In the past, when I’ve done these predictions, I’ve turned to mostly traders who follow public stocks. The predictions have been about the best long ideas, the best short ideas, and the estimated return of the S&P 500 in the coming year.
Instead of market predictions, I asked people for their best “sleeper ideas” for 2014. A sleeper idea is something that few people see coming. It’s a little followed idea that suddenly goes mainstream.
So when I approached people for this year’s list, I simply said, “give me your top 3 “sleeper ideas”… they could be a public company (to go up or down), a private company, or a trend or other type of idea.
In order to get the best collection of “sleeper ideas,” I knew we had to approach more than just traders. Therefore, you’ll notice that the respondents this year come from tech, venture capital, hedge funds, as well as trading.
My hope when I started compiling these lists three years ago is that we would all learn from each other sharing our thoughts together. I think this year’s collection of ideas – from 55 of some of the smartest people I know — is the best yet and I want to thank each participant for taking the time to look forward and take their best shot at guessing which ideas are ready to shine in 2014. Here they are (in no particular order):
Mark Pincus, Chairman, Founder and Chief Product Officer of Zynga, @markpinc
kik, uber, airbnb, dropbox (interestingly, the last 3, are all within a few blocks of us) and all are under valued (still) relative to their user growth metrics and business opportunities. In general I would overpay for companies with breakthrough products and scalable market traction.
Horace Dediu, founder of Asymco.com, @hdediu
1. More progress on transportation innovation. Expecting more companies to get involved in providing some form of technology for cars and even new car companies starting. Trend is fueled by modular manufacturing and even contract manufacturing of cars(!). In-car modular electronics and better user interfaces, monitoring and location services will be getting a lot of attention. This is in contrast to some of the crammed long-term pie-in-the sky moonshots from Google and Amazon which will have no impact for years, if ever. It’s also a contrast to powertrain-based innovation which gets most attention and capital today but which has far longer ramp time.
2. Bitcoin will continue to prosper. It’s not a product but an idea and the idea is good. As they say: first they laugh at you, then they fight you, then you win. The laughing stopped. 2014 will see more fighting. May have to way until 2015 for victory. Parallel bitcoin economies will emerge but perhaps not yet in 2014.
3. We might start to see the beginning of what I call the privacy wars. Revelations of state surveillance of communications might lead to a realization by internet denizens that they are being watched by mostly everyone. Some people will start to care. The response will likely result in a boom for personal encryption solutions and authentication (iTouch et. al.) I don’t expect this to become mainstream in 2014 but early adoption will accelerate and funding will be doled out to startups. Consequences for Google and others who sell user data is difficult to anticipate. Technologically they could adapt but business models may start getting frayed.
Stephanie Tilenius, Executive-In-Residence at Kleiner Perkins, @stilenius
Benedict Evans, Strategy Consultant at Enders Analysis, @BenedictEvans
My prediction, really, is confusion and surprise. The whole mobile space is in flux – Apple and Android have won the platform wars, more or less, but all the dynamics on top of that are changing all the time.
1) Superpedestrian – Spark is an investor here so I’m biased, but I think this invention is going to lead to massive global change some day. Imagine a world where you could live 10-15 miles outside of a city, and commute to work on a bike in 20 minutes without breaking a sweat (literally). This ability will change how cities work, be disruptive to the auto industry, and affect optimal real estate locations. #investor
2) Proliferation of computers on/near your body. If you think about how many computers are in your home over the past two decades, the number has exploded. In the 80s, you might have had a Mac or PC and a game console, and that’s it. In the 90s, computers started getting embedded in phones, media players, TVs, alarm clocks, etc… Nowadays, it’s an exception to see any device sold in the home that is not “smart” in some way. I think computing around our bodies will go through the same transition. In the beginning the only computer on your body was your cellphone. Now people are starting to add fitness quantified self wristband computers. Devices like Oculus and Myo will be two more human-attached computers (again, #investor disclosure). And in the next 5 years I think the number of computers on or near the body will rapidly proliferate.
3) Wireless Internet – It’s crazy that in this country we use our most valuable consumer-grade spectrum in order to broadcast over the air TV and Radio channels that could easily (and more efficiently) be delivered in IP packets over-the-top instead. I think we’ll see startups/ideas like Aereo challenge our assumptions that TV and Radio need over the air access, and instead all that spectrum will be shifted over to delivering better wireless internet for all.
Michael Katz, CEO & Founder of mPartcle and Founder of Interclick, @mkatz0630
Top picks: $GOGO, $CTRL and $TWTR
GOGO- i think as they update their tech and expand into international markets they can become either a $10B or a really attractive acquisition target by one of the wireless carriers or GOOG. Basically a monopoly.
CTRL- the leader in home automation. lots of people getting into the space from different angles like Nest, August etc. This is a trend that is accelerating and should be an interesting acquisition target at some point.
TWTR- nothing original here. great management executing nicely, expanding offerings and improving service to both consumers and marketers. think it has a lot of room to run.
Marissa Campise, VP at Venrock, @marissa/>/>
Top picks: Kyruus, Smartling, loT space and Dataminr
The convergence of changes in incentives and information for physicians will drive the next big HCIT category post ATHN’s revenue cycle management – that sector will be “patient access”.
kyruus solves the “patient access problem” wherein physicians are booked to 60% capacity but patients wait weeks to see a doctor with a big data driven web I/U for physician – patient matching.
In increasingly competitive markets, the integration of information and operations maximizes physician productivity and significantly enhance revenues while delivering optimal care to patients.
1) Based in NYC, focused on disrupting the $30B translation market
4) More than 150 big customers, including Delta, Sony, Spotify, TED, Tesla, Uber, Kodak, etc. http://www.smartling.com/clients
5) No real competitors, disrupting the language translation agency space where little technology exists
6) Raised more than $40M
3. With our Nest investment, we love the IoT space [Internet of Things] and are looking for more companies. The numbers here make my brain explode and it’s early days.
4.Dataminr is a real-time information discovery company that transforms raw social media streams into actionable signals, providing its customers with one of the earliest warning systems for relevant information, noteworthy events, and emerging trends. The company has a strategic long-term relationship with Twitter, and it is one of the handful of companies that has direct access to the full Twitter firehose. The company employs a large group of Ph.D.-level engineers and data scientists, and the algorithms they have developed find signals in Twitter data and metadata (geolocation, time, user history, user influence, etc.) and determine the relevance, significance and actionability of these signals to its customers, effectively discovering critical information and events before they become news or publicly known. For example, the company can find market-moving financial information before it becomes news and potential national security and safety threats before they are known. Dataminr is constantly adding to the number of data sources it uses./>/>
Victor Anthony, Managing Director at Topeka Capital Markets, @VicAnthony
Top picks: $GOOG,$ AOL and Wearables
AOL – a true transformation is in the cards
Wearables (visuals like Glass and Oculus Rift, Fuel bands) become more mainstream as their utility increases
Eisar Lipkovitz, VP, Engineering at Google, @lipko
- Top picks: $JO (Coffee ETF) $ GLD (Gold ETF) $TWTR
- Top shorts: $SBUX, $MSFT,$ HPQ, $NFLX, $BRK.B
Michael Pachter, Managing Director at Wedbush Securities, @michaelpachter
Top picks: Amazon, SquareTrade and Warby Parker
Amazon Prime Instant Video—The quality is getting better, the company appears to have the resolve to spend whatever it takes, and it is only a matter of time before Bezos figures out that if he unbundles Instant Video from Prime and lowers the price, he’ll attract millions of Netflix subscribers to his service at a lower price than Netlflix, and will be able to upsell them Prime free shipping.
Square Trade—a brilliant idea to offer low cost warranties without charging the customer an exorbitant profit margin. These guys are sneaky, they are insinuating themselves into ecommerce sales of consumer electronics and appliances, but it’s only a matter of time before Walmart or Target start using them and start kicking Best Buy’s butt.
Warby Parker—although they have been around a long time, they have not begun to offer bifocal/trifocal prescriptions which would attract the 80% of glasses wearers over 40. They just raised capital that will allow them to advertise, and if they can price complex prescriptions competitively, they could be a force.
Elias Roman, Co-Founder and CEO of Songza, @eliasroman
1. Mobile video ads (it’s a full-screen unit, easier to determine if someone is actually watching it than video ads served via desktop or TV; with FB getting in the game, more advertisers will have video creative to deploy; smart publishers will opt for a small number of more impactful ad units, like this one, rather than a much larger volume of far less impactful ad units).
2. Native advertising (advertisers and agencies want more and more ‘never been done’ opportunities; consumers are super adept at ignoring traditional ads, continued growth and importance of social media and social product referrals raises the rewards for a brand creating something worth talking about, which is much harder to do with traditional ads).
3. Thrillist Media Group. (Private company. Great trajectory, rock star team and Board, unique monetization solution that gives them the upside of both scalable ad sales against a tightly focused and desirable demo and highly curated ecommerce)./>/>
Hamish McKenzie, Formerly of PandoDaily and now writer for Tesla, @hamishmckenzie
Top picks: Tencent, Kik, Medium
Kik – you know I think it’s a dark horse. If the mobile web is going to be important – and I believe it will be – then Kik is key to the future. Also, it’s just totally underestimated by old people.
Medium – Beautiful publishing tools that will cause many people to ditch their blogs for good. Also a big bet on the web.
Dan Nathan, RiskReversal.com, @RiskReversal
Top picks: $ANF, $GDX, $FIO
- ANF ($32.79) use 10% stop on downside to about $30…could 2014 bring m&a, an activist investor or some sort of corporate action to cause investors to take another look at the beleaguered teem retailer?
- GDX ($21.83) use 10% stop to about $20…..fundamentals so bad for gold miners and price action even worse, could see dead cat bounce to Aug highs on pure technicals which would yield about a 35% return.
- FIO ($9.40) Big Data, Datacenter, Cloud, throw whatever buzzwords you want but the stock got creamed last year on declining sales from a very concentrated customer base. Here is another thing that is concentrated, short interest at about 20%. Company could be a cheap strategic asset for the right buyer. Back in September the stock rallied almost 50% in a week on takeover speculation, stock obviously lower now but downside risk could be outweighed by potential for asymmetric return to the upside.
Disclosures: long GDX
Michael J. Wolf, founder and managing partner of Activate, Inc. @michaeljwolf
Privacy, Trust and Identity are now at the forefront for all consumers, and have wide-ranging impact on technology and media businesses. From tech companies, expect lobbying actions, new tools, new policies and more personal control to rebuild users’ confidence, and from the policy world expect more guidelines around use of personal data and stricter repercussions for violations of user trust.
Personal Retail: As brick and mortar stores implement technology such as Apple’s iBeacon, Bluetooth Low Energy Technology (BLE), facial recognition and geofencing alongside broader use of tablets and located apps, the shopping experience will get more personal and more closely tied to the digital experience. This personalization is in direct tension with the privacy and trust issues, but should still present a significant opportunity for growth for the companies that innovate.
Mobile Money: After years of false starts, paying through mobile devices will start to provide enough value to be used alongside conventional credit cards. Financial services and technology companies will build these new experiences from mobile payment solutions such as PayPal’s Beacon, identity and verification systems such as Apple’s TouchID and offerings from new companies such as coin (www.onlycoin.com) which eliminate the need to carry all that plastic.
Mike Dauber, VP at Battery Ventures, @dauber
- Hadoop will surpass Teradata/Exadata as the de facto data warehouse in Fortune 100 companies
Jeff Macke, Co-Host of Breakout on Yahoo Finance, @JeffMacke
Trying to pick Shocking Events is a losing game. Sleepers aren’t about being first. Sleepers are about mild surprises that make people money. Here are three trends. One debunks a current assumption, one is an acceleration of something already happening and the final is something that will irritate me.
The long-awaited television will amount to an update of existing Apple TV stuffed into a glorious, expensive, huge television set. It will allow users to not have to switch inputs between cable and television.
The wearable device will be an amalgamation of the Jawbone and clunky Samsung phone/ watch. It’ll play into self-absorbed Millennial and GenX desire to record and view every single moment of our own lives. Like a selfie of you activity. It’ll have some appeal but is unlikely to advance much beyond evolution of existing or soon-to-be delivered app + device combos.
2) Amazon goes to same day order fulfillment in several major markets (probably New York, LA, Seattle and San Francisco… Large, concentrated populations).
This will or at least should terrify UPS and FedEx. Bezos wants the last mile. Events like delayed Christmas shipments make him absolutely insane. I’m only half-exaggerating. To a good merchant there is nothing on earth worse than debacles like the delayed delivery of packages on Christmas.
3) The CBOE starts trading Bitcoin derivatives.
I don’t like Bitcoin. It smacks of a collaborative between a hacker and the NSA. It’s a childish fantasy currency (“imaginary miners! Super-secret geek inventors!”)
Tero Kuittinen, Wireless and Gaming Analyst, @teroterotero
Glu Mobile – stock has doubled in a couple of months, but still well below 2011 highs. The latest “Deer Hunter” mobile app delivered surprisingly strong performance and overall mobile ad market is growing in both size and sophistication.
Ben Thompson, Founder of Stratechery, @monkbent
1) A Chinese phone company will become the 3rd largest smartphone manufacturer – both worldwide and in the US. They will do it by making Android phones to carrier specifications and with carrier branding/>/>
3) Payment innovation will come via Asia, not the US (see the Chinese influence on Bitcoin), due to the lower penetration of credit cards combined with the greater dependence on smart phones
Brian Ascher, Partner at Venrock, @VCsurferDAD
Since your audience is into investing and financial markets I think a very important and relevant trend is online wealth management. That is, diversified and continually rebalanced multi-asset class portfolios with low/no fees for trading. Mostly invests in stock and ETFs, with very reasonable Assets Under Management fee structures. Example private companies are www.Wealthfront.com , www.Betterment.com , and www.PersonalCapital.com (Venrock is an investor.) I believe these services are going to massively disrupt traditional brokerages and expensive private client wealth advisors.
Another hot trend are data-driven software applications. This refers to software as a service that not only automates workflow or serves as a structured data repository, but analyzes big data to help predict and prescribe decisions and action. www.retailsolutions.com , www.castlighthealth.com and www.Inrix.com are examples from our portfolio of private companies.
Eric Jackson, Founder and Managing Partner at Ironfire Capital, @ericjackson
- Zynga – The company has been left for dead by most, just like Groupon was at the end of 2012, right before it gained 150% in 2013. New CEO Don Mattrick has 6 months under his belt now. My guess is that he will (a) do a big cost cut and (b) start to unveil a new line-up of games starting mid-year. They only need one or two to do very well and this stock can start to trade much higher than its cash and real estate value. Don’t bet against Mark Pincus or this board.
- Chegg – In hindsight, Chegg CEO Dan Rosensweig should have been appointed Yahoo CEO back in 2007. The company never would have had to go through its fallow period. Instead, Dan’s at Chegg, itching to show the world he’s just as talented as former Yahoo colleagues like Jeff Weiner or other Silicon Valley rock stars. He’s also got a good team around him at Chegg – and a lot of investor skepticism since their IPO in November, mostly because of concerns about the sustainability of their textbook rental business. But I believe Chegg will show strong growth in its digital revenues this year which will cause investors to forget about this – just like they did Netflix’s DVD business when the streaming growth showed up.
- SFX Entertainment – The founder of Live Nation, Bob Sillerman, rides again now heading up SFX which focuses on the fastest growing niche of the music business these days: Electronic Dance Music (EDM). Critics say the dance music is a fad. I saw it’s been going strong for 20 years in Europe and America is just getting started. SFX is doing an industry roll-up of the festivals, merchandising, sponsorship, ticketing, talent management and more – and making good money at it.
Jason N. Ader, CEO and CIO of Ader Investment Management, @JasonAder
Adam D’Augelli, VC at True Ventures, @adaugelli
The Rise of Citizen Science
Humans have long participated in scientific research, but Moore’s Law and Open Source Communities have given individuals inexpensive access to powerful research tools for the first time. Similar to other industries, when the cost of experimentation approaches zero, you spur individual creativity and open up whole new areas of opportunity. Early success stories include Foldit, Galaxy Zoo, and Zooniverse but companies like OpenROV and 3D Robotics or projects like HiveBio in Seattle show what could be possible in the short-term.
Commercial Open Source Grows Up
Open Source software has come a far way from its roots with Richard Stallman and the Free Software Movement. Individuals have long understood the technical merits and starting with the Netscape’s open source experiment in 1998, corporations have been opening up to the strategic and business value of open source too. Over the past decade, we’ve watched more and more individuals build sustainable businesses around open source projects – early examples include Automattic, SugarCRM, Cloudera, Mulesoft, and Puppet Labs – and next year we’ll start to see more of them maturing into large independent enterprises./>/>
Human DNA as Code
This is the opportunity created by a software-first approach to solving problems in human biology and patient care driven by the explosion of available medical data (through EMRs) and molecular data (through the rapidly declining costs of full genome sequencing and other tests.) The market is ripe for rethinking as data finally comes online in a readable and maluable format. Companies to watch include Moleculo, Counsyl, Ginger.io, and Practice Fusion.
We believe that U.S.-listed China internet stocks will have a down year in 2014, and that their decline will start at the latest at the Alibaba IPO. The asset class was already frothy (if not bubbling), and many of the China-specific problems, such as fraud and VIE structures, have not been satisfactorily addressed. With their market caps having come back substantially in 2013, the stocks are enticing to short-sellers. With investors having already experienced significant gains in these stocks, their mentalities are likely to be more about preserving those gains than eking out additional ones, leading to heightened sensitivity to bad news and building negative sentiment.
Steve Landry, Managing Partner at EastBay Capital, @stevelandry10
Hit: Expedia- After a largely disappointing 2013, 3Q13 momentum continues with better results and outlook for at least the next 2 quarters. Business stabilizes in US and market focus turns to growth opportunities in Europe, Asia, Trivago, and mobile. At some point in 2014, Barry Diller decides he needs another yacht and sells enough voting shares to Liberty to gain control. Chart of EXPE from that day mirrors TRIP in 2013 as market appreciates massive equity shrink potential + long overdue operational changes with Malone & Maffei calling the shots. EXPE significantly outperforms PCLN and the broader market
Hit: Online gaming- Following NJ & NV lead, more states pass online gaming bills in 2014 and investors pile into the few public market beneficiaries of mobile gaming. Prefer those that enable and skim off the top like Scientific Games (SGMS) and Optimal Payments (OPAY LN) over the platforms that are susceptible to rising taxes, high marketing costs, and sell the news set-up post World Cup boost. Short China plays- 500.com and Boyaa- that have a reality check in 2014 as new licenses and national lottery system puts pressure on commissions that are artificially high today
Miss: Mobile games- Big deceleration in native app YoY growth over the holidays signals market maturation heading into 2014. There will be a new Top 5 hit for the lucky developer or two, but majority collapse given terrible underlying fundamentals. Smartphone penetration is no longer a tailwind + pressure from Apple/Google toll + subscriber acquisition acquisition costs (cost per install more than doubled in 2013) appreciate above lifetime subscriber value given extremely low barriers to entry. Sector that was rerated in 2013- especially in Japan with more than a dozen names to play- gives back billions in market cap in 2014. Short 2013 mobile/console gaming winners and go long laggards- 1) Gree and DeNA outperform peers thanks to big valuation support, core biz stabilization, and a couple surprise hits from native app pipeline. 2) Nintendo more than doubles as company makes long overdue strategy shift to license valuable IP to mobile platforms and de-emphasize hardware that was DOA
Enis Taner, Global Macro Editor at RiskReversal.com, @EnisTaner
Top picks: $NTES, $SLW, $UBNT
Top picks: OpenTable, RetailMeNot, Alternate payment networks
Here are some thoughts I have. I haven’t done any valuation work on the companies, so it’s hard for me to recommend them as “buys” or “undervalued”. I’d position them as companies that I think will have very strong operating performance in 2014-15 driven by solid business models, fundamentals and market opportunities.
OpenTable: Great business model (install fee, monthly recurring fee + seated guest fee), strong network effects, robust & experienced sales team, large & loyal customer base in a killer category (mobile local) and new opportunities (new geographic markets, hands-free customer payments, restaurant marketing)
RetailMeNot: Strong forecast e- and m-commerce growth over rest of decade are promising trends. Solid mobile app download and usage figures bode well for growth in in-store coupon business. More “connected” retail stores makes redemption tracking easier and could lead to more flexible (SKU-level) coupons, increasing retailer supply and consumer usage. These trends could also benefit Coupons.com, which is expected to IPO in 2014.
Alternate payment networks: The current US payment systems, while easy to use for consumers, are expensive and increasingly unwieldy for merchants, both large & small, from a compliance, security and information management perspective. The largest merchants are addressing this through the MCX payments venture, closed loop programs and other initiatives while emerging technology like Bitcoin give retailers new options. Pay attention to the response of Visa, MasterCard, American Express & Discover in 2014./>/>
Rafat Ali, CEO & Founder of Skift, @rafat
1. Rise of The Silent Traveler
The rise of digital has given rise to a new kind of traveler who is adept at all available online and mobile tools and uses them to jump across all industry-defined silos. These new travelers don’t need tons
of handholding, they shun human interaction, and know their way around everywhere they go./>
This presents the global hospitality industry a paradox: the human part of the service economy may become less and less important with the rise of the independent, digital traveler forging his or her own
way. But big data and personalization offer a way for travel companies to offer that invisible pillar of support. It also allows the travel industry an opportunity to balance the inevitable expectation of
personalization while simultaneously enhancing the need to remain independent./>/>
2. Rise of Mediata Startups
Historically, in the world of business information, the media and data companies have been started separately and put together down the line by roll-up shops backed by private equity, or by larger trade media conglomerates. But what would a startup built from the ground up to take advantage the organic fusion of media and data look like?
What would it mean to scaling of media startups, a group historically seen by the investor class as a low-margin, human-heavy, and purely ad-supported businesses not meant to scale beyond a certain point?
We call these new generation of companies as “Mediata Companies.”
Leigh Drogen, Founder and CEO of Estimize, @LDrogen
Top picks: Bitcoin, $IBM & Food tech industry
Bitcoin Protocol – Because most people don’t actually know what Bitcoin is at a fundamental level, how it actually works, they miss the true innovation of the protocol itself. 2014 is going to be all about the Bitcoin protocol as a means for verifying everything via the blockchain. Yes, the price of Bitcoin will most likely surge as well, my guess is as good as anyone else’s as to how high, but I would not be surprised to see $10,000 by the end of 2014. Look for dozens of startups which use the Bitcoin protocol to be funded by VCs and for many of them to succeed in beginning to replace older institutions. The other day I saw a startup which is trying to build a new way of voting online by verifying with the blockchain, it’s genius. This protocol will revolutionize so many things, and this is the year that you will see and hear all about it. Use the private market valuation of Coinbase as your privately tradable asset.
IBM Watson API – It took a while for IBM to get its act together, because it’s IBM and it operates on a completely different timeframe than anyone else. The company which is headquartered literally down the block from where I grew up in Chappaqua, NY, made huge strides this year in commercializing their Watson analytics engine. But the real promise of Watson is not what they can do with it, it is what everyone else can do with it. Finally towards the end of the year IBM opened the Watson API to third party developers, in a limited way. This sets the ground for 2014 to be the year in which developers get their hands on the amazing Watson engine and build a host of amazing apps with their intelligence layer. Don’t sleep on how important this advance is, and how long it took for IBM to get this into everyone’s hands. Will the market give IBM the credit it deserves this year in terms of a rising multiple, maybe, maybe not, that’s a tough one to call, but if a few apps built with Watson get out there and become popular which I think they will, yes you will see IBM’s stock benefit.
Food Tech – The food service industry will be reshaped head to toe in 2014. It’s been many years in the making, with fits and starts, but it feels as if 2014 will be the year when it really happens. We already have Seamless, Grubhub, Yelp, and OpenTable, but we’re about to see the next big wave which is going to connect everything. You’re going to see a wave of iPads hit restaurant tables and replace waiters, variable pricing models for high traffic restaurants, people cooking meals in their homes for each other, chefs that will cook meals in your home for your party on demand, and much easier ways to buy fresh produce and meat. There is so much waste in our food system right now that will be taken out with better logistics, collaborative consumption, and verticalized remnant labor apps. This is the year, use Blue Apron as your privately tradable asset.
Penny Herscher, President & CEO of FirstRain, @pennyherscher
Here are my predictions. Not sure they are “sleepers” but they’re what I believe!/>/>
- Google massively disrupts the major carriers by offering superior internet access to every person in North America
- Enterprise users get exponentially smarter with the adoption of personal business analytics on their mobile devices
- IT accelerates the move to the Cloud ahead of expectations – Cloud computation and storage dominate and are the future for every company
Twitter will blow by revenue projections, and do close to $2bil top line in ’14
Vanessa Alvarez, Head of Marketing at ScaleComputing, @VanessaAlvarez1
Top picks: $SAP, $DELL, $MSFT
SAP: will surprise in becoming a competitive cloud player, acq of Successfactors was a start, w/b more integrated into overall SAP business
DELL: Private w/give them opp to grow SW biz, while still making $$ on HW, become a true SW/HW biz, convergence w/help them get there w/ptrs
Derald Muniz, @1nvestor
My sleepers: NM,HIMX, KEY, AKS
Brian Sozzi, CEO & Chief Equities Strategist of Belus Capital Advisors, @BrianSozzi
- Top picks: $ARO,$ IXN
- Top shorts: $WMT
John Sarason Saroff, Chief Business Officer at Chartbeat, @saroff_nyc
Better Metrics for Brand Advertising - In 2014, publishers and advertisers finally start using advanced technology and metrics to not only measure brand awareness but also to bill/pay on it. Impressions become less relevant as brands start thinking about engagement and demanding it from their media. A new generation of companies at the intersection of media and analytics rise up to answer this clarion call.
Over-The-Top TV: An internet tv provider emerges in 2014 that provides many or all of the cable networks available through your friendly cable/satellite provider through an internet connection. Early bets are on a Verizon purchase of Intel’s OnCue service but this could also come from Aereo, Dish Network or even one of the programming services (ESPN? HBO?) themselves.
Inflation: Janet Yellen’s Fed embraces moderate inflation in 2014 as a way to spur job growth and shrink debts both public and private. It pops up fast and unexpectedly, spooking and mystifying a generation of corporate and political leaders (as well as journalists) who learned how to manage finances at the knee of Alan Greenspan and Ben Bernanke./>/>
Shaun Rein, Managing Director at China Market Research Group, @shaunrein
- Top Long Picks – Ginseng, Manuka Honey, Starbucks
- Top Shorts – Bitcoin
Ginseng and Manuka Honey: the pollution problems plaguing China the past year have been so bad — even causing e-commerce to boom as no one wants to go outside — Chinese are spending more on health food like American ginseng and Manuka honey. Expect the trend to continue as pollution problems won’t go away anytime soon.
It has the potential to become the new YUM Brands for investors eager to tap into Chinese consumers wallets. Chinese have bought into the coffee lifestyle and China will become Starbuck’s 2nd largest market in the world in 2014. It is luxury in a cup. Yet penetration for Starbucks remains centered in 1st tier cities so there is lots of room for growth.
Bitcoin: Chinese are scared of the fraud in Chinese equities so they have been shying away from China’s a-share market, speculating in all kinds of things. First came real estate, then pu’er tea and even ant colonies. Prices soared and then dropped. Now it is bitcoin. But investors should be wary as Chinese have driven up prices and will cash out quickly, sending bitcoin prices to plummet in 2014.
Joe Donahoe, President of Upsidetrader LLC, @upsidetrader
Top 3 With Targets: VEEV $50+ (cloud & biotech, what could be better?) EEM target $50–55 (it’s time), BMRN Target $95-100 (pipeline)
Dasan, Trader, @dasan
Long CACQ which is Caesars online
Short RAX rack space
Matt Davio Business development at Proxense, @MissTrade
Top shorts: Gold, $GOOG and $SBUX
Short Gold @ $1240 an OZ look for 900-1000 Targets, Still too many gold bugs, and we more of deflationary problem in commodities.
Short GOOG $1083 and look for 850-900, Cycle change just running on fumes to upside.
Short SBUX @ $78.75 and look for $60 Target as Coffee prices begin to rise finally and poor revenue numbers begin to trickle in on latest over build out and update of company own stores wears down the profit margins.
Anonymous Economist & concentrated value/event-driven investor: @nyonnais
Top picks: $AOL, $FCEL, $ABX/>/>
2014 Picks APP, BLDP
Market spikes down 15 to 20%
Ron Shuttleworth, President of RES Enterprises, @resthink
Some contextual themes first:
1. enterprise budgets are expanding due to better macro risk conditions and an urgent technological replacement cycle.
2. global economies are growing, helping to drive both employment growth and revenue streams – especially for tech.
3. Multiple expansion has plateaued for the past two quarters – so we may see multiple expansion moderating in 2014.
4. Canadian tech stocks are more fairly valued now in comparison to other jurisdictions like the US – meaning that there are more M&A opportunities for Canadian companies.
What we are looking for:
1. solid recurring revenue growth
2. balance sheet strength
3. Earnings – although revenue growth over earnings growth in 2014 because we think expanding economy could slow margin growth.
4. Enterprise over consumer
MSFT because it aligned well to benefit from the current enterprise tech replacement cycle. For the first time it has a unified OS across mobile, desktop and cloud.
MITL/MNW – reaping the reward of global communications upgrade which is just beginning to accelerate in 2014. In addition, the company should announce the completion of its acquisiton of Aastra, which doubles revenue, and helps the company to gain top market position in parts of Europe.
SUM – After a strong year, Solium Capital will still benefit from global employment growth and an ongoing shift towards equity compensation. The company raised over $20M recently and has sufficient capital to potentially make acretive acquisitions that should help it to gain more market share in Europe and US.
GXI – After a rough few quarters, GXI signed and began to deploy several high margin In flight Entertainment deals which should culminate in 40% growth in revenue and a more than doubling of earnings. We think that the stock should respond to these developments in 2014.
ESP – provides platform for network providers and TV manufacturers to offer seemless access to the Internet. Just signed a large multi-year deal to provide its platform to Rogers. We are also under the impression that there may be several other “Rogers-like” potential clients in the pipeline. We don’t think that is captured in the share price currently.
Todd Sullivan, Co-Founder and GP in Rand Strategic Partners, author of ValuePlays, @ToddSullivan
Top picks: $SHLD, $HHC, $SHOS
Joey Kunkle, Founder of OptionsHawk.com, @OptionsHawk
My 3 sleeper picks for 2014 are Ascent Capital (ASCMA), Himax Tech (HIMX) and Adept Tech (ADEP).
Ali Nazer, Co-Founder of Onside Sports, @anazer
1) Analytics for the real world (e.g. Euclid)
2) Native mobile advertising networks at scale/>/>
3) Disruptions in gaming interface and displays (e.g. Oculus VR)
Joe McCann, Director of Creative Technology at Mother, @joemccann
- Top picks: $JCP, $MSFT, $MU, $FB, $EBAY, $MGT, Uber, Over The Top (OTT) messaging apps, Node for short
- Top shorts: $PCY, $VJET, $TWTR
JCP – Long
Not sure if $JCP is actually a “sleeper” considering how much it’s in the news, but its current position in the market eerily reminds me of a one Best Buy at the end of 2012. People had left it for dead, it was heavily shorted, yet for 2013, Best Buy is up a whopping 240% YTD.
$JCP is approaching a 30% short interest and is down over 54% YTD. Bill Ackman, who was long up until August, capitulated his position and since then the stock has acted favorably whilst hedge funds have since loaded up on it. It is now one of the most heavily owned stocks by hedge funds with nearly 36% of all its float owned by hedge funds.
I like this trade purely on the contrarian nature of how it is so wildly hated and the recent price action in the stock over the past couple of months. When Goldman came out recently in December and voiced its concern that selling of additional clearance items and the elimination of some brands altogether would have a negative and deteriorating effect on margins at $JCP, the stock dropped 3%. However, the stock immediately rallied back the next day and has jumped an additional 12% since then. Call volume in the options pits are relatively bullish as well. Price actions feels like it goes higher into 2014.
Other stocks I like long: $MSFT, $MU, $FB, $EBAY, $MGT
PCY – Short
The hangover of the Federal Reserve’s QE policy will be felt strongest in emerging markets, particularly those who have seen a significant rise in foreign captial inflows over the past five years. According to the McKinsey Global Institue, “Purchases of emerging-market bonds by foreign investors totaled just $92 billion in 2007 but had jumped to $264 billion in 2012.”
With the Fed tapering imminent coupled with a bet on yields rising (even slightly), one has to risk manage the impact of either event and certainly both. My hypotheis is that redemptions by foreign investors in emerging market sovereign debt will increase in order to raise capital domestically if either event is triggered, be it rising yields or actual tapering policies, and hence my short call on $PCY, the ETF invested in the government bonds of 22 emerging market countries.
Other stocks I like short: $VJET, $TWTR
Private Company – Uber
Many are familiar with this company as well, but I believe Uber is still really early and has a ton of room to grow. The leaked info about their revenues is incredibly impressive: over $1 billion in gross bookings this calendar year alone. But this is only the tip of the iceberg.
Uber has the potential to become a massive realtime logistics platform for nearly anything. They have already nailed car services, but added on helicopters to The Hamptons, kittens, ice cream, mariachi bands, and even a toy drive over the holidays.
Uber is creating jobs. Loads of them and one has to consider the impact on the working class where Uber is providing drivers (and others in the service industry) means of additional or even full time income. The transportation lobby in many states and cities is aiming to fight Uber’s encroachment on their turf, but that becomes a tricky political battle for any politcian that wants to take on a topic that is actually creating jobs. Uber clearly has a strong legal team and I wouldn’t be surprised to see them actually spend money on lobbyists in DC in 2014.
Finally, Uber is actually impacting the psyche of consumers and their shopping habits particularly around fulfillment expectations. Uber is training our brains to reach for our phones and order up nearly anything at the moment we want or need it. Ebay, Amazon and Google are each trying to get out in front of this consumer behavior by launching their own same day fulfillment operations as well, but no one has executed as succinctly as Uber. Imagine a day where nearly anything can in fact be shipped to you in near realtime. This has potentially negative ramifications for UPS, FedEx and the USPS. Acquisitions of Uber’s competitors in that space seem unlikely by the big three logistics companies, but there’s no question they are on their radar as they are too monolithic to move and adapt to a realtime logistics platform like Uber, so growing via acquisition is the path of least resistance.
Tech Concept – Messaging Apps as Monetization Platforms
I wrote about how over the top (OTT) messaging apps were the new monetization vehicles for mobile six months ago, but wasn’t aware of how quickly the messaging apps would start to impact media, content, games, ecommerce and even household appliances.
In short, OTT messaging apps aren’t simply messaging apps, they are platforms to be leveraged in many other ways. From gaming to payment to celebrity content, the messaging apps have disrupted mobile messaging itself by creating a network effect of hundreds of millions of users inside the messaging app itself. The app is only the entry point to a platform of opportunity for brands, retailers, celebrities and of course users.
Line, a Japanese messaging app, has amassed 300MM users, has games, virtual stickers, has raked in over $160MM in revenue in Q3 of 2013 and is planning for an eye-popping $10 billion IPO. But they aren’t stopping there. Recently they announced an in-app ecommerce offering to retailers to sell their wares directly to Line users, taking a 10% cut of the final transaction amount. Line recently launched a pop up shop at a mall in Indonesia selling plush toys and Line-related regalia which reminds me of the route Angry Birds took with licensing toys, video games and even films. Line is also getting into your home, literally, by now allowing you to control your LG home appliances directly from the app. So this messaging app now provides messaging, games, virtual goods, physical goods, branding and licensing opportunities and even home automation capabilities. Upside here is massive.
WeChat, a Tencent company, has also captured nearly 600MM users worldwide with just under half of those users actively using the app on at least a monthly basis. WeChat reported revenues of an a mere $630MM for Q3 of 2013. WeChat has capitalized on Tencent’s payment mechanism allowing people to pay for physical goods, such as tea at McDonald’s, or virtual goods, such as the wake up calls from Chinese celebrities. Seriously. WeChat also has WeChat-powered vending machines (there’s the Tencent payment mechanism manifestation in the real world) and has now taken aim at your living room. WeChat is building a WeChat-enabled smart television and one can only imagine the possibilities of payment, messaging and a social network and loads of brands salivating to be a part of all of it.
It should follow that Snapchat’s passing on $3 or $4 billion from Facebook and Google respectively, makes more sense when one compares them to Line, WeChat or any of the other successful messaging companies. The United States is way behind the rest of the world when it comes to messaging, but I’d expect that change, quickly, in 2014.
Tech Concept – Node.js
Last but not least is a technology that unless you are in fact a technologist, you may not be aware of its existence and its potentially massive disruptive capability.
Node.js, or Node for short, is an application runtime for creating data-intensive, realtime network applications. Node also runs on any modern operating system and has been embedded anywhere from Android devices to LG Smart Television sets. Node is also wickedly fast as its “engine” is the same engine in Google Chrome’s web browser.
Enough with the technical jargon, why is it important? Companies are starting to rapidly adopt this technology as its performance metrics are simply to good to ignore./>/>
Walmart.com, on Black Friday, it’s most heavily trafficked day every year, saw 53% of its traffic flowing to its Node servers and not a single server went down. Not one. Moreover, CPU utilization (how hard the computer/server has to work) was near 1% the majority of the day. According to the lead engineer, “they were bored that day”. The year prior, Walmart.com saw many Java (Oracle) servers crash repeatedly due to the inability to handle the traffic.
Paypal recently piloted a Node app alongside a Java version of the same app and saw astonishing results. The Java app took twice as long to build (with more engineers required). The Node version of the app handled double the amount of requests per second to each server and the response time was 35% faster than the Java counterpart. Since the success of this app, Paypal is now developing not a couple more, but a dozen new Node apps and all apps going forward will be based on Node.
Groupon recently switched from Ruby on Rails to Node and is easily serving 50,000 requests per minute and has seen “response times drop dramatically.”
Mastercard is now leveraging Node to create a “cryptography as a service” capability for similar performance reasons.
So what does it all mean?
The unbundling of the enterprise software stack, dominated by Oracle via its purchase of Sun, is starting to breakdown. Loads of companies whom have been reliant on bundled hardware, software and managed services are shifting away from that model thanks to cloud offerings, SaaS products and now, an open source technology, Node, which empowers developers, allows for faster innovation and has performance and scalability metrics to back it up. The vendor lockin model that is synonymous with traditional vendors such as Oracle, SAP, Cisco, etc. is at risk as speed to market, scale and performance are more important than a “solution” by a single vendor. I expect Node to seriously mature as a first class technology solution in 2014 and will be evidenced by even greater adoption by IT organizations at companies worldwide.
Doug Estadt, Founder & Managing GP of Pennwall Capital, @wsmco
Top picks: ZNGA Jan’15 3 calls
Top shorts: European stock markets, $EWP, $EWQ
My best sleeper ideas would be short European stock markets, EWP EWQ and long ZNGA Jan ‘15 3 calls. I think ppl are too optimistic on Europe being “fixed” and too pessimistic on Zynga’s prospects
Brad Silverberg, VC at Ignition Partners, @bradsilverberg
- Long: Google, Amazon, next gen cloud infrastructure, mobile everything, mobile social/communication networks, everything is getting sensored and connected.
- Long: Github
- Short: Edtech, Bitcoin, PCs
TBD: Momentous year of change for Microsoft. What will the company look like end of 2014 and can it turnaround?
TBD: Will Apple introduce ground breaking products / new markets, or will it continue incrementalism?
PS. I could be very wrong on Bitcoin but I am skeptical that is can go from being a techie toy to real currency. All the things techies like about Bitcoin are why sovereign governments don’t.
Francine McKenna, Freelance writer and CPA,@retheauditors
Deloitte is the next Arthur Andersen
Global audit and consulting firm Deloitte, the largest by total revenue of the remaining Big Four, is in a race to the bottom to become the next Arthur Andersen. Deloitte thumbs its nose at repeat criticisms of its auditing quality by US industry regulator the PCAOB. But it’s the firm’s consulting work that it most the most likely to join Andersen in ignominy./>/>
Audit clients lost during the crisis include Bear Stearns, Merrill Lynch and Washington Mutual and bankrupt, fraudulent mortgage originator Taylor Bean & Whitaker. Deloitte recently settled the multibillion-dollar TBW lawsuit quietly. Deloitte is also in the SEC’s crosshairs for holding back on records of lousy Chinese company audit work. (Deloitte China has the most clients named in fraud lawsuits of all the global audit firms in China.) States like Massachusetts, Florida and California are fed up with Deloitte’s faulty software, taking a hard line on paying for bugs and threatening lawsuits. New York’s Department of Financial Services banned Deloitte’s Financial Advisory unit from bank work for a year for lack of independence in money laundering work at Standard Chartered and imposed a $10 million fine. The UK regulator said Deloitte’s audit of bankrupt MG Rover was compromised by advice it gave executives on selling their piece.
Which companies are impacted by a Deloitte downfall?
Fellow private Big Four public accounting firm PwC competes with Deloitte on the commercial consulting side but publicly-traded Accenture, the consulting firm spinoff of Arthur Andersen, will benefit from Deloitte’s latest lapses in serving the public sector well. Deloitte public sector competitors Booz Allan Hamilton, Maximus, and Navigant may also benefit. Software vendors Oracle and SAP typically team-up with Deloitte to implement new software. They’ll devote more time and marketing dollars to other integration partners if Deloitte’s reputation continues to erode. The US federal government, especially the defense department, is devoted to Deloitte but even the Feds and the Federal Reserve bank—a Deloitte audit client— will diversify vendors to mitigate the risk of key resources abandoning ship.
Worst not over for banks’ mortgage servicers
The court-appointed monitor for the National Mortgage Settlement said in a December report that Bank of America, JPMorgan Chase and Citigroup were still screwing homeowners— refusing requests to lower monthly loan payments, provided the wrong information to borrowers before beginning a foreclosure, and they failed to notify homeowners of missing documents in requests within the mandated time periods.
Citibank, I’ve heard from sources, has been particularly stubborn about fixing problems with inaccurate proofs of claim, the information creditors file with the bankruptcy court to support their claims against the home and other assets. Citi will probably be the next bank to be sued by the US Bankruptcy Trustee for this intransigence. Banks like Citi have been aware of these faulty systems and processes for years. The Fed/OCC foreclosure review at Citi performed by PwC didn’t solve these problems and they continue to cause severe hardship for consumers. Faulty mortgages, aka “distressed assets”, have been sold by the major servicers to “Specialty Servicers” as Mortgage Servicing Rights (MSR’s). Servicers are transferring distressed MSR’s at the same time the CFPB TILA and RESPA Rules take effect, January 10, 2014. They contain systemic errors embedded in the borrowers default, bankruptcy and foreclosure calculations and reflect questionable penalties and fees. Unsuspecting investors will bear the huge financial consequences.
Daniel Ernst, Principal at Hudson Square Research, @danielhsqr
Apple | AAPL | Buy
Simply put, after rising 60% Y/Y in FY12, earnings fell 7% Y/Y in FY13. At the end of the day, tech stocks are about growth, and Apple’s abrupt shift into reverse explains the stock’s fall from grace and its perch at $700 / per share. However, with that in mind, we like the prospects for Apple in FY14 as the company returns to earnings growth. At 12.5x earnings vs. 15x for the S&P, Apple trades like it won’t grow again, let alone innovate again. Further, odds are growing that this is the year Apple finally introduces a new category as Cook has hinted they will. Finally, buy backs and the dividends continue to support the shares and we expect that over the next year they increase both programs, even if not as much as some investors want.
Twitter | TWTR | Sell
While a fundamental catalyst is hard to come by, and consensus for both 4Q13 and 2014 looks particularly low and therefore beatable, Twitter remains grossly overvalued at 860x 2013 and 360x 2014 EBITDA while Facebook is 30x and Google is 15x. Further, while only time will prove this out, but we are not convinced Twitter’s opportunity is as large as Facebook’s. The combination of a potential mid-year seasonal slowdown, along with an end the lock up restrictions on 85% of the fully diluted share count in May could collude to right size the valuation. Our $20 per share valuation equates to a still rich 91x our 2014 adjusted EBITDA estimate and 35x 2015e
Oi Brazil – Portugal Telecom | OIBR3:BZ, PTC:LS | Not Rated – Potential long(s)
Global pay TV and at home broadband penetration remains relatively low, particularly in Latin America where both stand near 45%. Moreover, in Brazil, both stand near 30%, providing ample room for growth. We would expect the World Cup in Brazil, beginning in June should provide a lift, and also provide a benefit to roaming fees for local wireless networks. After rising nearly 200% over the last five years, vs. 100% for the S&P 500, U.S. cable and satellite providers trade at 8x EBITDA, and M&A activity in northern Europe has pushed several names above 10x. Sector growth and a more favorable economic climate have pushed Mexican network valuations above 7x. While the economy is a persistent risk in Brazil, the group looks particularly attractive at 4x. While a basket approach would likely provide a lower risk play on the event – including: Telefonica Brasil, America Movil, Numericable, Portugal Telecom, Zon Optimus as well as U.S. based providers DIRECTV, and Echostar. We focus here on Brazilian wireless and cable operator Oi trading at 4.2x EBITDA. Oi is set to merge with existing equity holder Portugal Telecom, trading 5.3x. The merger along with a significant equity raise into a new entity with a single class of stock is planned for late 1H 2014. Oi fell 54% in 2013 vs. down 16% for the IBOVESA and , and Portugal Telecom (PTC:LS) was down 11%. Taking into account pro-forma cash, recent asset sales (not included in announced deal math), and the planned equity raise (assuming Oi’s recent common market price) we estimate that at 5.0x our 2015 EBITDA forecast, New Co. could trade at BRL5.73 –or at 5.5x, BRL6.85 per share. At current prices and exchange rates, there is somewhat less upside to PT shares, but also less risk given a collar on the deal.
Greg Cohn, Co-founder of Ad Hoc Labs, @gregcohn
- The 3rd-party advertising ecosystem around social network platforms will break out, with a huge flow of dollars going into it, especially around mobile user acquisition once Twitter launches a product around this. Companies like Nanigans will emerge as key players the scale of the big search ecosystem players of 10 years ago
- Everyone’s talking about wearables — rightly, from a hardware point of view — but I think 2014 is the year fitness, wellness, and quantified self software and data companies will make real inroads with the incumbent medical and insurance ecosystems, showing how much value that will generate.
- We’re obviously also bullish on privacy and identity management and think that 2014 will be a big year for those kinds of tools in a mobile communications context.
Michael Neril, Co-Founder & Managing Director at Webb Investment Network, @michaelneril
+ Mobile retargeting becomes key growth driver for mobile
Example companies: Applovin (disclosure: Webb Investment Network (WIN) is an investor), Drawbridge/>/>
+ Peer-to-peer economy (leveraging technology to share assets) continues to penetrate new verticals driven by mobile, geolocation, and trust-based networks
Example companies: Airbnb for lodging, Prosper for consumer lending, RelayRides for car sharing (disclosure: Webb Investment Network (WIN) is an investor)
+ New wave of security startups emerge to counteract threats against cloud-based services and explosion of mobile devices (consumer and enterprise)
Example companies: CrowdStrike, Morta Security, Sentinel
First Adopter, @firstadopter
Top picks: Rift, Twitch
Top short: ZNGA
- Long Oculus Rift (private): virtual reality headset company. Recently hired technical wizard John Carmack as their CTO, the creator of Doom. It will be one of the most innovative developments in gaming for years to come.
- Long Twitch.TV (private): growth of this streaming video service for gamers will continue to hit new heights and critical mass in 2014.
- Short Zynga (ZNGA): new CEO Don Mattrick will fail to turnaround the company and be forced to do a mass layoff to lower cash burn.
Stacey Widlitz, Founder SW Retail Advisors, CNBC Analyst, @StaceyRetail
steady wins the race/category killer : LB
wish list for IPOs: J Crew, David Yurman
recent IPO w/ staying power: MONC.IT
[Eric Jackson was long SFXE, CHGG, and ZNGA at the time of writing]