On November 11, I returned to CNBC for a “Bull vs. Bear” debate that focused on the social media space. Weighing in on certain investment opportunities, I explained that specific platforms are under tremendous pressure to turn a profit. As outlined in the segment, my biggest objection is that I’m a ‘user’ of these services, but I’m not a ‘payer,’ and I like companies that actually get revenues from their clients. Click here to watch the full segment.
Expanding outside of the segment on the topic of social media stocks, many of the platforms being used are still very new and experimental. As far as generating revenue, I think that advertisers are still trying to figure out if social media is something that is valuable and how to use it in the best way possible.
We have always been more focused on tech companies that sell predominantly to business customers. We look for companies with products that add clear value to the buyer and ones that may be difficult to replace. Some specific areas that we find attractive include:
CA. CA Technologies is in the business of providing system and network management software that helps IT managers ensure that servers in a business are up and running. The company has acquired newer software aimed at managing cloud applications. With a recent CEO change as well, fresh ideas and newer products could be promising for the company over the long-term.
XLNX. Xilinx Inc. makes very complicated processors that are used in a variety of end applications. The company just reported strong sales, but issued somewhat softer guidance than the street was expecting. The company sells to the defense sector and it’s this area that the company is forecasting to be weaker than analysts had thought. (They do sell into the commercial aerospace industry and we think that the strength in this area may offset any lack in the defense sector).
INTC. Intel is a company that is unloved and misunderstood. We totally understand that demand for PCs has diminished and we don’t really see it rebounding strongly, perhaps ever. However, we don’t see that tablets are going to replace PCs in work settings. The home PC market should be replaced by mobile devices for the most part and we think that INTC’s upcoming product line should gain traction. We’ll see in this next quarter if sales to more business-related mobile device makers start to take off. The company has really great technology that allow its chips to run quickly, yet conserve power – the most important aspect of a CPU to be used in a mobile device.