Month: May 2015

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My Top 5 Explosive Growth Stocks for 2015

GrowthEvery diversified portfolio needs an allocation of explosive growth or momentum stocks. These tend to be volatile and should have a great growth story behind them. You can’t pick these stocks based upon a single day or even a month’s performance. They also have a life span that is somewhat governed by technology or major market themes.

Ambarella (AMBR) This is a video chip company whose products are used in the leading wearable helmet camera GoPro (GPRO). They are also a leader in automotive backup cameras. It has a huge upside because, beginning in July 2018, all US made cars and light-duty trucks must have backup cameras. In addition they are a leader in ultra-high-definition TV, a next generation TV that we’ll all have someday. Last quarter, their 4th quarter they beat their revenue and earnings forecast. I bought this stock in late 2014 and it is up 60%. It is up 400% in the last 12 months and trades at a 55 P/E, not too bad.

AMN Healthcare Services (AHS) This company provides staffing and staff management services to the healthcare market. Obama Care has put pressure on hospitals and other healthcare facilities to both find qualified nurses and physicians and manage costs. The healthcare market will continue to grow for years to come and this company is well positioned to enjoy excellent growth. They are up over 100% in the last 12 months and trade at a 33 P/E. I first bought this stock in late 2014 and have added to my position a few times when it hit its daily 50-day EMA.

NXP Semiconductors (NXPI) This chip company provides “near field” communications for products including the Apple iPhone and Samsung phones and tablets. This technology is behind mobile payment systems like Apple Pay and competitive brands. They just recently signed up Chinese consumer electronics maker Xiaomi and acquired Freescale Semi in March. Freescale is a leader in automotive chips for keyless entry. The stock is up 100% in the last 12 months and trades at a 80 P/E. I bought this stock in late 2014 and it is up 40%.

Palo Alto Networks (PANW) This company is a leader in enterprise cyber security. This stock is in my basket of cyber stocks that include FireEye and CyberArk. They all have been hot for the last 6-9 months. Cyber threats will continue to be a hot topic for years to come. PANW and FireEye actually lose money but they continue experience substantial growth. PANW is up over 200% in the last 12 months when I started buying it.

Skechers (SKX) This is a shoe and apparel company. When I moved to Florida a year ago I found that I needs more casual shoes that were very comfortable. I bought a few pairs of Sketchers and I love them. After some research I bought the stock and after flat performance in 2014 it has really picked up. I’ve also seen the 2 founders on Jim Cramer’s Mad Money and they tell a convincing story. The stock is up 90% in 2015 and have overtaken Addidas and New Balance to become the #2 footwear provider in the US. The stock trades at a 32 P/E.

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Invest in China – My Top 5 Selections

ChinaAs the US economy goes into a slow growth mode I’ve been increasing my exposure to China. Currently my direct China investments only hold a 4% allocation in my portfolio. My goal is to increase this to 6-7% by mid-summer. I’d like to have 15% allocation to the combination of Europe and China. My actual exposure to China is more than 4% because some of my other holdings have substantial China exposure, like Apple (APPL) my largest single holding alone representing 5% of my investments. In the most recent quarter, Apple sold more iPhone’s in China than in the US.

My strategy in China is to go with the sector winners where possible. Here are my picks; all have provided double-digit returns in the last 12 months.

Baidu (BIDU): Baidu is the “Google” of China, it services including maps, news, video and encyclopedia searches. Baidu completely dominates China just as Google does the Western world. Google has only 3% of the China search traffic and 90% of the rest of the world. I’ve held Baidu for a number of years.

Ctrip International (CTRP): Ctrip is the “Expedia” of China. As a matter of fact Ctrip just acquired a 38% equity stake in eLong, a Chinese competitor, some of this stake came from Expedia another investor in eLong. This stock just hit its 52 week high on Friday, up over 100% in the last 12 months. Ctrip’s mobile app has over 800 million downloads and in Q1 about 70% of all of the company’s online transactions were mobile.

iShares China Large Cap ETF  (FXI): This is my catch-all for all the large corporations in China that trade on the Hong Kong Exchange. FXI track the FTSE China 50 Index which includes the 50 largest companies in the Chinese equity market that are available to international investors. It currently is trading close to its 52 week high, yet only has a P/E of 13. It has returned over 70% in the last year. If you are going to only own one Chinese stock, this is the one to own.

NetEase (NTES): NetEase, operates an interactive online community across multiple areas, including Online Game, Advertising, E-mail and E-commerce.  Similar to Yahoo in the US, it offers news, information, community and communication services, such as photo albums, instant messaging, online personal ads, and online video. Their e-mail services are used by a lot of large corporations. It too is now trading close to its 52 week high and has gone up more than 100% in the last 12 months.

Vipshop Holdings (VIPS): Vipshops has a unique on-line “flash sales” business that really doesn’t have an equivalent in the US. I’ve held VIPS for many years and it’s gone through a recent stock split. This is a controversial stock and can be volatile. They are also a regular discount retailer with many of their own brands, maybe like a smaller version of Amazon or WalMart.com. This is probably the riskiest China stock that I own, and my cost is so low that I really don’t want to sell it and pay a substantial capital gains. This stock can easily return 10-15% or more a year and is a great “trading stock” if you have a short-term outlook.

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Please Buy My Golf Course!!!!

GolfOK, let me just share my frustration. I bought a nice house in Florida on a beautiful golf course and the week we moved in, the golf closed. That was one year ago and the course is still not open. From my pool deck I now see weeds instead of golfers. We live in a nice gated community with a HOA that isn’t sure what to do. Some are in the hope and pray mode! Many would just like the grass cut and hedges trimmed around the club house. A few of us on a special committee are trying to be more proactive and develop plans to better control our future.

This can only be a discussion about MONEY and COMMUNITY – Not Golf! 

We are being told by the real estate agent that a mysterious (to us) buyer has an offer accepted by the bank and is in the “due diligence” process. We are suspicious because a last “deal” fell through, and this buyer has thus far made no attempt to contact the HOA or anyone in the community. If I was going to spend millions, I surely would want to talk to my potential customers before inking the contract. That’s just me and the way I think.

The golfing business just isn’t the same any more, it seems to have not recovered from the 2007 recession along with the fact there are just less golfers today than 10 years ago. However, the law of supply & demand must still work. There are well run golf courses throughout Florida, some owned by HOA’s and some by private owners. It appears the secret to success is professional management, not a bunch a golfers who think they should own a course (the previous owners).

Our HOA could potentially buy the course and then hire a top notch professional to run it. We have over 800 households in our community and the cost to buy and operate would be a fraction of the costs we’ve already suffered in home values.

The problem is that it is tough to build consensus (on almost anything, including golf). Of course the non-golfers vs the golfers is a losing battle. Only a small percentage of any community, even ours, actually play golf. The non-golfers will immediately point out that they aren’t going to subsidize the guys in pink shirts, drinking beer and cruising along paths. It appears that most of these comments come from those without lots that directly face the course. They don’t seem to express any vision for the future other than “we need to do something”, or “we hope someone buys it”.

But, as I said earlier ……. This can only be a discussion about MONEY and COMMUNITY! Our losses in property values could already buy at least a few courses. Hopefully our special committee can present a plan that solves the problem, but we can’t just rely on only the golfers.  

We have a really nice golf course for sale!

 

 

 

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It Far Less Expensive to Keep than Lose Good People

E,ploteeIn my last posting I identified how to hire the right people and who you might want to avoid. In this post we’ll discuss keeping good people. Some businesses just seem to suffer from continual turnover of the staff, others appear to be training grounds for other businesses in their field.

One fact of business …. it is immensely cheaper to keep good people than to find good or better replacements. First we’ll take a look at the top 5 reasons why people might leave in the first place.

Top 5 reasons why employees leave.

  1. Higher Pay. Surveys consistently show that the overall #1 reasons employees leave is compensation. It is interesting to note that many times this is a result of “pay compression”. This compression exists when there appears to be very little difference in pay between top, mid and bottom performers. You know the scenario, everyone gets an automatic 3% raise and there are little in terms of substantive evaluation. The job only appears to be worth a tight salary range. Add all sorts of benefits into this discussion of total compensation.
  2. Below Market. This is very similar to the one above but looks a little different to the employee. In this case the employee has access to surveys that show they are paid well below market rates. Many times you don’t need a survey, just find out what newly hired employees in the same company are being paid for the same job. Not surprisingly, the employee finds out that their 7 years of loyalty and excellent appraisals pays much less than risky new hires.
  3. Over or Under Managed. In this case it’s either they are being micro-managed and there is little room for growth, or they have little communication and direction from a manager. It’s no mystery that employees actually like to be properly managed and crave for leadership. To me, excessive turn-over is a manager problem.
  4. Overall Communication. Communication or the lack of, is one of the key reasons employees feel dissatisfied with their job. How well am I doing? I have no idea because no one tells me. All employees from top to bottom like to know both how they are performing and how the overall business is doing. Why, it’s a matter of safety to them. It builds trust when these things are communicated.
  5. The Environment. What is the workplace like, is the employee comfortable, is it professional? Is there too much drama, employee in-fighting and low moral? If so I can guarantee you’ll lose good people quickly.

Ways to keep good people

  1. Actually it’s quite easy, just deal with the top 5 reasons why they might leave.
  2. Let’s tackle Higher Pay. Although employees might say this is the number one reason for leaving, it may not have started them looking in first place. Communicate to each employee upfront and on a continual basis what the business’s overall compensation plan is for the position being discussed. Can the company provide a growth path for excellent performers?
  3. Many employees will sacrifice pay for other items they feel are valuable to them. For example, the security of a long term job, with a company that “treats them well”. This tends to be the case for small or mid-size firms who just can’t match the compensation for big city, big companies. There are many non-compensation factors that keep good people on-board.
  4. Give employees “real jobs”, those that have responsibilities, the ability to be recognized publically for a job well done. Provide the best management you can, don’t knowingly let a poor manager cost you people.
  5. Have fun, employees what jobs that are fun. I know it sounds corny and you run a professional business that is just too “out-of-place” to allow “fun”. You are wrong. Every business can find ways to allow their employees to become engaged in fun activities and functions. Conduct a contest, hand out simple goofy awards, those types of things. Kool-Aid at lunch contests. Just ask some of your more outgoing employees what might be fun and let them run with it.
  6. Never stop communicating. It’s just amazing that all business people believe they are good communicators, that communication is essential and that employees what consistent communications. Then they just don’t do it, they are just too busy to consistently communicate. Hold regular company meetings; allow both managers and staff to talk about accomplishments. Constantly tell them what is going on, good news and bad news. They are much better off hearing the good and bad from you than others who will get the details a little wrong.
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How to Hire the Right People and Those to Avoid

E,ploteeAll but the very largest businesses can become very “people-dependent”, therefore small changes in staffing can have much larger effects on the business.

Here are some helpful tips on hiring the right people.

  1. Start with a comprehensive job description for the position. Also determine the career path and level of training you are willing to provide.
  2. Almost completely disregard a person’s references and resume, other than to put them in the generally qualified category for further evaluation. References provided by the applicant are going to give you nothing but the very best qualities and resumes are well known to exaggerate a person’s real accomplishments.
  3. Before taking a lot of time with candidates, have them tested for various competencies, including analytical skills. Can the candidate solve problems, are they extroverts and you are looking for someone with communication skills? Testing will quickly find personality traits that match your needs.
  4. Only hire the smartest people, assuming they have the basic skills to do the job. Make sure they have problem solving skills and can adapt to constant change.
  5. The smaller the organization the more important it is to have a cultural fit, have a few existing employees interview the candidate.
  6. Provide the new hire with early hands-on training and a well-defined on-boarding process, this helps make sure you have the right candidate.
  7. Put all new hires on an “up to 90-day probation period” and watch closely. You can usually find a bad hire within a few weeks.

Beware of these People.

  1. Beware of people that have been doing the same exact job for a very long time. Why? Because it may have taken them a very long time to learn simple, basic tasks. Secondly, they may be unwilling or unable to accept constant changes. We all admire employee loyalty, just make sure this loyal candidate also passed through the first 5 steps above.
  2. Beware of hiring “victims”, these are people who never take any responsibility for their own actions. Everything that ever happens in their department, office or business was someone else’s fault. They couldn’t do their job because of others, constantly. If in doubt, read the book called The Oz Principle.
  3. Beware of people who have inappropriate or strange postings on their Facebook, or LinkedIn site. I would use anything here to hire a candidate, but I would surely use it as a reason to disqualify a candidate.

If you follow these guidelines you might even find and keep a valuable employee.