The Tech Industry Has Never Been More Exciting for Investors

[Editor's Note: This Q&A references past issues of Strategic Tech Investor - Michael Robinson's free e-letter about investing in the lucrative tech industry. To get all of Michael's research and analysis twice weekly as soon as it's released, click here.]

Stock market futuresIn 2014, we discussed well over 100 ways to make huge gains from tech stocks.

And I'm looking forward to sharing many more tech investing ideas with you in 2015.

Before we get started on that, I want to address the questions and comments you've had about our twice-weekly chats over at Strategic Tech Investor.

I want you to know as much as possible about investing in technology - the single best wealth engine ever - so you can navigate today's choppy markets in a way that creates life-changing gains.

Let's get started with a comment about a company whose services most of us probably use every day...

Futuristic Profits with Google (Nasdaq: GOOG)

Let's start with our Nov. 10 conversation about Google Inc. (Nasdaq: GOOG, GOOGL), a company famous for its search business that is busy laying the groundwork to dominate several futuristic technologies.

Q: Thank you for your insight. It has given me a more thorough understanding of what Google is really all about!

- Charles W.

A: Thanks so much for the nice comment. One of the many things I enjoy about what I jokingly refer to as "my job" is taking the opportunity to shine a new light on tech stocks that many investors simply take for granted.

I see this happen all the time. Wall Street and the mainstream financial media have a tendency to pigeonhole companies or focus mainly on the next quarter. Google is a Silicon Valley giant that is investing for the long haul, years and even decades from now.

That column also drew a question about the mechanics of investing in Google.

Q: Michael, I found your article about Google and Ray Kurzweil very informative. When considering an investment in Google, however, which ticker would you recommend: GOOGL or GOOG? I realize one has Class A shares and the other is Class C, but I'm not sure which would be a better pick.

- Randy

A: I'm glad you asked that question because it's something that confuses a lot of investors, even some folks in the media who should know better. From a share-price appreciation standpoint, it probably doesn't really matter.

But here's why knowing the difference between GOOG and GOOGL shares is important...

From a shareholders' rights standpoint, there is a substantial difference between the two. As Class A shares, GOOGL gives investors voting rights. GOOG represents nonvoting class C shares.

Most investors don't attend shareholders meetings or vote on standard matters like hiring a new auditor. But if something major were to occur, such as a merger offer, you wouldn't have a vote unless you owned GOOGL.

The REIT Stuff

In our Nov. 14 conversation, I mentioned that Sears Holdings Corp. (Nasdaq: SHLD) was considering turning itself into a real-estate investment trust (REIT). I suggested avoiding that one in favor of American Tower Corp. (NYSE: AMT), a company focused on real estate for the wireless industry.

Q: The article says that American Tower is a REIT, yet toward the end of the article you say that the company sports a 72% payout ratio. However, REITs are required to return no less than 90% of earnings to their shareholders. A clarification is in order.

- Jim L.

A: Jim, thanks for your question. You are clearly a savvy investor with a good head for numbers.

However, in this particular case, you seem to be glossing over the difference between the payout ratio with the company's tax status. Yes, REITs are required under federal law to pay out 90% of their taxable earnings, which is different from their total earnings.

And the difference between gross and taxable earnings can be substantial. ZAIS Financial Corp. (NYSE: ZFC) is a high-yielding REIT. But its payout ratio is 60%, or 16% less than that of American Tower. In other words, many factors can affect both taxable income and the payout ratio.

The Power of Three

My Nov. 25 note to you on the three key signals every tech investor ought to know struck a chord with several readers.

Q: Your info is not only always informative, but very often (like now) has a calming influence. Thank you.

- Bob B

A: Bob, I really appreciate your comment. That's exactly what I was trying to do with that column - not just give investors like you more peace of mind but also provide a brief guide to the type of empirical data you should be tracking.

Truth be told, we're still in a major uptrend for both the broader market and for stocks in the tech industry. But it remains a volatile time. During 2014, the Standard & Poor's 500 Index declined by 4% or more five times. And from mid-September to mid-October, it registered a 7.4% drop.

Periods like that can take a psychological toll on some investors. That's why I start almost every day with the same ritual - scanning the markets for solid data I can use to make informed investment decisions.

This is so important that it's embedded in Rule No. 2 of my five-part strategy for building tech wealth - separate the signal from the noise.

ETFs for Tech Industry Profits

On Dec. 10, we talked about three technology investments you can use to double your money

Q: As always, I love your analysis. What about FBIOX?

- Jeanne C.

A: First of all, Jeanne, thanks for continuing to read this column and for keeping in touch. I very much appreciate it.

As regards the Fidelity Select Biotechnology Portfolio (MUTF: FBIOX), it's a solid investment. However, it's a mutual fund. This is an investment vehicle I recommend for retirement accounts where the plans are so restricted you cannot invest in exchange-traded funds (ETFs).

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]

I recommend that, whenever possible, you invest in ETFs over mutual funds, because ETFs generally have much lower expense fees, no sales commissions, and no minimum purchase amount. Unlike mutual funds, they trade as though they were stocks.

Having said that, FBIOX trades at $232 and has done very well over the past year, gaining more than 24%. By mutual fund standards, it actually has a low expense ratio of just 0.76%. But it requires a minimum investment of $2,500.

By contrast, iShares Nasdaq Biotechnology (Nasdaq: IBB) is a popular ETF that gained more than 36% over the same period but has an expense ratio of just 0.4%. It trades at roughly $321 a share, but there's no minimum investment.

Three Tech Stocks to Avoid

During our Dec. 16 chat, I highlighted three scary stocks that I think investors ought to avoid this year.

Q: I have never shorted a stock ever. It might be time, and the three worst tech stocks might be the ticket. It all makes sense to me.

- Ken L

A: My hat's off to Ken for his enthusiasm and optimistic outlook. Those are two very good traits in an investor, ones that over the long haul stand you in good stead.

However, shorting stocks is beyond the scope of this advisory service, so I can't add much insight into the mechanics of it all. I will say I think you need to be careful when you short stocks because you have to "borrow" them from your broker using a margin-approved account.

And remember, my main focus here is to bring you tech investments that offer life-changing gains. You can only find five- and 10-baggers by going long in such areas as mobile, biotech, cloud computing, and Big Data.

The Best Tech Stocks to Buy

On Dec. 26, I wrote to update you on why I still think Ambarella Inc. (Nasdaq: AMBA) has a lot of upside left after a more than 200% run since I first recommended it back on Aug. 2, 2013.

Q: What other tech stock would you recommend besides Ambarella to invest in? Please let me know your best stock.

- Chuck F

A: I'm glad you asked that question, Chuck. I get suggestions similar to that one from time to time.

I launched Strategic Tech Investor with one big goal in mind - to help investors make money in technology stocks, which over the long haul are the greatest source of wealth in this country.

That means going well beyond a quick stock suggestion. The idea here is to help you all become better informed, savvier, and more profitable investors.

And the only way to really do that is to provide in-depth analyses, case studies, and examinations of the unstoppable trends driving tech winners. Of course, we'll be discussing this all in terms of the five investing rules we use here regularly.

Now then, if you would like a longer list of stocks to consider for the year ahead, then I urge you to get a copy of the 2015 Forecast issue of my tech investing service, Nova-X Report. In this special issue, we provide a wealth of information regarding seven tech stocks we think will do particularly well this year. To get ahold of this special report, just click here.

About the Author

Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...

  • He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
  • He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
  • As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.

This all means the entire world is constantly seeking Michael's insight.

In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.

Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.

And even with decades of experience, Michael believes there has never been a moment in time quite like this.

Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.

To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.

His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.

Read full bio