(AMZN), and Google determine
(GOOGL)—with their fortress-solid balance sheets, are poised to come out of the downturn without problems as effective as they went in. But for intrepid tech investors, there are less apparent opportunities to be found amid the present carnage and chaos.
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To aid find the best ideas, Barron’s reached out to a few of our favourite tech-focused stockpickers. Some clean problems run thru their recommendations: The work-from-home revolution underlines the power of cloud computing; we all still want to be entertained, even if we’re stuck at home; and we’re still going to desire broadband, now more than ever.
Here’s what the experts have to say:
Readerman is owner of Endurance Capital Partners, a San Francisco–based tech hedge fund. Readerman has zeroed in on cloud plays. “What’s absolutely being reinforced right now,” he says, “is that cloud-based information-technology architecture is providing agility and resiliency for agencies to function dispersed workforces.”
Readerman says the jury is out on whether there’s a lasting affect on how we paintings, having said that he adds that contingency making plans now requires the ability to work remotely for multiplied periods. Among his cloud software alternatives are
(DOCU), a carrier of electronic-signature tool, and
Zoom Video Communications
(ZM), the videoconferencing company that has been one of the year’s easiest stocks. “If there changed into ever doubt about the migration of the company to cloud structures, Covid-19 has proved its capabilities,” he says.
Readerman concedes that Zoom’s valuation seems extreme—the stock trades at 34 times Wall Street’s sales estimate for the economic year finishing January 2022—nevertheless he says there’s an chance for Zoom to monetize its surge in new users. He thinks that Zoom can expand beyond videoconferencing to offer a wider variety of tools. “Zoom reminds me of AOL at the same time as it became everywhere, with ease of use and the freemium model,” he says.
Readerman is bullish, too, on data middle operators like
Digital Realty Trust
On the more speculative side, he likes their smaller rivals,
(COR), which may just be consolidation targets. He says that
is seeing a surge in traffic to its servers, an alternate sign of the boom of the cloud-computing trend. “Grocery shops are sold out of rest room paper, and we all need more broadband,” he says. Companies like
he adds, are “the necessary on/off ramp for internet-based connectivity and commerce.”
Greenfield, the co-founder of research boutique LightShed Partners, has covered entertainment and media agencies for 25 years. His coverage universe change into dealing with disruption—the technological kind—long formerly coronavirus, having said that the pandemic is creating a set of more severe challenges, with movie theaters and subject matter parks closed, sports shuttered, and ad budgets crunched. Greenfield notes that 12 of the top 50 TV advertisers are in poor health vehicle makers; an alternate 11 are quick-serve eating place chains.
The lack of sports content is especially difficult on the advertisements front. The National Collegiate Athletic Association basketball tournament became canceled, and the National Basketball Association season, Major League Baseball, and the Olympics have all been delayed. There is no clarity on whilst the experience calendar will choose up—and whilst individuals will be relaxed in public settings. “How long does it last?” Greenfield asks. “Does the stimulus ward off a recession or depression?
It’s difficult to tell. No one knows how to forecast this.”
But americans still crave entertainment, and that’s keeping Greenfield bullish on
Unlike most content businesses, Netflix sells no ads. And while movie and TV production is shut, Netflix has a number of months of new content equipped to move.
“They’re in a really effective function relative to their peers,” he says, pointing to
(DIS), which has been battered on numerous fronts—its ESPN has no sports to show, its theme parks are closed, and it has no open theaters via which to distribute films. The susceptible ad marketplace, meanwhile, is tricky for Disney’s broadcast and cable properties.
Says Greenfield: “More people are using Netflix than ever earlier.” He notes that the number of subscribers is accelerating, which isn’t fabulous given all of the home-bound americans with more hours to fill and no sports to watch. He says Netflix will benefit from people switching to more costly dissimilar-user plans and from reduced churn, or cancellations. In coming quarters, he says, Netflix will have “higher subscriptions, higher basic income in keeping with user, and better free cash float than individuals think.”
Greenfield is also bullish on
(TWTR), which this past week warned that income for its March quarter may be down year over year, as ad budgets fall. But, he notes, Twitter is seeing listing usage. While profits and earnings will take a near-term hit, he facets out that Twitter can resist the crisis, with $6.6 billion in cash.
And the agency is poised to advantage from a crowded routine calendar once the virus chance ebbs. “There aren’t adequate weekends on the calendar for all the stuff coming down from September via summer 2021,” Greenfield says, with spring wearing movements shifted to the fall, a packed film-release schedule, and the November election. “It’s absurd.” And he thinks it will all force traffic—and ad dollars—to Twitter.
Meeks wears multiple hats, as a portfolio manager for Independent Solutions Wealth Management, an asset management firm in Williamsville, N.Y., and a manager of The Wireless Fund, a small tech mutual fund. Meeks say that he has been employing the contemporary rally to enhance cash, at the same time as dabbling in marquee names and “banking proceeds for a larger day.”
Meeks says that he’s waiting till “income estimates are slashed to the bone” formerly making immense new commitments. “I want to see them all confess all their sins, and to take down numbers dramatically.”
In the meantime, Meeks has been nibbling on megacaps, in particular Amazon and
Alibaba Group Holding
(BABA), either of which he thinks will advantage from the improved role that e-commerce will play in the post-coronavirus world. Eventually, he says, whilst income estimates reset, he desires to own his “dream team of semiconductor stocks,” adding
Advanced Micro Devices
Taiwan Semiconductor Manufacturing
(AMAT), wherein he expects to cross from actually zero to a big overweight.
Meanwhile, Meeks is bullish on
(VIRT), a New York–based tech-driven financial trading platform. Meeks sees the company as a play on volatility. He notes that Virtu trades for about 10 times earnings and will pay a “fairly certain” dividend, lately yielding 4.3%.
“When stocks cross up continually back, and investors are complacent, they turn into an universal company again,” he says. But, for now, Virtu will benefit as long as we continue to pass to “whipsaw moves in either directions.”
Niles is founder and portfolio manager for the Satori Fund, a tech-focused hedge fund. On Feb. 17, just after Apple pulled its March quarter guidance, Niles tweeted that he had 50% of his portfolio short Apple, seven of the company’s suppliers, and
an exchange-traded fund that tracks the Nasdaq 100.
It became a prescient call.
Niles remains generally bearish on the marketplace, but there are stocks he likes and owns, especially around videogames. While Niles thinks the market has exaggerated the impact of a fifth-generation, or 5G, iPhone release later this year, he sees chance in a less-watched product cycle: new videogame consoles from Microsoft and
(SNE), expected this fall. “They’re going to launch the first new hardware systems in view that 2013, and everyone is stuck at home,” he says. “I like them all,” he says of the videogame stocks, including
Take-Two Interactive Software
(EA), along with China’s
Other Niles bets are Amazon, a beneficiary from the shift to e-commerce, and work-at-home play
(RNG), a cloud-based communications carrier.
Meanwhile, he’s still in a role to brief Apple again as the inventory rallies. For one thing, he says, “I don’t understand who is going to suppose wealthy adequate to purchase an iPhone.” And he wonders why any one would pay 19 times current income for Apple, when other hardware plays like
(HPQ) trade for with ease seven times.
Moffett, founder of the research boutique MoffettNathanson, is the marketplace’s most influential telecom and cable seer. He predicts deep issues for a few of the largest businesses he covers, chiefly
(CMCSA), given their exposure to ad-supported content via their respective WarnerMedia and NBCUniversal segments. AT&T and Comcast are getting a enhance from their broadband units, notwithstanding Moffett sees better methods to play that trend.
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He’s bullish on
(ATUS), either pure plays on the cable business and, therefore, loose of ad-supported content worries. Charter is down 13% over the beyond month. “The fact that Charter has sold off as tons as the broader market makes no experience at all,” Moffett says. “The cable businesses are easily digital infrastructure providers. They are agnostic approximately how you can get your video content. And the broadband industrial is going to be just fine.”
He says that Altice, whilst a little riskier than Charter, is even cheaper. Both companies are seeing call for for faster—and more expensive—broadband plans, with folks and toddlers spending so many hours at home. Moffett thinks that Altice may just rally 40% to 50%, at the same time as Charter may just upward thrust 30% to 40%.
Moffett is also bullish on
(TMUS), which is about to be a robust No. 3 player in the U.S. wireless marketplace after it closes a pending deal to buy
“They’ll be very well positioned, with line of sight to cost discounts and margin expansion, and network benefits that should translate into industry-share gains for years and years to come,” he says. And while Moffett still sees a few risk to the deal’s completion, he thinks that T-Mobile is attractive with or without Sprint.
Write to Eric J.