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The link is for an infographic on The Reformed Broker’s site. He is a great source of investing knowledge and humorous commentary. The graphic is awesome in its content and simplicity. It requires no more introduction.
The first two sectors for 2013 are beginning to overlap in a lot of ways – but for this purpose when we talk cloud we are focusing on providers and the data center while mobile is more equipment and service providers. In general, we continue to be positive on technology spending as a whole. There are not a ton of pie-expanding investments out there – tech spending is all about ROI now and the faster the better. Technology investments are enabling more efficient and nimble companies and helping profitability (and even morale in many cases). There are more themes and more specific niches to consider – but here are the major groups.
1) Cloud
a. Premise: I want what I want, where I want, on any device I want…
b. Delivery: leaders in the cloud services space are AMZN and GOOG. Names to watch: MSFT, RAX, CTXS, and HPQ (last hope). Specifically – CTXS, RAX, and NTAP get attention as acquisition candidates by Cisco
c. Data Center: the “cloud” is a generic term, but in general the idea of housing all of your data at remote data center and delivering it on a global basis instantaneously puts heavy demands on computing resources. The ability to cost effectively scale the data center and deliver speed is critical. Top names: EMC (has VMW and will spin out Data Analytics), CSCO, IBM
d. There are some consultant type plays that would include CTSH, IBM, SAP and ORCL
e. Salesforce.com (CRM) falls into the “cloud” and I love what they are doing, but the valuation, like Amazon, is difficult to digest. CRM represents the SaaS (software as a service) space which saw several M&A deals this summer. The recent darling IPOs are Workday (WDAY) for HR Solutions and ServiceNow (NOW) for cloud infrastructure management
2) Mobility
a. Premise: Freedom; flexibility, and the same premise as cloud only I want it NOW
b. Delivery: telecom networks are traditionally high div paying and we still think VZ and T are fair plays on sell offs – but nothing to be exicted about
c. Infrastructure: as the world seeks to build out 4G networks the lead players are CSCO, ERIC, …
d. Equipment: there are only 3 names to watch: AAPL, GOOG, Samsung. Hail Mary plays in RIMM and NOK
e. Components: QCOM, ARMH, BRCM
f. Mobile Ad Spend – the only pure play is Millenial Media (MM) – but the big guys to watch are Google, FB, and Amazon – Apple is trailing.
3) Data Analytics
a. Premise: the world is generating data on a exponential scale – but what does it all mean?
b. The only way to describe this space is to say there are lots of people working the solve the problem of extracting information from data – across nearly any end market – healthcare, utilities, retail, tech…etc. There are hundreds of small, private companies working on solutions –most are getting gobbled up by the bigger players: IBM, ORCL, SAP. This space is likely to see several smaller IPOs this year and many more acquisitions.
Niche to Riche?
1) 3D Printing – initial market for industrial prototypes becoming saturated – key to the story is first, low cost home/office printing. Second, improved material possibilities leads to new “mass customization” market: only two real public plays are SSYS, DDD – expect HPQ to try something (they currently license SSYS); Autodesk (ADSK) for software – they will be a part of this.
a. Unknown what Trimble may do – they bought the 3D CAD software from Google (SketchUp) – they likely want to integrate with construction GPS aided equipment but something to keep an eye on. We like Trimble as a productivity enhancement play for construction, agriculture and fleets
2) Social Networking – yes, overhyped and underdelivered in many cases… a lot of this has to do with the misconceptions of what these firms actually DO vs the optionality you are buying. Moving forward, LNKD and FB are interesting, they have the ability to monetize their users and to expand the optionality of their platforms. LinkedIn has an actual market, job placement, and is expanding its offerings. FB is facing lots of problems, the biggest being mobile. The good news is they were able to generate $3-4b in revs without trying – currently they are rolling out new services, revenue models like mobile ads and ad exchange networks at the fastest pace to date. YELP not working. Hail Mary in ZNGA on gambling legislation
3) Housing meets Data – Zillow (Z) and Trulia (TRLA)
Favorite large cap names:
GOOG, IBM, QCOM, ORCL, AMZN, EBAY, EMC, CRM
Turnarounds: MSFT (data center), INTC (servers), YHOO
SMID Names: high valuation – prone to blow ups but like the technology
FIO, FTNT, SPLK, WDAY
3D printing has the potential to improve many niche industries, create new ones, and fundamentally change the supply chain model.
Comparisons to the PC industry are accurate – it begins with early adopters and hobbyist, shifts to high value users with real business applications, and finally transitions to productivity and job/life enhancement of the masses and speeds the process of innovation.
Thus far we’ve already seen 3D printing in spare parts, rapid prototyping, prostheics, implants, toys and hobbies.
Think bigger – fabrication of unibody parts, body tissue and organs, on site manufacturing, distributed IP…
This is why 3D printing is potentially such a big deal.. sure it sounds like a lot of pie in the sky… but then again so did the idea of globalization 100 years ago…or a phone that you carry in your pocket and can call phone nearly anywhere.
This is not just about bobble heads or model building, its about real applications in automotive, electronic, industrial, and other consumers supply chains. The real potential here is less about building something “cool” and unique and more about turning the existing model of design, procure, build and ship model on its head. The link is to the WikiHouse project which is a fantastic idea by itself – but he vision of 3D and the idea of distributed manufacturing and design discussed by Alastain Parvin is as well.
“We’re not there yet, but imagining how the widespread adoption of capable 3D printers could change the world doesn’t just stop with industrial designers or hobbyists. One day you might print out your flatware, your trash cans or even your next computer. If you think this is nuts, just ponder the line from the minicomputer to your smartphone.”
We are always on the look out for real change and disruption. What do we mean by real? There are very few times we have witnessed real change in the economic world, perhaps once each generation. The majority of concepts we identify as change are really just extension of the real change or evolution on top of it. Examples: mobile networks, the internet, the PC, television, the automobile, telephone, steam engine and railroads… you get the idea. These are BIG changes. Things like social networking, outsourcing, interstate highways, ecommerce are all extension of the big change or are enabled by it.
So, as we look out over the next few years at potential for change, we see a couple of things the strike our fancy – one being 3D printing. This is just what it sounds like. You can print something, nearly anything, in three dimensional form using materials like plastic and eventually metals and others. It works in a layering process, depositing each thin layer at a time and building vertically. The is virtually no limit to the types of items you can make – save for size and material – both of which technology will solve. So what? I can print a chess piece or model building? You could. And you could also print an antique car part, or customized case, or a machine part, or a prosthetic limb (already happening)….
What?
Yes, THAT is the type of reason this is exciting, that applications are only growing with awareness – just like other big changes who’s original audience and application was far more limited vs. its final mark.
Keep an eye on this space.
The Change Investor 