Seeking Alpha by Adding Beta

On Friday last week, 4 tech darlings (Amazon, Microsoft, Alphabet and Intel) added market cap equivalent of IBM's market cap (close to $150 Billion) in one DAY! It reminded go-go days of dot com era. Almost exact same happened on Flashback Friday back in Apr 2015 . So is it different this time compared to 2000? Are these astronomical gains sustainable? One common factor which makes it different this time is: Network Effects. Network Effects:   The network effect is a phenomenon whereby a good or service becomes more valuable when more people use it. We see it in many services or goods we use. For example: land-line phones (more people used these when more people had phone connections), Internet, Social networks, Streaming networks, Costco membership and so on. The virtuous  positive cycle which gets triggered due to network effects is what is in play for many of these technology companies. Let's look at some of them. Amazon: Back in July I wrote about Amazon...

The Four Horsemen of the Apocalypse is a metaphor depicting the end of times in the New Testament. They describe conquest, war, hunger, and death respectively. While this analogy may not exactly map to economy and markets, it's one way to look at how good times could end. Markets are on a roll with indexes hitting all-time highs every week (DOW has reached this milestone 53 tines in 2017). At current pace, my predictions for indexes by end of year are: DOW: 24K, S&P: 2625 and Nasdaq: 6800 (about 2-3% upside from current levels). No one would have predicted that we would see these levels 12 months back. So with this backdrop, let's look at analogy of Four Horsemen which could propel or end the good times! Federal Reserve (FED): For world economy and markets, this institution is most powerful in world (even powerful than US Government itself). FED came to rescue during 2008 financial crisis and still helping the economy with its policy of gradual interest rate hikes...

During my MBA at Haas School of Business, UC Berkeley, my most favourite subjects were economics (macro, micro) and finance. I really enjoyed topics on how policy impacts countries' economic growth, currencies, interest rates as well as formation and success of businesses. Around that time I also developed interest in "behavior finance". Since then I have always wondered - Is Economics a science of pure math (Equations) or human behavior (Emotions) or mix of both? In most of the academic history of Economics, it is considered a mathematically precise discipline. There have been few exceptions along the way when in 30's Maynard Keynes suggested that we should also consider Animal Spirits which was taken up as book topic by Yale professor and Nobel Laureate Richard Shiller. This years Economics Nobel was awarded to another practitioner of human side of economics - Dr. Richard Thaler (his book Nudge is my reading list). In my opinion, Economics as science is best un...

My family and friends know that I like to take small bets almost on any topic. They also know that I win most of them. I did lose  big one with one of my colleague on Hillary vs Trump (no one would have imagined Trump would win except may be few folks like my colleague Arun). I ended up buying lunch for my colleagues for losing the bet. Investing is somewhat like betting. Depending on analysis and confidence, one is really making bets on companies doing well (or not) and investing (aka making bets) on stock prices going up (or down). Markets being at all time high, one must be wondering: Are there any sectors which are still worth making bets? Based on my analysis there are still opportunities in three of my favorite sectors - Biotech, Energy and Technology. In today's world of acronyms like FANG, I decided to call these as "BET". Let's look at why these three sectors? Biotech: Two years back our family went thru experience on cancer. Since then, I have been doing q...

Nvidia has been hottest tech company (and stock) for last 3 years with his stock more than triple in just 18 months. Most of the excitement is justified due to Nvidia's unique position in cloud players (Amazon, Google etc) as well as emergence of Artificial Intelligence in self-driving cars (Tesla and so on). So while Nvidia stock may not repeat last 3 years feat, there are other companies which could offer similar excitement. Micron (MU) has been on similar trend with its stock already tripling from under 12 to 39 in 18 months. Last week Micron announced record quarter with revenues growing at 91% compared to last year. Let's look at factors which are causing "commodity" players like Micron shine. Micron makes DRAM and NAND memories. In technology world, ASP (average selling prices) go down every year. Due to demand and supply imbalance, ASP for DRAM and NAND   have gone UP by 6-8%. That's rare! On demand side: Memory markets used to be driven mainly by PC...