Saturday, May 14, 2011

Why I Like Tech Stocks

Warren Buffett never like tech stocks, he thinks that the valuation of these companies are too difficult to understand! Although Warren Buffett is my idol, but I’m afraid I’ve to disagree with him this time!

As we are entering to the 21st century – the information technology era, I see enormous potential in technology companies. I strongly think that every investor SHOULD and MUST have at least one tech stock in his or her portfolio!

A tech stock could be referring to companies providing the hardware like Dell, Acer, Apple, Sony, Nokia; it could also be software companies like Microsoft, Google, Cisco; or it could be the infrastructure supporting companies like American Tower Corp, Rackspace Hosting and so on.

There are tremendous opportunities in these stocks as technology and computers are part of our lives. Just take a look at the subscription rate of the Malaysian mobile phones, it’s a wopping 106% of our population with about 30million subscribers (slightly more than our 26m population).

Another example, iphone4 has sold more than 4 million since its launch last year. The mobile phone industry is experiencing phenomenal growth, but it is also very competitive.

How to select the best tech stock? Well, just look around what are the favourite mobile phones people are using. As simple as that! Hence, Apple and Google are analyst favourite. But these stocks are too expensive! I agree! So now I’m looking at the following stocks (I’m not recommending, because I’m in no position to recommend stocks, but I can share with you some trading ideas).

Sony (SNE)
Sony is going to launch its S1 and S2 tabs very soon. You may check it out at the following link:
Appearance wise, I think it can top Apple I pad. Performance wise, its definitely more superior than i-pad because its Android based. For your information, Android has 35% of the smart phone market share as compared to Apple’s IOS 25%. If you think Sony tab is going to be a hit this Autumn, you might want to accumulating the stock now. Currently the stock is trading at PE 30, low debt equity ratio at 0.25, and price to cashflow is 4.45, free cashflow US$6.5billion.

Nokia (NOK)
Many people must be wondering: “Are you kidding me? This stock is losing its market share!” Yes I agree! But do you know that Nokia is going to launch new smart phones with Windows Phone 7? I’m sure for people who are using i-phone, don’t you wish that i-phone is Windows compatible? Precisely, we have been so comfortable using Windows for ages, if your smart phone is Windows compatible, won’t that make you work more efficiently? In my experience, I can’t use my i-pad for heavy duty work, i-pad or iphone for me is only for leisure purpose. So if my smart phone is Windows compatible I’m able to work smarter and more efficiently! FYI, if you intend to buy Nokia, its going to be a longer term perspective. Because Nokia’s new smart phone with Windows Phone 7 will only be launched in 2012. Currently the stock is trading at PE 10, with US$3billion free cashflow.

Happy investing,
Pauline Yong

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