Experienced investors will tell you: "Don't fight the FED". I fought the FED for over two and a half years and paid the price. After the market crash of 2008-2009, I got short the market with leveraged ETFs because I truly thought we would revisit the lows during the dark days of four years ago. Things didn't work out as planned.
I took my best shot, and also took a bath with an expensive investing lesson: historically speaking, stocks go up two out of three days. To say I don't regret my decision of sticking with my short positions would be a false statement. What's done is done. I'm on to other endeavors. Most specifically, I'm trying to take advantage of the nascent wireless broadband revolution by investing in anything that is involved with smartphones and tablets: applications, facilitators and infrastructure plays.
In the six months since I began putting my money in long positions, I'm slightly underwater. No beef on my part. Although the market has seen gains since early March when I began to dollar-cost-average with concentrated portfolio selections, the stocks in my possession have rotated out of favor for the likes of risk-off, or dividend paying securities. This may soon change if technology stocks come back in vogue for the third and fourth quarters as they historically do. What I would like to do now is offer a summary of my buys and sells the past six months and see where I stand.
Facebook (FB): I think today's Barron's cover story, "Facebook Is Worth $15", says it all. A lot of smart people priced the Facebook IPO at $38, only to see its world turned upside down a few months later. It crossed the tape at $18 two weeks ago. The brain trusts on Wall Street can't be that wrong. I picked up the social media giant at $19.15, and will keep a close eye on it because I really don't use the service although a billion people are really lapping it up. Facebook has rallied nicely the last two weeks to $23. If they can figure out how to monetize their mobile application, it can double in two years.
Sequans (SQNS): I took a sizable stake in Sequans last March with an average cost of roughly $2.50. The producer of 4G LTE semiconductors lost a considerable revenue stream when a significant customer stopped manufacturing WiMAX phones. Since new initiatives in 4G LTE won't come to fruition for a few more quarters, I decided to sell my shares when the equities price dropped to $1.80.
I usually hold securities for a long time horizon, but with the price dropping so much on a percentage basis, and the fact Sequans is not making money at this juncture, I have decided to keep them on my watch list. If an opportunity presents itself after the first of the year, I would be inclined to purchase more shares. They have many solid relationships in Indonesia and China.
Glu Mobile (GLUU): Glu Mobile's business plan fits perfectly into my investing philosophy for the smartphone/tablet space: platform agnostic, internationally positioned content provider. I've maintained a long position in Glu from the get go, but have also been trading the equity when it gets to be too large of a position in the portfolio. I've used the profits to add to other stocks on the menu that have been under pressure.
I'm not a gamer, so it's difficult for me to get excited about Glu's stable of freemium mobile games. However, this is a well managed organization, and is in turnaround mode. There's a lot of buzz on the street about this company, so investor psychology may play a big role in propelling this stock higher around New Year's. I sold half my position when it rose 40% in three months, then added more shares when it sold off, so I'm basically back to my original allotment. My average cost is $4.80.
Acme Packet (APKT): Acme Packet is the global leader in Session Border Controllers (SBC), but its share price has been decimated from weak European and North American telecom operator demand. Originally, I purchased the bulk of my shares at $25, then bought more when the price dipped to $18. On a trailing twelve month basis, the stock is sill expensive at around $19. In fact, going forward into 2013, it's still not a bargain.
However, I like the management of Acme Packet, they've got a spic and span balance sheet, and great prospects going into 2014 and beyond. They are a major player in VoLTE (voice over long term evolution) which is the future of telecom. I plan on accumulating more shares during 2013 if the price is still depressed.
CEVA (CEVA): CEVA is the global leader in DSP (digital signal processing) semiconductors. They basically licence their technology to other chip manufacturers like Broadcom (BRCM). I was surprised they didn't participate in the halo effect after the launch of Apple's (AAPL) iPhone 5. According to their latest conference call, they expect a significant reduction in inventory going into 2013, which may goose the stock in the 4th quarter.
I bought in at $22, and added additional shares at $15 where is currently crosses the tape. It's selling at its 52 week low. Its high was $34.50. They have a significant part of their portfolio in 4G LTE technologies. I added to my position when I sold Sequans, and my average cost is $18.50.
Velti (VELT): Velti resides in a sector that is a place of potential combustion: mobile marketing and advertising. They've got a tremendous amount of competition with the likes of Google (GOOG), Apple, Millennial Media (MM), and a slew of smaller firms. Everybody is at each other's throats. It's survival-of-the-fittest. However, Velti is the only international pure-play in the sector which is why I'm banking on it.
I've overloaded the portfolio with shares of Velti because I believe it has the greatest potential for price appreciation in their sector. It's cheap on a valuation basis with a P/E of 13, and a growth rate of 30%. If it can reach a PEG Ratio of one, the stock could triple in the next year, if not sooner. I originally bought my shares at $12, then added a significant portion at $6.50. As of this writing, I'm treading water with this investment.
Synchronoss Technologies (SNCR): The secret weapon for this company is that they are invisible to the millions of smartphone owners who check their e-mail, sync on the fly, and upgrade to newer mobile devices among a slew of other things. You've got to be able to take a punch in the fickle world of Wall Street, and that's exactly what's happened to Synchronoss this year. The stock was trading near $40, only to be knocked down to $18 because of concerns that they rely too heavily on AT&T (T).
Well, they do a significant amount of business with Ma Bell, but that may be in their favor with the recent release of the iPhone 5. AT&T is Apple's largest carrier and customers are upgrading in droves if early reports are any indication. Synchronoss is also branching out by doing business with Vodafone (VOD) and Verizon (VZ). The stock now trades near $25, right about my average cost per share. I expect big things from this company in the next few years.
SUMMARY
Like all investors, I am expecting my stock selections to increase in value during the next 3-5 years. That's my usual holding period. However, sometimes an equity gets so far ahead of itself that it's time to take some profits. Primarily, I prefer to keep a stock for over a year to take advantage of capital gains laws, but sometimes you just have to sell like I did with some of my Glu Mobile shares earlier this year.
I'm not so sure buy and hold investing is as dead as many pundits are predicting, especially as we enter a new phase of technology development, the buildup of Web 2.0, otherwise known as the wireless broadband revolution. If the market doesn't crash again, we may very well be in another era like the PC proliferation in the 1980s. My decision to invest in a concentrated portfolio isn't what financial planners recommend, but I believe it's my best way to take advantage of the explosive growth in smartphones and tablets we are experiencing.