Looking ahead to the new year, a new administration, possible new Federal Reserve interest rates and all of the uncertainty that accompanies each of these, investors are taking stock, literally, and deciding what to do with it.
Opinions abound about what to have and not to have in your portfolio moving into 2017. Here’s a look at two big stocks and several not so big that experts like.
The combination of Amazon.com’s Prime subscription sign-ups and the number of people using its subsidiary cloud service (AWS) is a one-two punch that’s hard to duck. For the first 3 quarters of FY 2016 the company reported topline growth of almost 30% YOY and revenue of $92.25 billion.
With millions of Echo Dot devices sold, huge growth in Prime membership and sales of Amazon devices up more than 2.5 times Cyber Monday, the Amazon ecosystem continues to grow and shows no signs of slowing down.
When it comes to competitive advantage, Facebook Inc. (NASDAQ:FBF) has the most of anyone. There is simply no competition for what Facebook does in the way it does it. It was first and it is best and it has 1.8 billion monthly active users.
Other advantages include a huge amount of data, robust growth, the WhatsApp/Instagram effect that whole “connect the world “thing, options galore, cash, Zuckerberg, ownership investment, reasonable P/E ratio given all of the above.
Facebook’s PE ratio of 57 is only part of the picture. The company’s stock trades for 40 times free cash flow and only 23 times expected 2017 (non-GAAP) earnings. So there.
Others To Consider
If neither Amazon nor Facebook strike your technology fancy, there are other options. Here are 3 Fortune likes for the upcoming year.
Lam Research (NASDAQ:LRCXC) has already risen 35% this year but that shouldn’t drive you away. The stock trades at 13 times estimated 2017 earnings or, put another way, at a 21% discount to the Standard & Poor’s 500 index. LAM doesn’t make its chips but rather the equipment companies like Samsung use to put flash memory in semiconductors. LAM products find their way into Apple Inc. AAPL iPhones, Tesla TSLA automobiles and even inside the massive structure of Amazon.
Palo Alto Networks (NYSE:PANWB) makes state-of-the-art cybersecurity equipment. Cybersecurity spending grew about 13% in 2016 but, according to Gartner, is expected to slow to about 8% over the next few years. Not that Palo Alto cares. It is growing its sales about 4 times as fast. Despite the ups and downs, Palo Alto expects to grow revenue 31% next fiscal year. That would make its 2017 estimated P/E of 49 look reasonable.
Vail Resorts (NYSE:MTNC) certainly doesn’t sound like a tech stock and technically it is not. The technology inside the business model of what was once just a nice place to ski in Colorado, however, qualifies Vail for consideration. Vail created ClassPass, a subscription model for lift tickets offered as a season pass with unlimited access to 13 different maintains in 6 states, Canada and Australia. Vail trades at a 2017 P/E ratio of 31 with anticipated organic earnings growth of 10 – 13% next year.