IntelligentSpeculator’s 2014 Tech Stock Power Rankings

By: ispeculatornew
Date posted: 01.08.2014 (3:00 am) | Write a Comment  (5 Comments)

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Every year, this is the one post that takes me the longest to do. Writing it isn’t such a challenge but coming up with my actual rankings truly is. I guess I’ll never feel 100% convinced of my rankings but at some point, I do have to press “publish” and that time has come. After spectacular results in 2012, I came up short of expectations last year so hopefully this time I can get my groove back:) Trading did go well last year but preparing a 1 year prevision for 30+ stocks isn’t easy and in many ways is more difficult than trading.

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? What is the risk that a stock I hate will do extremely well or one that I love get crushed
-What are the upsides and downsides to each stock? 

Some Companies Were Excluded

I once again decided to exclude a few companies, mostly because I wasn’t able to get a good enough feeling about them. Which ones? Here is the list:

WebMD Health Corp (WBMD)
XO Group Inc (XOXO)
Groupon Inc (GRPN)
Ctrip.com International Ltd (CTRP)
QuinStreet Inc (QNST)
Youku Tudou Inc (YOKU)
Yandex NV (YNDX)
BlackBerry Ltd (BBRY)
Zynga Inc (ZNGA)
Orbitz Worldwide Inc (OWW)

Without further wait:

2014 IntelligentSpeculator Technology Stock Power Rankings

Rank
Stock/Company
Stock/Company Comments
1 Apple (AAPL) Apple continues to be a stock that I have a tremendous amount of belief in. Very limited downside, an attractive (cheap) valuation and leading products in strong growth markets.

Key Numbers: Estimated P/E Next Year: 11.3, Sales 5Y Growth: 28.6, EPS 5Y Growth: 29.52

2 Facebook (FB) I’m a Facebook shareholder and certainly believe in its potential as it will hopefully move in a meaningful way beyond advertising.

Key Numbers: Estimated P/E Next Year: 50.57

3 Baidu (BIDU) I continue to see tremendous value in holding the leading Chinese internet stock, especially at a very reasonable valuation. China’s economy has slowed down but it remains a key market where most competitors are locked out

Key Numbers: Estimated P/E Next Year: 26.53, Sales 5Y Growth: 58.52, EPS 5Y Growth: 58.19

4

LinkedIn Corp (LNKD)

I do still think that LinkedIn is too expensive and I doubt I’d put my money just now into it but the stock has come down and I do still think LinkedIn has a great place in the market. There is an increasing number of doubters…time to get it?

Key Numbers: Estimated P/E Next Year: 91.28

5 TripAdvisor (TRIP) TripAdvisor has a unique business and is very difficult to compete with. I do believe its ability to generate qualified leads for hotels and other types of businesses will continue to pay off handsomely.

Key Numbers: Estimated P/E Next Year: 36.52

6

Google (GOOG)

I do still believe that Google is the most exciting company around these days and would love to buy some shares but I’m having an increasingly difficult time trying to understand where the business is headed

Key Numbers: Estimated P/E Next Year: 21.33, Sales 5Y Growth: 22.41, EPS 5Y Growth: 18.89

7 Amazon (AMZN) Amazon is a fascinating company and an intriguing stock. The company makes little to no money, has no clear plans to make any but has built an incredible ecosystem that “could” become a money-making machine.

Key Numbers: Estimated P/E Next Year: 83.66, Sales 5Y Growth: 32.23, EPS 5Y Growth: N/A

8

Microsoft Corp (MSFT)

Microsoft is near multi-year highs and is about to get a new leadership that will certainly give the company a big boost. I do think it remains at a very reasonable valuation.

Key Numbers: Estimated P/E Next Year: 12.41, Sales 5Y Growth: 5.26, EPS 5Y Growth: 9.12

9 Netflix (NFLX) Wow did I get things wrong last year on Netflix and I should have known better. I do still think that the expected growth remains slow compared to its P/E but things are so dynamic and the leaders are very strong. I’ll be a believer this year

Key Numbers: Estimated P/E Next Year: 72.88, Sales 5Y Growth: 27.12, EPS 5Y Growth: 70.9

10 eBay Inc (EBAY) eBay is an interesting company. While I have strong belief in its Paypal business, I’m very skeptical of what its trying to do with its main business, going down the route of same-day shipping to compete with Amazon and others.

Key Numbers: Estimated P/E Next Year: 16.52, Sales 5Y Growth: 13.43, EPS 5Y Growth: 8.94

11 Priceline (PCLN) Priceline has been an incredible business for many years and is as consistent as ever. I do think that will continue and do believe it will still outperform.

Key Numbers: Estimated P/E Next Year: 22.39, Sales 5Y Growth: 32.54, EPS 5Y Growth: 76.16

12 Oracle (ORCL) I did research Oracle in the past few months and have compared it to Microsoft a decent amount and I did end up deciding to rank it slightly lower this year.

Key Numbers: Estimated P/E Next Year: 11.76, Sales 5Y Growth: 11.77, EPS 5Y Growth: 17.82

13 Expedia Inc (EXPE) There are still doubts about Expedia following the spinoff of TripAdvisor for me but I do think its valuation is attractive.

Key Numbers: Estimated P/E Next Year: 18.57, Sales 5Y Growth: 11.18, EPS 5Y Growth: 16.23

14 Salesforce.com (CRM) Salesforce is a difficult business to value because it is fast growing but not yet profitable. I do expect good things

Key Numbers: Estimated P/E Next Year: 108.24, Sales 5Y Growth: 31.39, EPS 5Y Growth: N/A

15

IAC InteractiveCorp
(IACI)

I was a big doubter of IAC a few years ago but it does seem to have turned things around and is now growing much faster..!

Key Numbers: Estimated P/E Next Year: 16.44, Sales 5Y Growth: 16.63, EPS 5Y Growth: N/A

16 Dice Holdings (DHX)
I’m not exactly sure why Dice Holdings did not perform better last year but I do expect the company to recover this year as it continues to be very targeted.

Key Numbers: Estimated P/E Next Year: 14.68, Sales 5Y Growth: 8.87, EPS 5Y Growth: 17.05

17 Blue Nile Inc (NILE) Who could have guessed… I have been bearish on Blue Nile for years, have traded it very successfully and it was often the most overvalued stock in my opinion. My opinion is slowly changing…!

Key Numbers: Estimated P/E Next Year: 37.58, Sales 5Y Growth: 8.85, EPS 5Y Growth: 11.69

18

Adobe Systems Inc
(ADBE)

Adobe is in a very difficult environment, suffered issues from security breaches and is trying to change its business model which I think will be very challenging, so I’m certainly not a believer.

Key Numbers: Estimated P/E Next Year: 28.38, Sales 5Y Growth: 4.11, EPS 5Y Growth: -5.15

19

Twitter Inc. (TWTR)

Ahh Twitter, I love the product but the company is extremely overvalued in my opinion, I’d be afraid to short the stock but I’m far from buying it.
20 ValueClick Inc (VCLK) In the past few years, Valueclick has been able to increase its earnings but not based on actual revenues increases so I’m highly skeptical that these can continue. Margins can only increase to some extent.

Key Numbers: Estimated P/E Next Year: 12.34, Sales 5Y Growth: -0.57, EPS 5Y Growth: 271.24

21 Demand Media (DMD) Ah Demand Media has been stuck in the middle of the whole “content farm” debate and the fact is that in my (and many others) opinion, it adds very little with its sites.

Key Numbers: Estimated P/E Next Year: 24.45, Sales 5Y Growth: N/A, EPS 5Y Growth: N/A

22 Yelp (YELP) Yelp is trading at an extremely high P/E ratio but there is hope that profitability is around the corner. I’m a bit skeptical but the odds are big enough for me not to set it at the very bottom of these rankings:

Key Numbers: Estimated P/E Next Year: 128.53

23

OpenTable Inc (OPEN)

It will be very difficult for OpenTable to continue to have strong growth and for that reason, I do think the stock is overvalued.
24

Travelzoo (TZOO)

Travelzoo has a good business but the fact is that it has been displaying little to no growth making it a very poor investment.
25

Yahoo (YHOO)

I do have strong belief in CEO Marissa Mayer and she has done a lot of good but the fact is that the stock has increased much more than the actual fundamentals. It will happen but will take a lot of time so at these levels, I will personally stay away from Yahoo.

Key Numbers: Estimated P/E Next Year: 24.29, Sales 5Y Growth: -8.13, EPS 5Y Growth: 259.97

26 AOL Inc (AOL) Aol has made inroads, especially since acquiring the Huffington Post but it remains a challenge to actually increase the overall revenues of the company. Can AOL turn things around? Yes, probably but I’ll be waiting on the sidelines.

Key Numbers: Estimated P/E Next Year: 19.25, Sales 5Y Growth: N/A, EPS 5Y Growth: N/A

27

Trulia (TRLA)

As I mention for Zillow, I’m very skeptical of both companies and will be staying away. They did perform much better than expected last year but they both seem very overvalued.
28 Monster Worldwide
(MWW)

I’m very skeptical about Monster’s long term business as it competes with companies like LinkedIn but also more targeted names like Dice Holdings.

Key Numbers: Estimated P/E Next Year: 17.46, Sales 5Y Growth: -8.43

29 Zillow Inc (Z) For both Zillow and Trulia, I’ve been extremely skeptical of the companies, of the businesses and how they will be able to compete. I do hope to be proven wrong

Key Numbers: Estimated P/E Next Year: 195.1

30

Pandora Media Inc (P)

Pandora is a solid company but I’ve expressed my doubts about companies that are trying to make money in the music business. I simply do not believe in it, especially when you consider the competition from Apple, Amazon, Google and so many others.

Key Numbers: Estimated P/E Next Year: 171.14, Sales 5Y Growth: N/A, EPS 5Y Growth: N/A

31

Rosetta Stone Inc (RST)

Rosetta Stone is a company that has a great product but it has 2 issues. It targets retail clients and faces increasing competition from products that are free such as DuoLingo… so I’m a big doubter.

Key Numbers: Estimated P/E Next Year: 130.11, Sales 5Y Growth: 0.65, EPS 5Y Growth: N/A

32

Rackspace Hosting Inc
(RAX)

Not shocking to see Rackspace at the very bottom of these rankings. I did after all short it in my first trade of the New Year…!

Key Numbers: Estimated P/E Next Year: 50.32, Sales 5Y Growth: 23.1, EPS 5Y Growth: 26

Disclaimer: Long Facebook (FB), Long Apple (AAPL), Long Microsoft (MSFT) & Short Rackspace (RAX)

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5 Comments

  1. Comment by Zavi — January 8, 2014 @ 7:35 am

    Woow thanks for sharing!!

  2. Comment by IS — January 8, 2014 @ 8:51 am

    Thrilled to see you back Zavi:)

  3. Comment by Zavi — January 8, 2014 @ 8:54 am

    Quick thing: I saw that twitter is now is the power rankings, but who disappear from the list?

  4. Comment by Johan Lindén — January 11, 2014 @ 11:09 pm

    Would you kindly care to make a post about the valuation of Yahoo and the unanswered critique you received from seekingalpha readers on your post there?

  5. Comment by IS — January 12, 2014 @ 6:02 pm

    @Johan – I will try to answer some of those comments tomorrow and will also be writing more about Yahoo in the coming days. Thanks for the feedback as always

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