Our tech stocks forecast for 2015 features several "Big Idea" trends that Money Morning Defense & Tech Specialist Michael Robinson sees hitting their stride next year. Robinson has worked as a consultant, senior advisor, and board member for Silicon Valley venture capital firms. He is Money Morning's go-to expert on all things technology, and he likes what he sees for tech stocks next year.
Recently, Money Morning Executive Editor William Patalon III sat down with Robinson to talk about his tech stocks forecast for 2015. Here's a partial transcript of that discussion.
Patalon (Q): We spend a lot of time on the phone talking about tech investing, tech stocks, and tech trends. And I've gotten the impression you're more bullish about tech in the New Year than lots of other folks. Are you upbeat about tech? And why?
Michael (A): Indeed I am. The U.S. economy is still growing at a healthy rate. We have a boom for new cars and trucks, which are big users of high-tech items like chips, sensors, and software.
We also have a global aviation boom with a backlog of jetliners now approaching 10 years, meaning it would take that long to construct all the passenger jets that have been ordered. And again, jet aircraft are loaded with the best in high-technology - including advanced materials that save weight.
The mobile revolution is coming on strong and just really getting started in countries like China, the world's largest phone market that is gearing up for 4G. Europe also is transitioning from 3G to 4G and that bodes well.
Patalon (Q): What has you most excited?
Michael (A): What really gets me turned on about tech investing right now is just the sheer pace of innovation. I'll give you an example. I was at a meeting at Money Map Press [Money Morning's parent company] back in August when I once again talked about how we're on the verge of having neuronal networks that mimic the human brain and with enormous bandwidth.
The very next day, International Business Machines Corp. (NYSE: IBM) announced a huge breakthrough in neuronal chips, adding these could lay the groundwork for neuronal networks.
Patalon (Q): And what has you the most worried?
Michael (A): One concern I have is the volatile nature of today's overall markets, and the fact that we haven't had a correction for a while. As the market marches higher, people get worried that a correction is at hand and the market overreacts.
I actually think a correction would be a healthy development. It would give the market a chance to catch its breath before moving higher.
I'm not really worried about anything related to tech stocks at this point with one proviso. The smartphone market is starting to mature in the U.S., and I'm concerned that Wall Street might overreact to that and pronounce that it is "game over" for mobile.
Patalon (Q): And that would be totally incorrect.
Michael (A): Totally incorrect.
Remember, most of the world has yet to fully embrace the 4G mobile wireless standard, so there's still huge global growth in the smartphone market - which is especially good news for Apple Inc. (Nasdaq: AAPL), which remains the king of smartphones.
Patalon (Q): What specific areas do you like among tech stocks in 2015? What are your four favorite "Big Idea" trends?
Michael (A): The year ahead looks especially bright for wearable tech in particular. You have Apple coming out with its new smartwatch, and some analysts say the company could sell as many as 30 million units in the first year. We're just starting to see the emergence of "smart clothing," and I think that will be a breakout category as well.
Cybersecurity has also got to be at the top of the list. We've seen so many data breaches this year, like retailers having 40 million or 50 million accounts hacked. So tech stocks with strong offerings, particularly in mobile, will find a "target-rich" market in 2015.
I think we'll see fewer big biotech mergers this year now that Washington has cracked down on tax inversions. But I also expect to see more action out of small-cap biotech firms in the market in 2015.
Most investors don't know this but we saw nearly 100 healthcare-related initial public offerings (IPOs) in 2014. Just as an example, back on Nov. 25, seven IPOs were set to be priced and start trading. Of those, six were biotech firms. We've got quite a pipeline building up here.
And then there's the Internet of Everything (IoE). Bill, you've been telling your readers about this megatrend for several years now.
Patalon (Q): At one point, I likened it to a $14 trillion "land rush" - like the ones the government held in the Midwest in the late 1800s.
Michael (A): Not a bad analogy. And I believe that 2015 will be the year that the IoE becomes more mainstream.
We're on the verge of what I call "pervasive computing" where everything everywhere can talk to each other. Machine-to-machine (M2M) communication will help drive this along, with greater use of advanced chips and sensors. Smartphones will become the preferred control device, meaning you run your stereo, security system, and thermostat from your phone.
Patalon (Q): So out of that, what's going to be the No. 1 tech story of the New Year? What will be a close second?
Michael (A): Tech is moving in so many directions and at such a rapid pace that I don't believe there will be any one tech story dominating this year. But the fields I think look great from an investment standpoint are semiconductors, advanced sensors known as MEMs, wearable, mobile, biotech, the Cloud, and Big Data.
Patalon (Q): How will some of the overseas issues influence your outlook for technology? Especially Europe - and perhaps worries about China, too?
Michael (A): I generally look the closest at U.S. trends in tech because we are the overall world leader in innovation. Having said that, I do have overseas on my radar screen this year for one big reason - the dollar.
Our relative economic and political stability is one of the reasons why the U.S. stock market has done so well over the past five years. And it plays a big role in the dollar's recent rally, rising anywhere from 4% to almost 9% against (in order of increase) the peso, pound, yen, and euro.
It's great news for importers since overseas goods are now cheaper. But exporters like tech stocks may see a hit at the end of either the fourth quarter of 2014 or 2015's first quarter. So, I'm keeping my eye on this over the short term to see what impact it will have on sales, profit margins, and earnings growth.
Patalon (Q): What's happened with 3D printing? I know you had big expectations for that coming into 2014. Why the disappointment since then? Do you still have big expectations?
Michael (A): I've been talking about 3D printing for more than four years now, so I think that puts me among the early investors in this field. What I'm disappointed by is the way investors have beaten down some tech stocks in the space, particularly shares of 3D Systems Corp. (NYSE: DDD). The company has been on an acquisition spree, picking up several companies over the past year, while at the same time boosting R&D. Both will pay off with future growth.
The sector is badly oversold at this point. Patalon (Q): What's the outlook for Bitcoin? Do a quick compare and contrast of Bitcoin versus Apple Pay... which will be bigger in 2015? Which will be bigger long term?
Michael (A): I think 2015 will be a great year for Bitcoin. I expect to see the launch of a new Bitcoin ETF by the second half, if not sooner. This will greatly open up the field to the average investor who may not want to trade in the virtual currency itself.
From an e-commerce standpoint we are just getting started. Businesses will want to accept Bitcoin because it has very little overhead per transaction. It also reduces the amount of charge-offs they get when customers use credit cards. By the end of the year we could see more than 110,000 merchants accepting Bitcoin versus just about none just five years ago.
Patalon (Q): And Apple Pay?
Michael (A): I like the whole Apple Pay story, too. I also see Apple Pay as one of the big tech stories of the New Year.
Patalon (Q): There's room for both?
Michael (A): Without a doubt.
Patalon (Q): Thanks, Michael. We appreciate your taking the time to share your thoughts on the prospects for tech stocks and tech investing next year.
Michael (A): Anytime.
Daily Stock Picks: Straight up stock picking (and winning) is what Bill Patalon does best, and he does it every weekday exclusively in Private Briefing. His track record has been astounding with 36 triple-digit winners over the last 36 months. To find out Bill's secret to picking winning stocks like clockwork, just click here.
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