Back to School

On Wednesday night, I was invited to speak to the New Jersey City University Graduate Business Program about some of my key investment themes for 2013. The crowd was great, as were the questions -- some of them from the student investment team that won the University of Dayton's 13th annual investing competition. (Kudos to the team and their mentor Dr. Bernard McSherry.)

While I have previously shared these themes with Real Money Pro subscribers, I'm raising the subject here to discuss the audience's questions and to offer an observation about public perceptions of the market.

Did I prefer Apple (AAPL), Blackberry (BBRY) or Nokia (NOK)? one questioner asked. My response, which seemed to catch people a little off guard, was that I did not like any of them. I went on to explain that while additional growth is to be had in the smartphone space, the rate of growth is likely to slow as global penetration rates rise and the market relies more on replacement demand. In addition, the incremental growth will be found in the lower-tier price points, which will pressure margins. The entrance of manufacturers like Huawei, ZTE and others, as well as up-and-coming mobile operating systems being used by the likes of LG and Lenovo, will make the fight for third place bloody. 

I said that I would prefer to "buy the bullets, not the guns." That means investing in a company with great technology that is used by most smartphone companies; has a strong position in emerging devices; and is positioned to capitalize on The Connected Car and The Connected Home.

For those doubting the future of The Connected Car, let me point out that the market has been creeping up over the years, with products such as  LoJack (LOJN), Bluetooth connectivity, GPS navigation and so on. To me, however, the real tipping point came earlier this year when General Motors (GM) and AT&T (T) announced that they would bring high-speed wireless connectivity to several GM models later this year. My recommendation for investing in this area was to buy Qualcomm (QCOM), a company that I remain as excited about now as I was back in 2009 when I recommended the shares at $42 with a $60 price target. 

I told the audience I predicted that Facebook (FB) was a company to watch in the smartphone market space. As a comparison, consider that long before Apple introduced its first iPhone, it teamed with Motorola to bring iTunes to the mobile phone market via the ROKR model. While the model was lackluster, it marked Apple's foray into mobile and offered insight that helped lead to the iPhone. Through that lens, I see Facebook's move with its Home offering on Android as another step toward a more pronounced move in mobile. 

Regarding The Connected Car, one audience member asked my view on GPS-related companies like Garmin (GRMN), Cobra Electronics (COBR) and Voxx International (VOXX). My response was that I saw little reason to own these companies, given the strides that mapping apps have made, particularly those from Google (GOOG) -- programs offering excellent turn-by-turn, voice-enabled directions on a smartphone or connected tablet. My views here were cemented recently when the GPS unit in my rental car did not find the location I needed, but Google Maps and Apple Maps had it just fine. 

Did I think Microsoft (MSFT) was a sell, another person asked, after the dismal  PC shipment data from the fourth quarter of 2012? I did not think so, I answered -- nor did I see it as a compelling buy. Yes, the company has some great assets in its product portfolio -- Skype, X-Box, Office and some others -- but they do not more than offset the risk to be had with the continued decline in the PC market. If Microsoft were better positioned in the smartphone and tablet markets, I might hold a different view. 

Other audience questions included: What do I read to collect the data points I use? (There are too many sources to name here.) What have I learned from a recommendation that went bad? (Don't become emotional and think you can will the position higher. It is better to be disciplined, cut your losses and move on.) Is there any downtime? (Um, not really -- just ask Jim Cramer, Stephanie Link, Brian Sozzi and Bob Lang.)

Now for my observation. At one point I asked the audience if they thought the U.S. economy was doing well. Only one individual raised a hand. I asked him why he thought that; he said that his 401K was as high as it has ever been. That was not really what I had in mind, of course -- but it says volumes about how the average person might be seeing things while we focus on the latest data and figures. 

At the time of publication, Versace held no positions in any of the stocks mentioned in the article.