When I had the idea for this post, I thought it would be incredibly interesting to try to rank all of the stocks that I follow from the best to the worst. It turned out to be much more difficult than I had anticipated. Why? So many reasons, but basically, how would you judge these stocks? On their home run potential? On their bust likelihood? Over what time horizon? I ended up spending a lot of time trying to determine what the criteria would be and then even more trying to judge these stocks from best to worst.

Let me start off by saying, I will be making mistakes here, obviously. The goal is not for all of my top picks to do well or all of my bad picks to do poorly. Rather, I hope that my top 10 picks can end up doing better than the bottom 10. Does that make sense? Hopefully by a fair margin but I’m not even asking for that much to be happy.

How I Rank Them?

Two main things I looked at are:

-How undervalued/overvalued are these stocks in my opinion?
-How confident am I in that prediction?

Sub questions turned out to be:

-How wrong could I be? For example, I think the downside for Yahoo (YHOO) is fairly small given the value of its assets so that would be a good thing. A company such as Groupon has a lot more questions and thus more downside.

Some Companies Were Excluded

No surprise, despite being a big believer in Chinese stocks (SNDA, SOHU, NTES, CTRP, YOKU), I excluded most of those that I follow because these days I still don’t feel like I have a good grasp on them and would hesitate to voice strong opinions. You would also notice that I did not include those stocks in my 4 stock picks or even in recent long & short stock picks. I excluded Yandex (YNDX) and MakeMyTrip (MMYT) for the same reason and Orbitz Worldwide (OWW) because the stocks trades under $5.

I also had to exclude stocks that have yet to turn public such as Facebook:)

I don’t expect a single person to agree with the entire list, the chances of that happening would be nearly 0. I would still love to get your comments.

Without further wait:

1st ever IntelligentSpeculator Technology Stock Power Rankings

Rank	Stock/Company	Stock/Company	Comments
1		Apple (AAPL)	I’ve written about this, I think that Apple has tremendous upside, very limited downside and is priced at a great valuation, there’s very little to make me hesitate.
2		Baidu (BIDU)	Being the dominant player in the exploding Chinese market with very little competition? Priceless.. My biggest issue is the lack of information regarding Baidu.
3		Google (GOOG)	Google is gaining traction with Google+, has tons of new initiatives and a dominant mobile platform, and did I mention their search dominance?
4		TripAdvisor (TRIP)	TRIP was spun off by EXPE late last year and we heard little about it, but it’s an incredible business, perhaps the best play on social currently available.
5		Zynga (ZNGA)	There is clearly some uncertainty involved in buying Zynga (ZNGA) and some downside but I think that it has a great position and its valuation is very attractive. The cost structure is less favorable than TRIP’s but it has tremendous upsize.
6		Amazon (AMZN)	I love Amazon’s direction, its recent acquisitions, how it is becoming a leader in cloud computing.. the stock is very expensive though which is why the upside is more limited.
7		Priceline (PCLN)	I traded Priceline very often in the past few years, the company’s growth has slowed down but it’s a great brand and remains a good value in my opinion.
8		OpenTable Inc (OPEN)	Risky.. This is clearly the most risky pick in my top 10. Why? The company continues to have momentum and I think it could go much higher but it is facing increasing competition from Google among others. Tough one but I’m generally bullish.
9		Travelzoo (TZOO)	Travelzoo is a company that seems like a great play on the Groupon business. Why? Attractive valuation, less questions about its numbers and certainly less risk with a lot of upside.
10		Dice Holdings (DHX)	I’ve often gone  long on DHX against MWW simply because the valuations were off and unfortunately, that seems to have been corrected to some degree. I still do think it’s a great play, the company has quality products and is very focused.
11		Yahoo (YHOO)	A company that I’ve shorted so often, criticized over and over and now is nearly a top 10 company? Shocking. I did hint in a  recent tech newsletter that I’m becoming more optimistic because of the limited downside of Yahoo (given its foreign assets) and the leadership change can only be good.
12		Netflix (NFLX)	Wow, Netflix has been a great example of a falling knife, I think it certainly has great potential for a rebound, though it still has an uphill battle following the PR disaster that occurred last year.
13		LinkedIn Corp (LNKD)	I saw and still see so much potential in LNKD. This company is rock solid, continues to grow and will be able to make significant money when it decides to turn the “switch” to on. I would LOVE to buy LNKD but for now, as I complain too often, the stock is priced too expensive.
14		Groupon Inc (GRPN)	In most regards, Groupon’s IPO has been a disaster. The company had issues with its numbers, had to restate some of them, and there are still many concerns about its profitability. I am staying far away for now but that could cost me. The company is growing very quickly and could turn out to be a huge thing. It just seems very risky to me and I can’t add it to my top 10. The upside potential is significant enough though.
15		WebMD Health (WBMD)	WebMD is a company that I’ve been looking at for some time, they do have a great property and I like the fact that the company is not trying to be broader than it needs to be. That being said, the company is suffering from the lack of advertising from drug companies and after saying it would not be selling itself after all earlier this month, the stock dropped nearly 30%
16		Microsoft Corp (MSFT)	Boring? You might say that. Despite some new exciting segments in its gaming, and online divisions, the company continues to be defined by its decade old Windows and Office products. Steady growth and good value of overall but this stock will likely not move much. Great for safer dividend investing but not the home run that others are looking for.
17		Quin Street Inc (QNST)	Quinstreet is a fairly small, unknown company but it has been building some solid assets and its advertising business, I do think there is better upside than most seem to think here. That being said, competing with Google, Facebook and others for advertising dollars is a tough business.
18		ValueClick Inc (VCLK)	Valueclick is a company that I’ve enjoyed shorting but lately has been coming up with stronger growth. I’m far from sold but am backing off on selling this one for now. That being said, there continues to be little to be excited about here.
19		Demand Media (DMD)	Demand Media has lived through the storm after its IPO and does seem to be working on improving its web properties but I do still have major doubts about its structure, how it can compete with more “focused” web companies.
20		eBay Inc (EBAY)	eBay, the company formerly known for its auction business is now moving fast to mobile and continues to do extremely well with Paypal which continues to face very little competition. I do expect growth to accelerate at some point and do like the business but it just seems like the Paypal growth is barely offsetting the decline from its”eBay” business.
21		Rackspace Hosting Inc (RAX)	No doubt, RackSpace continues to evolve in a very competitive, low margin business but it has been doing so very well so far. I
22		IAC InteractiveCorp (IACI)	I’ve never been very positive about IAC Interactive but recently I’ve read more research that suggests the company’s best times are in the past. There are few attractive properties at IAC and while it does get some revenues from its search and dating services, I doubt those can generate much growth in the medium term.
23		Expedia Inc (EXPE)	I did like Expedia’s business quite a bit but the recent spin-off of TripAdvisor means that its best asset (in my opinion) is now off the books. It’s unclear to me what the financial picture will look like going forward so I’m staying away.
24		Adobe Systems Inc (ADBE)	I’m not a very big trader of ADBE (have only traded it once) but I do think that in general, the company has failed to deliver big new products, in a similar way as Microsoft (MSFT) but with weaker “core” products and not as much in the works (you can argue about the insignificance of the Xbox or others but at least MSFT has those in the works).
25		AOL Inc (AOL)	For some time there, I almost became an AOL believer after big moves like  buying TechCrunch and the  Huffington Post. But recent exec defections are a clear sign that things are not going well at AOL
26		Zillow Inc (Z)	Zillow is another one of those companies that will do well one day but I think that day is down the road. The real estate market is crumbling and unlikely to recover anytime soon making it even more challenging for Zillow to turn profitable. For someone that takes a lot of input based on P/E ratios, that makes Zillow difficult to trust.
27		Monster Worldwide (MWW)	Monster could be a great company, it has a great brand in a decent product, but it’s going after every industry in every country which is not working so well. The valuation has improved but I still have my doubts about MWW’s ability to deliver much growth.
28		Research In Motion Ltd (RIMM)	The company is going to be losing money soon,  has little hope left of turning things around, the biggest danger in shorting is that the company should end up being acquired. Horrible products.
29		Pandora Media Inc (P)	Pandora is one of those companies that will  face an uphill battle for a very long time. Pandora faces very high competition from big players such as Amazon, Apple and Google but also smaller players like Spotify. That will make for tiny margins and I just don’t see how a company that doesn’t expect to turn a profit for the next 2 years can be worth buying. I was afraid to go short but I’m becoming less so…
30		XO Group Inc (XOXO)	The company formerly known as the Knot remains a great short despite its new name. There is little to no growth and nothing that warrants its current valuation.
31		Rosetta Stone Inc (RST)	Ahh Rosetta Stone, wonderful company, wonderful products (I’m a fan!) but the company does not have the great business model. It depends heavily on advertising which makes its margins smaller than they should be. I’m not very optimistic about this stock making big moves.
32		Blue Nile Inc (NILE)	What can I say,  I go short NILE about as often as I can, it usually works. Those holding this stock need to tell me how in the world the valuation makes sense. This stock is going nowhere…

So, what do you think? Agree with my rankings? Be sure to also check the Dividend Stock Power Rankings at TheDividendGuyBlog!

In the past, we have looked at many different sectors for dividend stocks and one of the more promising ones has been companies in the oil & gas sector. In fact, one of the few criticisms that I received for the Ultimate Sustainable Dividend Portfolio has been being perhaps a bit overweight in oil/energy stocks. That is certainly something that I will be looking at as is the idea of having more international exposure in that portfolio. For that purpose, today I will be looking at two of the stocks that did make the cut, Exxon Mobil Corp (XOM) and Conocco Philipps (COP) in order to see if Royal Dutch Shell might be a better pick than those two. To be fair, you could argue that all 3 companies have a fairly significant international component but I do think that RDS/B might be a good addition here. To judge them, I will use sustainable factors but also the top 20 things that I look at when judging dividend stocks.

Dividend Metrics

Exxon Mobil Corp (XOM) 

Conocco Philipps (COP)

Royal Dutch Shell(RDS/B)

I think that you could maybe argue that Conocco Phillips (COP) might have a better profile give the growth in recent years but since Royal Dutch Shell pays almost 1% more already, I would still likely side with RDS/B, with the only worrying point being that dividends have not increased in nearly 2 years. That is certainly cause for concern.

Company Metrics

In terms of sales, Royal Dutch Shell has been growing its numbers very quickly while earnings growth is strong but comparable to its two US based competitors. The bigger worry though is that the payout ratio for RDS/B is much higher (almost double COP and XOM) which will certainly leave less place for improvement.

As well, Royal Dutch seems to have a bit higher debt than XOM for example.

Stock Metrics

Industry Metrics

I don’t think there is any doubt that the outlook for oil prices is very uncertain. It is very much tied to the world economy and there are still many questions about China, Europe and even the US economy. How oil will react looks more like a guess in the short term. I do however think that the longer term outlook remains very strong. The demand continues to climb much more quickly than producers can improve capacity (when even possible). These companies are profitable, have little to no debt and while there is competition, the big players are the same year after year and I don’t think anyone expects one of them to outperform the others significantly.

Fit Within Your Portfolio and Sustainability

I would probably argue that the Ultimate Sustainable Dividend Portfolio was perhaps a bit too weighted into oil stocks and will probably adjust that over time. That and the lack of international exposure are probably the two biggest flws as of right now. That being said, I still think the portfolio is exceptional and will perform very very well over time. It’s also very important in my opinion to include some oil/energy stocks in your dividend portfolio. These companies generally have very stable revenues, and are able to pay consistent and solid dividends. It’s also important to note how sustainable and long term these companies are. Oil might eventually go away but probably not in our lifetimes and in fact, it is likely to become much more valauble before that happens so I personally do not worry very much about the prospects for these companies. If I had to pick, I think I might still pick the two same ones although you could easily argue that Royal Dutch Shell would make a great pick, especially if it resumes dividend increases.

I guess I didn’t do my homework. Or something like that. I’ve been discussing the Zynga (ZNGA) and Facebook IPO’s over and over but one of the most interesting web companies turned public and I didn’t even say a word about it (I did mention it on Twitter but it was late). Good thing for me is that I’m not the only one. As much I’d love to blame the Christmas Holidays for my miss, the truth is that this one went under everyone’s radar.

Why TripAdvisor (TRIP) Was Barely Mentionned

The biggest reason in my opinion is that this company did not go the more traditional route of being private and then going for the IPO. Instead, it was bought a few years ago by Expedia (EXPE) which decided to spin it off earlier this month. I’m not sure why Expedia did not put more of an effort to make this more public.

I’m Not Complaining Though

Believe me, I’m more than happy to see Tripadvisor go unnoticed. Why? It certainly looks like the company’s valuation is lower than it probably would have been. Right now, TRIP is trading at a valuation of $3.5B or so. That is a bit over half of Zynga’s (ZNGA) valuation with revenues also close to being half of its competitor. You might think that I’m crazy to compare the two. Obviously, I beg to differ.

Zynga And Tripadvisor Are Both Plays On Social

While Zynga has an incredible team of designers and programmers, the thing that sets it apart from competitors such as Electronic Arts and Blizzard is the fact that it was able to acquire a dominant position in social, especially on Facebook. As the web moves to a more “social” environment, that is proving to be key. In a similar way, Tripadvisor is also a leader in its sphere from a social perspective.

If you don’t know Tripadviser, it is the leader in travel guides. It offers the possibility for visitors to view hotels, restaurants, things to do, find out how others liked their time, what their Facebook friends did and who has visited a given place. It’s by far the paradise for those booking travel from the web (increasingly everyone!). The best part is that all of the content is built by users while Tripadviser staff and engineers can focus on the structure, features such as the Facebook integration, etc.

How TRIP Makes Money

Basically, every time a user decides to book a hotel or restaurant, Tripadviso tries to make an amount of money off of that reservation. Because of that, the company has been profitable for almost 10 years now. I encourage you to view the video below if you’d like more information about the company.

The Concerns Regarding TRIP

There are certainly downsides in Tripadvisor’s business, like most new digital companies (or all of them for that matter). The two main ones in my opinion are:

-Competition: There is no doubt that many powerful players including Google are going after the local market. I still think that Tripadviser’s “travel perspective” remains unique and basically unchallenged. Also, it will be a significant challenge for players like Google to build such a site. Personally, I think that the competition factor is less important than for players like Zynga.

-Reliance On Community: There is certainly the potential for any social player to screw up big time. Companies like MySpace managed to screw up big time and allienate their users to the point where they all left. I think this remains a risk, especially as a public listed company with shorter term horizons. So far, the company seems to be able to manage things in the right way and continues to get increased respect from the travellers community. It does remain a risk, but not a significant one in my opinion.

High Margins

The incredible feat for companies that let users generate the content such as Facebook, LinkedIn (LNKD) and Tripadvisor is that they can turn very significant margins. Why? Their costs are very limited. Over time, I think that will prove to be a critical factor and I personally give a lot more credit to revenues from a company like TRIP than others like ZNGA and Pandora which have to spend big to acquire and produce content.

I know, it’s the least original idea to be bullish on Apple. Everyone is. The average analyst rating according to Bloomberg is 4.7 (out of 5). Only Google (GOOG) and Baidu (BIDU) score better and barely so. It just feels like I’m every day, thousands write about owning Apple. You’d think I’d want to stay away from the crowd right? How often does following everyone else turn out to be right? Very rarely, I’ll tell you that. Just look at gold these days. Seems like a few months ago, buying gold was the new “risk free” way to make money. These days, everyone is running for the exits…

Hear Me Out

I’m glad to see that you’ve kept on reading. I’m not trying to just be a “me too” guy over here. But Apple is dirt cheap and I think it’s crazy that the stock has not increased more. When I compare it to the other stocks that I follow, it comes out as one of the safest and undervalued investments. Rarely do those 2 words come together. Let’s look at a few numbers to start off. In the last 4 quarters, Apple has reported earnings per share of $27.67 and is trading at $400 or so… that is a trailing P/E of 14,5 or so. Very good right? Estimates are for the current P/E to be 13.81 and next year’s P/E to be just under 10, at 9.83.

Let’s take a look at all of the cheapest companies in terms of forward P/E (excluding Chinese companies which are a bit more complex) from the stocks that I follow:

Tell me, is there any stock on this chart that even compares to Apple? Some might outperform without a doubt. But I would put all my chips on Apple if I had to choose. Just take a look at Apple’s revenues growth in recent quarters:

Is it recession proof? It’s not very far. Some might say that growth will slow down and they might turn out right (eventually they will) but even 10-20% growth would be a bargain at this price.

The Upside

The biggest thing about buying Apple is that not only is the downside very limited, but there is also significant upside. The mobile market continues to explode and I don’t think anyone would argue that the iPhone is losing momentum. It does face very stiff competition but things are still going strong for the Apple. Add to that the iPad which continues to see little to no competition in the tablet market.

2012 will see the launch of a new generation of iPad’s, perhaps a smaller version and will likely see the launch of the iPhone 5, all of which will certainly turn out to be huge winners. As if that wasn’t enough, Apple seems to be almost ready to officially launch Apple TV. Steve Jobs hinted in his last days that he had finally figured out tv and most analysts expect Apple to launch the product in 2013. Will it be a hit to the level of the ipad/ipod/iPhone? Perhaps but I don’t even think it needs to be THAT successful.

Steve Jobs Factor

Honestly, the only knock that I can see regarding Apple is the uncertainty created by the departure of Steve Jobs. That could certainly create issues but so far things do seem to be on pace and I think that if that is the knock against Apple, it is way overblown.

Are You Bullish On Apple?

I would love to hear from anyone that thinks I’m way off here. What would I be missing? If Apple is overvalued, what would you rather buy? Especially in the technology sector?  In case you have missed that, if nothing crazy happens between now and the year end, Apple will be one of the first stocks that I will end up going long on when stocks picks resume in a few days.

Disclosure: No position on Apple

It’s an exciting day for me. No, not the type of day that I wake up wanting to jump up and down 10 times (maybe when Facebook will go public it’ll feel that good) but it’s still a great day because Zynga, one of the companies that I have been discussing for a very long time is finally turning public. The IPO was priced at $10, a $7B valuation for the company and should start trading today on the Nasdaq exchange. In case you did not know, a company that goes public will typically give a range at which it expects to sell its shares. Then, depending on demand, the number of shares available and how much each investor is willing to pay, a final price will be made public. In general, there has to be a balance between two different things:

-IPO investors are generally the underwriter firms best clients so they want the price paid to be low enough for those investors to make some money
-However, the higher the price, the more money comes in for both the underwriter firm and the company (Zynga in this case) itself.

LinkedIn (LNKD) was a case of a stock that turned public well below what it ended up trading for which ended up meaning that:

-IPO investors made a ton of money
-Linked (LNKD) ended up selling its shares at a very cheap price
-Underwriters were heavily criticized

It will be interesting to see how things will play out for Zynga. As I’ve said many times, I think that while there is a decent amount of risk involved, it’s a bet that I would be willing to put up with. I think the growth in social gaming will be significant and Zynga is the dominant player in this space.

Risks Are Overblown

I think the 2 main risks that are being discussed are worth discussing but not significant in my opinion:

Zynga depends too much on Facebook

While it’s true that Zynga depends on Facebook for an overwhelming majority of its revenues, I think it’s too easy to say that the company is worth less because of that.

Facebook is also very dependant on Facebook: Not only is Facebook making a huge part of its revenues (both in advertising and through its credits) from Zynga but damaging that relationship would end up hurting the confidence level of other partners.

Despite Rumors, Facebook Will Not Start Making Games: Another big rumor is that eventually, Facebook will start making its own games. Is it impossible? No. But I don’t see it. I believe Mark Zuckerberg when he says that Facebook will not be in that market. It makes no sense for Facebook to start producing games, licensing music, etc. Facebook seems much better off trying to tax all companies using its environment/infrastructure.

Zynga Depends On Its Ability To Produce Hits

No doubt, coming up with winning games frequently will be a major challenge. I do think that Zynga has things setup in a way to be able to produce these. Zynga has produced several very popular games, has a solid user base and will have cash. It will be able to acquire smaller, promising games, talented individuals and promote those games better than any other player. Time will tell if I’m right about this but I expect Zynga to be able to produce over long periods of time. One thing to note is that for several years, main gaming competitors such as Electronic Arts and Blizzard were not competing too much in social gaming and that is changing very quickly. However, I think there is enough space for several large players and for now, I think Zynga can compete.

It Remains A Gamble

I’ve had a good 2-3 years of stock picks in technology and you would think that I would have a stronger opinion about ZNGA. The truth is, I think it’s worth a gamble, a shot at being a long term speculative pick. The investment might not work out but I personally think it’s worth trying.

It All Depends On The Price Of Course

Every asset has a price at which I could buy or sell. Ok, I’m sure you could find exceptions but I think you get the idea.The main thing is that I do not know how ZNGA will be trading, especially in the first few days/weeks. I was asked a few times how I will be trading a stock like ZNGA that goes public.

How Will I Try To Buy?

What I will not do is place market order (I try to never do that) or even a limit order today or probably even next week. I personally prefer staying away from all of these crazy movements. I am in no hurry to buy and I prefer to wait to have the feeling that the price is less volatile. Once that happens, I will evaluate the cost and value and decide on buying accordingly.

There is no way I will try buying the stock when it’s moving by 10-20% or even much more…

So how about you? Do you intend on buying ZNGA? If so, how and when?

Yahoo used to be a stock that I loved to trade. To be more specific, it was a stock I loved to short. Thanks to the great direction of Jerry Yang and Carol Bartz, the company has been able to fall behind competitors and fail miserably in almost all of its projects. In fact, the one thing that been working well for Yahoo was its Asian investments in companies such as Yahoo Japan and Alibaba which have both been run independently. Even in those cases, yahoo managed to screw up big time. It even made me wonder if it was time to buy Yahoo.

At its peak, Yahoo not only had the best brand on the internet but also products such as Yahoo mail and Yahoo finance that were better than anything else on the web. A few years later, those products have fallen behind, the company’s direction is unclear and while there are a few success stories (Flickr would be one), the lack in other key areas (mobile, apps and social being the three key areas) overshadows everything else.

What Is Yahoo Doing To Turn Things Around?

A company that has performed so badly must be very desperate and acting very quickly right? You would certainly think so. But it’s not the case. In fact, the company has not yet replaced CEO Carol Bartz that was let go in September. Firing her was the right move although it should have been done a long time ago. Not replacing her though is certainly not helping things. In the fast changing tech sector, not having anyone truly leading the company is surely making all of Yahoo’s assets just a little less valuable every day.

It is well recognized at this point that Yahoo’s board is incompetent. That board has hired bankers to help determine the next few actions. There are many possibilities but those usually involve either:

-Selling Assets such as its Asian assets
-Simply hiring a new CEO to turn things around
-Selling the company outright
-Going Private (this would likely involve one or several private equity groups)

Yahoo’s Stock Is Now A Walking Zombie

To me, Yahoo’s stock is not tradable these days. Why? A large portion of Yahoo’s assets is tied to its Asian operations which are in limbo but trying to remain solid despite the economic context. The other part of Yahoo, its “base”, continues to become less relevant every day thanks to its bad leadership, direction and very stiff competition in Silicon Valley from the likes of Google, Facebook, Apple and Amazon. The fact is that the stock is not moving. Just take a look at its chart:

Yes, there are movements, but those are not so much related to the company products or even the markets. Rather, most movements are related to M&A activity rumors. It is not so much about trying to determine if Yahoo can get decent growth in its advertising sales but rather about trying to figure what type of deal Yahoo will be able to get and with who. Yahoo thus becomes one of two things:

-A gamble on what the new Yahoo will look like
-A way to gamble on insider information that some individuals/firms have

I’m not interested in either of them so for now, unfortunately, I will remain on the sidelines

Disclaimer: No position on IS