google Trends for free and find out search volume trends for almost any keyword/search phrase (given that the number of searches are significant enough).

If Google had it’s own hedge fund, I would imagine it to be one of the more successful funds in play. Imagine having real time statistics on Internet search trends at your fingertips, you would have been able to detect trends in 3D Printers long before the herd of portfolio managers, advisors, and analyst ever caught wind of the industry. Imagine knowing the exact moment in time when searches for 3D printers increased from next to nothing to say 1 million, 2 million or 10 million searches a day.

A very successful and popular portfolio manager by the name of Peter Lynch utilized the same concept, of using trends and “local knowledge” which is essentially being aware of the products and services you or others around you use on a regular basis. At a high level, his investment strategy suggested the companies that produce the products and services that you or those around you use on a regular basis or that are increasing in popularity could be a good investment given that the underlying fundamentals hit all his high water marks. To give you an idea of the success he had with this strategy, Lynch averaged 29.2% annually and holds the record for the best 20-year return of any mutual fund EVER!

With Google Trends, you could literally never leave the comfort of your home and have an infinite amount of current trend data equal and in some cases better than what was used by Lynch during his time. Google search data gave multiple hints before and during massive appreciations in share price in companies such as Apple, Tesla, Stratasys, Amazon, and many more. On the same note, Google Trends can also inform you when a particular keyword is falling out of favor. When searches for a particular keyword begins to fall, this would suggest it is falling out of the public’s favour and would bode negatively for the company’s future prospects, especially if it is web based in nature. For instance, search the term “Facebook” and you’ll see an exponential increase in searches since 2004 but over the past year, searches have seen a very alarming depreciation in searches that coincides with a statement by the CFO that engagement among teens is in decline. Now if you’re a long-term investor that is thinking about taking a position in Facebook, this is one trend that you would want to know and think about before committing your hard earned dollars.

Google Search Trends are NOT a replacement for fundamental or technical stock analysis as they are still very important methodologies used in stock selection. On the contrary, Google Search Trends can be used in conjunction with both fundamental and technical analysis and frankly, as the world becomes more and more intertwined with the internet, I would dare to say that any analysis of a company should include a review of search trends whether the company in question is web based or not.

This is where Trendvesting.wordpress.com seeks to arm readers with the same foresight that Peter Lynch had by identify relationships between companies and related google search trends with the goal of identifying companies that are primed for price appreciation. Trendvesting focuses on providing insight into macro economic indicators, and company search trends. Subscribe to Trendvesting today for the latest in Google search trend analysis and the latest stock picks!

Should You Invest Your Money in the Stock Market?

plan to invest your money in the stock market

Do you plan to invest your money in the stock market?

When should you invest your money in the stock market? It’s a really great question and one that I often hear from from readers of StockIdeas.org.

So…

In this short blog post we’ll look at the answer to the common question of “when do you invest your money in the stock market?”

I’ll also touch on some other questions that can help you decide whether or not to invest your money in the stock market.

Sound good?

Invest Your Money in The Stock Market… Or What?

People often want to know when they should invest their money in the stock market. And while each person’s situation is a little bit different, the basic truth is that you should invest your money in the stock market as soon as you can!

So how much savings do you need to invest your money in the stock market?

To be honest… getting started in the stock market doesn’t require as much money as you might think!

That’s because:

We’re lucky enough to live in an era of technology that enables us to take advantage of tons of opportunities. And this is especially true when it comes to investing your money in the stock market. Investing online is easier than ever thanks to the internet.

So I’m telling you, it’s in your best interest to learn how to trade stocks online. Now let me show you why that doesn’t have to be complicated…

Getting Started Investing Your Money In the Stock Market:

invest your money in the stock market

Investing your money in the stock market doesn’t have to break the bank.

There are (of course) a number of ways to get started investing your money in the stock market.

But…

If you’re truly clueless I would recommend reading an introductory book like The MoneySense Guide to the Perfect Portfolio.

That’s because:

This easy to read book will bring you up to speed with best practice very quickly.  Knowing the best practice options can really go a long way to helping you decide exactly how you can invest your money in the stock market.

Now if you’re a little further along the path, there are some other articles you might find helpful in deciding how to invest your money in the stock market. So check out…

As you can see from the articles above, getting stated investing your money in the stock market is actually quite easy. And you can definitely approach it one step at a time. It’s not like you have to

Why Investing Your Money in the Stock Market Makes Sense:

I know investing your money in the stock market over the last 20 years has been a bit of a bumpy ride. Between the dot com crash and the 2008 financial crisis it’s hard to believe that stock investing for the long term can ever be profitable. But…

Hopefully this long term chart will show you why you should invest your money in the stock market:

long term chart for investing your money in the stock market

As you can see: Over the last 100 years, investing your money in the stock market has been a winning proposition. So what are you waiting for?

So as you can see, even if the short term actions of stocks are a little bit bumpy – you can see that extended growth is very likely over the long term. And since we’ve just had so many bumpy years in a row it seems like we could really be off to the races any week now!

That’s why you should get started investing your money in the stock market as soon as you can. Get started reading some investing books and talk to your financial advisor. Retirement isn’t going to take care of itself. But this proactive approach can really set you up for the rest of your life.

So are you starting to see the value of investing your money in the stock market?

And By The Way: You don’t need to break the bank to learn about the stock market. One great free resources I’d recommend you review is my free ebook which is available below this post. Just enter your information into the form and you’ll get a copy sent straight to your inbox. You’ll also get weekly tips and tools sharing information on how to more effectively invest your money in the stock market. Why not check it out?

Get Started with Green Stock Investing

Green stock investingGreen Stock Investing can help you put your money to work in socially responsible and environmentally conscious ways. That means your money can have an impact beyond just the bottom-line.

So if you want your money to work for the triple bottom line then this short article on green stock investing is exactly what you’ve been looking for.

And to be fair…

This isn’t the first time we’ve written about green stock investing and how to invest in responsible companies. But today we’re going to go a little deeper into the specific different ways you can invest in green stocks. It’s actually easier than you think.

So here are the fastest and easiest ways to get started investing in green stocks.

Green Stock Investing Indexes:

The fastest and easiest way to get exposure to green stock ideas is through one of the green stock investing indexes. There are a number of sustainability indexes you can use to guide you on your way to find green stock investing picks.

For example:

Financial services industry leader like Dow Jones are realizing that green stock investing is more than just a trend. The Dow Jones Sustainability Index covers 24 industry groups with an industry leader in each. You can get detailed reports on corporate social responsibility for a broad array of companies. So if you’re looking for green stock investing ideas within the publicly traded stock markets this is a great place to get started.

Another leader in the field of green stock investing indexes is a company called Sustainalytics. They offer a number of green stock investing options through sustainability indexes. The Jantzi Social Index is one of the most popular and a great way to start finding green stock investing opportunities.

There are also an increasing number of socially responsible mutual funds. These funds work exactly like regular funds except that they are focused on finding socially responsible companies to invest in. If you’re looking for a broad basket of socially responsible investing opportunities these green mutual funds are probably the way you’ll want to go.

Of course, if there are specific areas of the stock market you want to focus on you can also find green stock investing opportunities by sorting through the relevant industries.

Green Stock Investing by Industry:

Green stock investing is made easier when you focus on only those industries that are by their very nature green. The most prominent example would be renewable energy sources like solar energy and biofuels. You could also look into industries that are trying to actively solve environmental problems like these pollution and treatment control companies.

Use free online stock screeners to drill down on the industries that present the best green stock investing opportunities. And…

By focusing your green stock investing analysis on industries that are inherently green you can really improve the chances of your investment having a positive impact. And once you find an industry you like you can easily drill down to do an intra-industry analysis to compare your best green investing ideas based on more traditional financial metrics like P/E ratio and price to book.

On the other hand, investing in green companies doesn’t have to be limited to the public stock market.

Green Investing Outside The Stock Market:

Green Investing Outside Stock MarketIf you really want to invest responsibly to create a positive social impact then your best bet might be to allocate money outside the stock market.

Since stockideas.org is almost exclusively focused on publicly traded common stocks this isn’t an approach we usually talk about.

But in the case of green investing there are lots of opportunities outside the stock market where you don’t need a lot of money to make a difference and you can get started right away. You can also allocate your money to projects that you think are good investments (based on your potential return and the n

Platforms like Zidisha and Kiva are great in this way because you can pick the exact cause you want your money to go towards. And in the case of Zidisha you can even set your own interest rate so that you get the return you want, while still having a positive social or environmental impact. Just keep in mind that unlike the stock market these are debt investments. So you’ll be paid back plus interest, but you won’t be

In any case, analyzing and investing in green stock opportunities is definitely a positive trend. And there are lots of great tools and online platforms to help you get started both inside and outside the stock market. Just be sure to make the company is financially prudent and not a money-bleeding charity.

And By The Way: If you need any help improving your approach to analyzing stock ideas (green or otherwise) I encourage you to download the free ebook below. You’ll also get weekly email tips, tools and updates to help you make smarter investing and swing trading decisions.

fishing for stock ideas

Fishing For Stock Picks

Fishing for Stock Picks is how I describe my stock investment research process. The analogy is a bit cheesy. But bear with me.

Because there are a number of reasons looking for stock investments is like fishing. Do you want to know why?

Well, to be honest, researching stock picks and going fishing have a lot in common. Seriously!

Because in both cases…

You’re going to be doing a lot of sitting around without much result. If you want to fish you need to have lots of patience. And the same goes for diligent stock investment research.

If you still don’t believe me, here are a couple of more specific examples…

Fishing for Stock Picks with Nets

I’m a big fan of using free online stock screeners to speed up your investment research. Of course stock screeners aren’t perfect (they’re constrained by GAAP and can only focus on statistics not management commentary).

stock research net fishingBut stock screens are still a great starting place to accelerate the pace of your investment research.

And in terms of fishing for stock picks…

Researching stock ideas using stock screeners is a lot like fishing with big nets. You put the nets (or stock screens) out in the ocean and you periodically check in to see what comes up.

By putting fishing nets in your favourite spots (or screening for your favourite investment criteria) you have a standing tool to help you see who’s passing through that part of the ocean.

It’s working for you. And you can check in whenever you like. This is especially true when you save your favourite stock screens on sites like finviz.com and check in on them regularly.

But there are other ways to fish for stock picks too…

Fishing for Stock Picks with a Spear Gun:

Sometimes, you see a specific stock investing opportunity and you need to act immediately. Maybe it’s a new IPO, a stock idea that has gotten oversold or it’s just a new stock pick you really want to get a piece of.

In this case, researching stock ideas is kind of like fishing with a spear gun or harpoon. You are out and about cruising the seas for fish (or reading your favourite value investing blogs for ideas) when something catches you eye. You zoom in on the one fish of interest and nail it down as fast as you can.

You’re totally focused on one meaty idea and you do everything you can to get a piece of it as fast as you can.

Fishing for Stock Picks with a Rod:

rod fishing stock researchFinally, researching stock ideas can also be like fishing with a rod.

You pick an investment publication, read it quietly, and see what bites.

The best part of this kind of stock research is…

You don’t have to get wet! And the whole process might even be relaxing.

Sure, fishing with a rod might not be the most effective approach. But it can work if you’re in the right place at the right time. And it doesn’t require any fancy tools.

If you’re just getting familiar with a new area of investment research (or a new body of water) this is an easy way to get acquainted. You might not get lucky with any bites but you’ll start to familiarize yourself with where you should lay your nets or aim your harpoon.

The key of course is to use the right lure and hang your line at just the right depth. Have a vague idea what you’re looking for and be open to possibilities. And be patient.

In Summary…

The whole fishing for stock picks analogy might be a little bit silly. But it pays to think seriously about the different ways you can research stock picks and analyze investment ideas. And if you can teach yourself to fish you’ll always have plenty of opportunity coming your way.

So be effective with your time and conscious of your methodologies. Make sure you’re researching your stock picks effectively – or you’re definitely going to go hungry.

And By The Way: If you’re looking for more investing ideas and tactics to improve your approach to the stock market I encourage you to download the free eBook below. You’ll also get free weekly updates with my favourite tools and tips to help you improve your investing and stock trading decisions.

Happy Easter (and One Year of Stock Ideas)

happy easter from stock ideas

Happy Easter from StockIdeas.org!

Happy Easter! I hope this holiday long weekend treats you well. And that you’re able to spend some time friends and family forgetting about the never-ending caprices of the stock market.

It’s time like these that I like to take a step back and remember why I put so much time and effort into finding, analyzing and sharing investment ideas.

After all, if you aren’t able to enjoy friends, family and some holiday food and drink then what’s the point of working so hard?

Speaking of hard work and gratitude:

Easter weekend also marks the first anniversary of StockIdeas.org. It was just about a year ago that I found this domain and decided to start writing more actively about the stock market. In that time, this little web blog has exceeded all of my expectations. We’re now getting tens of thousands of visitors a month, hundreds of email subscribers and lots of great stock ideas, analysis and discussion each and every day. So…

Thank you to everyone who has come by the site, left a comment and shared a link. I truly appreciate everyone who has reached out to me with compliment or constructive criticism.

If nothing else:

StockIdeas.org has taught me there are tens of thousands of amazing investors and traders online. The access to information and analysis is amazing and I genuinely feel lucky to be alive in a time when financial markets are so easy to access and anyone can take financial freedom into their own hands.

Thank you to all the authors who sent me books for review, thanks for all the commenters who asked insightful and thought-provoking questions and thanks to all the email subscribers who gave great content ideas for what they wanted to see on Stockideas.org.

Now…

If you’re bored waiting for Easter dinner, check out these investing books, stock pick analysis or finance documentaries. Or maybe you will enjoy the most popular blog post on StockIdeas.org, Seth Klarman’s Margin of Safety. Whatever you’re looking for, there’s plenty of great content on stockideas.org to keep you entertain and amused this Easter long weekend.

Thanks again and have a wonderful weekend.

best technology investments for 2014

Best Tech Investments For 2014

What are the best technology investments for 2014? It’s a good question. Especially since high beta social media and biotech stocks have really under performed in the last month. So you might be wondering…

And are there any tech stocks that can make for a great investment in 2014?

Luckily, the answer is yes.  And even though the Nasdaq is down over 1% this year there are lots of great technology investments you can exploit in 2014 to try and make your portfolio outperform. So do you want to know what the best tech investments are for 2014?

The Best (Old) Technology Investments For 2014:

To be sure, there are a lot of exciting developments in technology going into 2014. For example, graphene companies are starting to gain a lot of traction. And cyber security companies remain in the spotlight following the increase in malicious software and hacking of major companies and governments.

old school technology stocks 2014

Are old school tech stocks coming back in style for 2014?

But to be honest…

I think the best technology investments for 2014 are some of the “older” technology companies. 

Let me explain what I mean by that:

A lot of the “bluer chip” value technology stocks that have proven track records of revenue generation have been left behind by investors going in to 2014.

For example…

While there are lots of new technology companies going public, and biotech stocks are forming a “blow off top,” old school technology stocks like Microsoft, Oracle and Apple seem to have been forgotten about by investors.

Just look at the relative performance of Apple vs. Facebook over the last year to see what I mean:

Best Technology Stocks Analysis in 2014

Can social media stocks really keep outperforming other technology investments in 2014?

At some point, it’s hard to believe that investors will continue to ignore older and more established technology companies. So where specifically should you be looking?

Some Technology Stock Picks for 2014:

As we head into the second quarter of 2014, I remain focused on finding high quality technology companies trading below intrinsic value. Rather than obsess over momentum favourites, this approach allows for investing in cash generating businesses at a fair price.

And after all, that’s the Warren Buffett Strategy for investing. So some of the tech companies I’m analyzing in 2014 are…

In addition to the list above, I’m also interested in ORCL and MSFT. But I haven’t gotten around to analyzing them in depth yet. For now, the list above could be a good place to get started looking for long term value in technology stocks.

But it’s not always smooth sailing when you’re investing in technology…

The Best Technology Stocks in 2014 – A Word of Warning:

To be sure, nothing in the stock market is a sure thing. And as these enterprise technology companies adopt to the future of cloud computing there will definitely be some bumps along the road. But…

Rather than give up on proven company’s like IBM when they miss earnings, long term investors might be able to find a nice entry point at a discounted price. If you do your homework there could be some great profits in the right technology investments in 2014.

And by diversifying across some of these “old technology” favourites you can reduce your risk further, by owning a nice basket of cash-flow generating technology stocks at very reasonable valuations. Now given the recent Nasdaq correction I’m not diving in head first. But I’m doing lots of investment research and adding these stocks to my stock market watch list so I can be proactive with investing opportunities when the time is right.

If you’re investing for the long term and looking to find value I think these technology stocks present an interesting opportunity. What do you think make the best tech investments in 2014?

And By The Way: If you want more information on how to analyze technology companies in 2014 you might enjoy my free ebook below. I created the ebook to share what I wish I had known when first refining my approach to the stock market. You’ll also get free tips and tools sent each week with the best resources for improving your stock market investments.

Get a clear view of what works with a stock market watch list.

The Importance of a Stock Market Watch List

The Importance of a Stock Market Watch List cannot be over-estimated. It’s hard to stay oriented without one. And that’s why using a watch list to manage your stock market portfolio and potential investing opportunities is a winning strategy used by successful stock traders and investors everywhere.

So…

In this blog post we’ll look at why a stock market watch list is so important. I’ll also share some ideas you can use to build your own stock market watch list. This way, you’ll be able to track opportunities and strike when the time is right.

Now on that note…

Let’s get into the benefits of a stock market watch list:

Why a Stock Market Watch List Can Improve Your P&L:

The reason you’re probably interested in a stock market watch list is because it can improve your profit and loss statements. In fact, in my experience, using a stock market watch list is truly the best way to consistently stack the deck in your favour.

Just think about it…

stock market watch list examples

Get a clear view of what works with a stock market watch list…

When you build, maintain and regularly update your stock market watch list, it’s like you have a dashboard of all the best trading or investing opportunities right in front of you.

Using a stock market watch list lets you be proactive. It lets you make a trading plan and be ready to exploit investing opportunities just when the time is right. And it puts you back in the driver’s seat.

Without a stock market watch list you’ll always be on your heels reacting to the latest financial news headline. On the other hand…

When you use a stock market watch list effectively you can start investing on your own terms and being proactive about where you choose to place your capital. A watch list makes sense for a lot of reasons.

But we haven’t even mentioned the best part about stock market watch lists…

The Best Part of Stock Market Watch Lists:

The best aspect of using a stock market watch list is that there isn’t really one single best practice version of stock market watch lists you should refer to.

Instead:

You can build a customized and totally personalized stock market watch list that shares the information you need most. That way, you only get the important facts – and you can see everything with one quick glance. Sounds pretty good, right?

What you include in your spreadsheet will primarily be a matter of whether you are a short-term trader or a longer term investor. If you’re a trader looking to track technical patterns then your stock market watch list will have a lot more information about price trend, volume and relative strength.

Whereas, if you’re a longer term investor looking for buy and hold opportunities your stock market watch list will contain fundamental measures and valuation metrics to help you compare different investing opportunities.

The beauty of a stock market watch list is that you can choose what to include. The only important thing is that it reflects your trading or investing style and allows you to compare different stock ideas against the same criteria.

Plus:

Getting started making your stock market watch list is really easy. All you have to do is it fire up your favourite spreadsheet program (be it Microsoft Excel, Apple Numbers or Google Spreadsheets). And then create a table to compare your favourite stock market characteristics. For example…

Here’s a screenshot of one of my stock market watch lists:

Stock Market Watch List ExampleAs you can see from my stock market watch list above, things don’t have to be that complicated. The left hand side contains information on the name and ticker of the company. Then I look at the current price, my ideal entry and a target price based on intrinsic value calculations. The rest of the spreadsheet is just about other fundamental criteria that I want to keep an eye on.

But do you know what the most important part of this stock market watch list is?

One Take Home Point for Building a Stock Market Watch List:

One of the things I find most useful about the stock market watch list example shared above is the ability to rank stocks based on their potential percentage gain (column G). Why is that so important?

When you catalogue your stock ideas and use objective measures to determine entry and exit targets then you can also get a critical look at your potential percentage gain if the trade goes right. By ranking your stocks based on profit potential you get valuable perspective on where you should put your money.

Seriously:

This approach works for both fundamental investors and technical traders. The only difference will be the factors that help you determine your price target and entry price. But at the end of the day…

When you can clearly see where your money can be earning the highest return it really helps you improve your portfolio returns. This way you’re focused on the highest profit opportunities, rather than the exciting news headline of the day or a recommendation from a broker or Twitter follower. Make sense?

And By The Way: Using a stock market watch list is just one of the tips I recommend to help you make the most out of your stock market investing. If you want more free tools and resources I encourage you to sign up for updates below. You’ll also get a copy of my free value investing/swing trading ebook. Check it out for free below!