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• 2014 Thoughts
• 2014 Stock Picks
• 2013 Stock Pick recap

2014 Thoughts
Technology is driving continuously faster change to the way we operate with respect to communication, commerce, and education. People are more connected to each other and they can buy anything they want, pretty much whenever. Video has made it easier to disperse educational materials. And more powerful and easy to use devices—phones and tablets (Apple, Google, Samsung) at lower prices have increased the convenience and utility of access to enabling information/data. 2014 is marked by this transformation where technology has truly hit the mainstream, across all levels, and, arguably, has “made life better”.

Education (Google, Apple). World-class online educational lessons [note-distinguishing lessons from actual instruction; that nut has yet to be cracked] are now available to virtually anyone. This democratization of information has helped to embrace intelligence and creativity of individuals and has reduced barriers based on stereotypes, stigmas and differences. As an example, it is refreshing to see increased awareness against bullying in schools and a resurgence in performing arts. Remarkably, we’re seeing in our local schools the emergence of Google as a leader in education, previously dominated by Apple. Google apps, Chromebooks, and YouTube are now staples in education.

Social (Facebook, Twitter) has become increasingly very powerful. Consumers are now empowered by using social signals to speak out for or against the brands or causes they are interested in; because of the public and democratic nature of social communication, any person now has a voice and the potential to be heard. Because it is public, the brands must react. The government certainly is listening to these social signals.
Twitter, in particular, has forever changed the way news is covered and presented. 

The downside of social is the Pavlovian behavior created by self-publishing on Facebook and Twitter. People have become addicted to the feelings of connectedness and need for reinforcement by their friends “liking” or otherwise responding to their Facebook posts or retweeting. While it is arguably bringing the world closer it may be sacrificing real and deep emotional connections with simple more mechanical acknowledgements that may or may not be as meaningful as intended. This said, these social applications are likely bringing the world closer and, to be honest, more utopian.

E-commerce. Amazon (physical and downloadable goods) and Apple (downloadable goods) have really changed the way people think and buy. The desire to consume and have whatever I want RIGHT NOW has fundamentally changed purchase behavior, and interestingly, with Apple’s ability to instantly download music, it “feels” like getting physical goods should be just as instantaneous. It’s bizarre how in the past, consumers could go buy pretty much anything they needed with a little research locally—but getting it at the lowest price was important. Now, ironically, people will pay for the convenience of getting it faster (what's wrong with just driving to the store and getting it?). We’ve seen this Holiday season how UPS and FedEx could not keep up with Christmas Eve deliveries; Amazon (and every other e-commerce player) relied on the UPS/FedEx infrastructure to deliver goods but they simply couldn’t keep up with demand. In the not so distant fugure, to solve for this increased demand, Amazon will morph into more of a logistics company—in the next few years, you will be receiving packages from UPS, FedEx, and Amazon. Amazon will eclipse one or both within a decade. I believe Google’s experiment with local shopping is just that—they are trying testing the waters to see how much real demand there is for instant local delivery. Who knows, maybe UPS and FedEx won’t exist in 20 years, only Amazon and Google Shopping Express? There is a big opportunity for Walmart to reinvent itself and leverage it’s own distribution network to provide logistics services for others [though I wouldn’t bet on Walmart].

Drones (NOC, GD, TXT). “Drone” is the perfectly vague word that helps keep at a distance what drones can really do. The scary though possibly very useful applications are related to air warfare, surveilliance, and logistics. In the end, remote controlled aircraft will likely have higher safety ratings than human pilots and they will be less expensive to fly. For commercial use, Amazon was “teased” for releasing a story about using small aircraft to deliver 5lb packages That is not where the real opportunity is. The real opportunity will be Amazon using drone cargo planes to deliver goods to distribution centers in remote areas across the country. EV/Hybrid delivery trucks will take goods the last miles to the doorsteps of their customers.

Video (Google/YouTube). Video is fast becoming the preferred delivery media for content because of faster bandwidth, range of content, and, most importantly, editing and production. The art of video is having something to share or explain but to present it in a manner that gets the users attention quickly, maintains it, and then effectively “teaches” or entertains.

Here are two examples:
http://www.youtube.com/watch? v=GZ4xl7XJM08 
This simple video teaches you how to cook a steak in a different manner. The pace is perfect, the production is sparse but creative, and most importantly, you learn something quickly. We have been using the iPad to watch videos like this while cooking!

https://www.khanacademy.org/ partner-content/mit-k12/mit- k12-physics/v/bridge-design-- and-destruction---part-1
This video makes learning about Physics fun. There is a great use of humor, it moves quickly, but, again, most importantly, you learn. How cool is education when it is this entertaining?

The bottom line: sites that curate great video content and products and services that make video creation easier and better have huge opportunities.

3-D Printing (Statasys, 3D Systems, Autodesk). The creativity made possible by 3-D printing is nearly impossible to visualize. It puts in the hands of people a new way to express their creative ideas in ways never before possible. The innovation and change that will come out of 3-D printing is going to create a whole new marketplace (think Etsy on steroids) and management process for intellectual property (the community will want to share plans but also reap rewards). Soon people will be “printing” their own customized iphone holders, creating accessories for their hobbies, and actually building what they imagine. Our local UPS store actually has a Statasys printer that you can use by the hour so it is already accessible. Couple online education with the availability of these devices and we’ll see massive acceleration and adoption of 3-D printing. For the investor, the trick is betting on which company will emerge.

Search. Visual search and video search (Google, Amazon) experiences and subsequent monetization will be areas of innovation for 2014.

Air travel. Finally, air travel is ripe for disruption. Face it, flying sucks. Someone is going to make it easier and more enjoyable. Price probably isn’t the issue; it is expensive across the board so consumers will pay for a better experience especially because business travel is paid by corporations. The obvious ways to differentiate will be features like web/mobile access, incremental leg room, better food, and easier security screening. But there is something larger that can emerge; I have no idea what this will be.

2014 Stock Picks

So with all of this opportunity, what to buy? Unfortunately, pretty much everything except Gold has skyrocketed to new & record highs this past year. It’s funny to think that last year there would be so much potential upside. This year it is a lot harder to predict what will actually grow. Regardless, here are some picks:

Google. Unstoppable, disruptive and experimenting in many different market segments. Their core business of search and search monetization is fundamentally tied to virtually any business. That is, any business in the world needs to be indexed by Google. And if these businesses want traffic and sales, they most likely have to advertise on Google. Google has become a “must have” ingredient to the success of virtually any business. Though the stock is at an all time high, Google will become even more powerful (and profitable) in the next 1, 5, 10 years. Short of government intervention, not much can stop Google. Google really is the most far-reaching and influential corporate force, perhaps of all time.

Amazon. Like Google, the stock has increased 60+% this year and is at a record high. Is there more room for growth? Well, is there a company so singularly focused that is executing so well? Adoption of Amazon is massive and this usage will continue to grow. As they take over the logistics of the country, they will become even more ingrained. If they can really expand Internationally, they will truly be transformative. Like Google, what will Amazon do in the next 1-10 years?

Apple. Apple was great because it made the devices to make the consumption of digital goods and social experiences better. They certainly have lost a bit of their edge and magic touch since the passing of Steve Jobs. But the stock grew less than 10% in 2013 so there may be some signiicant upside in 2014.

LinkedIn. LinkedIn really has no competition. They have completely disrupted the employment & job recruiting segment. Their struggle will be to continue to find new ways to innovate and grow. LinkedIn is relatively low priced compared to it’s 1 year target price, so this may be a very good buy.

Tesla and Solar City. Tesla’s market cap is 1/3 that of General Motors. How is this possible? Regardless, their cars are truly amazing and consumer adoption has been incredible. Solar City, Elon Musk’s other company, is building the charging stations that will make Tesla’s viable for long distance travel. Both of these stocks are extremely volatile but could be great buys at the right price.

Garmin. Garmin is a leader in GPS technologies and devices. They are well-placed to be a partner for the “wearable” market. And they are diversifying into the action video camera space dominated by GoPro. The stock is wildly volatile, though, so use caution. Remarkably, they pay nearly 4% dividend.

Facebook. Stock has already gone up 111% in 2013. Their mobile app is terrible, too. That said, there are over a billion users and they still have room to improve the monetization of those users. Figure out monetization and improve the mobile app and they can sky rocket.

Twitter. Twitter gets a lot of flak for being over-priced and for not generating enough revenue. But they will figure out how to sell the sentiments of their users to governments and brands; this data is extremely valuable. The price of the stock is ridiculously high right now, however.

Others:

• Gold ETF to diversify. Gold is down 30%. There is room to go up.
• Boeing, Northrop, General Dynamics and Textron for Drones
• 3D Systems, Stratasys, and Autodesk for 3D Printing
• Adobe for what they might do with Video and 3D printing, among other things
• Sell Yahoo!; up 107% this year, take your profits!
• Don't buy Walmart. They have lots of potential but the stock has never performed when I’ve recommended it.

So here are the picks for 2014. I have to say, very nervous because most everything is at an all-time high. Good Luck!