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Four Stocks to Consider

I just attended the Stifel technology investor conference in San Francisco and came away with some new investment ideas. Over 140 companies presented and overall the tone was very positive. Demand for technology and related products is growing at a fast clip. The semiconductor industry is seeing a broader use of its products into automotive, industrial and “internet of things” applications so is less prone to the previous cycles associated with PC’s. Demand for mobile phones continues and is growing for software and related services. Industrial applications including “additive manufacturing” using sophisticated software, Lasers and 3-D printing are experiencing robust demand. While business is good, stock prices are near record highs so you should take a long-term view.

Of the 140 companies presenting, I selected 15 to attend and came up with a list of 4 to consider. Full disclosure – I now own all 4 stocks.

At the top of my list is an Israeli company called CyberArk, ticker CYBR. CyberArk is a software company that protects organizations from cyber-attacks that have made their way inside the network perimeter. This is very important as many hacks can easily penetrate the firewall but remain dormant for some time and then begin to cause havoc. CyberArk’s products provide the protection to find and detect issues before they become a major problem. The company is growing, profitable, has good cash flow, lots of cash and no debt. It’s not cheap, trading at a 35 price to earnings ratio, but the upside seems very high in my opinion.

Next is a larger but not all that well-known semiconductor company – Microchip, ticker MCHP. Microchip makes microcontrollers and analog semiconductors used in thousands of applications from refrigerators, motors, autos, lighting and numerous industrial applications. This is not a mobile phone semiconductor company and no one customer accounts for more than 3% of revenue. It is a way to play long-term growth in electronics without relying on laptops and PC’s. It is a fairly large company with nearly $4 billion in revenue. MCHP has an excellent track record of improving profits and margins and recently completed a major acquisition and is beginning to see the benefits. It is trading at its 52-week high so not undiscovered. The company has plenty of cash as well as long-term debt and pays a dividend with a yield of 1.77%.

The next company is a 20-year favorite, Intuit, ticker INTU, best known for TurboTax, Quicken and QuickBooks. It’s a large company with a market cap of over $35 billion, trading near its 52-week high and is not cheap. It has a big seasonal movement in revenue with Q1 strong due to TurboTax. What I learned is that they are doing a major expansion outside the US. Their platform works well with self-employed and small businesses where most of the worldwide job growth is originating. In addition, any tax reform will likely make things that much more complex so TurboTax should only grow. It pays a dividend with just under a 1% yield.

The last company is a smaller semiconductor measurement company called Nova Measuring Instruments, ticker NVMI.  NVMI sells optical and x-ray metrology systems which are attached directly to wafer fabrication process equipment. This is important as semiconductor devices are getting smaller and smaller so accurate measurement during the manufacturing process is vital to higher yields. They are growing, profitable and have no debt. It too is not cheap trading near its 52-week high but the industry is growing and few companies can do what they do. On top of this, there has been a lot of M&A activity in the space so they could be a very attractive acquisition target for a larger semiconductor capital equipment company.

When considering any investment, I encourage you to do your homework and discuss this with your investment advisor and CPA to see if this is suitable for you.

 

Ray Link is a CPA and holds an MBA from the Wharton School. He served for 20 years as a CFO for 2 large high-tech public companies before he retired. He is now on the on the Board of Directors of FormFactor (NASDAQ: FORM), Electro Scientific Industries (NASDAQ: ESIO) and nLight Inc.

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Posted in Investing

Dick Cheney Shot Me in the Face Released Today!

Hey Bizzy Lifers –

My new book, Dick Cheney Shot Me in the Face – And Other Tales of Men in Pain – has just been released.  I will begin a book tour this weekend, and am heading to the following cities:

  1. Portland, OR
  2. Missoula, MT
  3. Billings, MT
  4. New York City
  5. Boston
  6. San Francisco
  7. Santa Barbara
  8. Los Angeles

You can find more info at www.timothyolearylit.com – or head to Amazon and buy a book!

https://www.amazon.com/Dick-Cheney-Shot-Me-Face/dp/0998087203/ref=sr_1_1?s=books&ie=UTF8&qid=1487218685&sr=1-1&keywords=dick+cheney+shot+me+in+the+face

 

 

 

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Posted in Livin' Large

How To Protect Yourself Online

If you’re like me, the vast majority of your financial assets reside in cyber-space with only a login ID and password protecting your accounts. While many financial intuitions provide some sort of guarantee, a hack will nonetheless create a major headache. Perhaps even more problematic is someone stealing your identity and opening new accounts and credit cards under your name.

While no security system is 100% foolproof, there are several things you can do to reduce the risk of identity theft or fraud. First make sure your login ID and passwords use a complex series of letters, numbers and special characters and that you change them at least twice a year. Next, never and I repeat never, log onto your financial accounts using public Wi-Fi like at airports, libraries, Starbucks, etc. as they are not secure and hackers can steal your credentials.

To further protect your account, adopt a “two-factor authorization” process. The most common way is to download an app on your phone that sends a random code that you add to your login password. Thus, for someone to access your account they would need your phone (which hopefully you have password protected) as well as all your other account information. It is a very simple added level of protection. Ask your banker or broker for details.

To reduce the likelihood of identity theft you should adopt a “credit freeze” at the three major credit agencies. A credit freeze stops anyone who stole your ID from adding new credit to your account and running up large balances in your name. Anyone who has experienced this knows all too well how difficult it if to correct the damage that was done. To do this contact the agencies and request a freeze on your account. You can temporarily thaw the freeze by contacting the agencies with security codes assigned to you should you need to open a new account or add a credit line or a loan. The cost is approximately $10 per account and you need to do it for both you and your spouse. This is a great web site explaining how:  http://www.clark.com/credit-freeze-and-thaw-guide.

I recommend you periodically request a credit report on yourself and look to consolidate your financial accounts and credit cards as the more you have, the higher the risk of fraud. Make sure you review your accounts regularly and balance your checkbook each month. The guarantees offered by financial institutions require you to report a fraud in a timely matter so it is incumbent on you to be pro-active.

 

Ray Link recently retired as CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School.

 

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Posted in Investing

Baker’s Dozen Return for 2016

Now that the books are closed for 2016, time to check in to see how my Baker’s Dozen performed. After a blistering first six months, the returns leveled off with losses in the third quarter followed by gains in November and December. For the full year, the portfolio returned a very respectable 19.7% including dividends.  No stock posted a loss and 3 posted returns over 30%. This trounced both the S&P 500 which returned 11.9% with dividends and the Nasdaq composite which returned 7.5% for the year.

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As we launch into 2017 I suggest you read my blog on investing in a Trump world

Ray Link recently retired as CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School.

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Posted in Investing

Investing With A Trump Administration

Whenever there’s change in administration and policy, there’s opportunity in the financial markets, regardless of how one feels about the outcome. While we have seen a big run-up in all the major indices since the election, there may be some sectors worth considering.

For starters, it is likely that we will see corporate tax reform allowing U.S.-based companies to repatriate foreign cash for investment or dividend distributions without a huge tax bite. At the top of my investing list are those with a stockpile of foreign cash like Apple, Coke, Cisco, General Electric and Qualcomm.

Next, I am optimistic we will see some growth but growth brings inflation so the Federal Reserve is likely to increase interest rates. I am not too alarmed and think the increases will be small and gradual. However, that does mean bonds in the near term could be under pressure so I‘m avoiding longer-term bonds (maturity of over 5 years) and bond funds. In addition, stocks with a price earnings ratio of over 25 could see some pressure on valuations. However, we could see a nice uptick in small / mid-cap growth companies, especially those with a solid business model and a track record of profits. A few examples in the tech sector are Garmin, Seagate, Qorvo, FLIR and Maxim. I would also consider investing in the small cap index via the Russell ETF “IWM”.

Once the Fed does a few rounds of rate increases, it may be time to reconsider bonds.  I like U.S. Govt, agency and corporate bonds rated A or better with a maturity of no more than 10 years. I buy the actual bonds (not bond funds) and generally hold them to maturity.

We will likely see some pull-back on regulations, especially for banks, energy companies and health care. But I believe a lot of the gains we saw in the days since the election were in these sectors so I don’t recommend investing there now.

I remain of fan of larger cap, market leading, big dividend stocks. I am a “buy and hold” guy and less concerned with the daily fluctuations and more about long-term staying power and cash returns. Some of these companies include 3M, Johnson and Johnson, Clorox, Emerson Electric and Met Life.

I currently own shares in all the stocks noted above, but before you buy, please discuss your situation with your financial and tax advisors to see what is appropriate for you.

 

Ray Link recently retired as CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School.

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Posted in Investing