Recently, our very own Paul Meeks appeared on CNBC’s Fast Money Halftime Report to discuss stock investments. As you may know, Paul is our firm’s CIO and portfolio manager.
Paul possesses a wealth of knowledge in tech stocks and as such, is the perfect candidate to discuss investment opportunities in the technology sector. The subject of this particular interview was cloud-related businesses.
According to Paul, there are three leaders in this industry:
Amazon Web Services (AMZN)
Microsoft Azure (MSFT)
Google Cloud (GOOGL)
These three businesses stand out among the leaders in this area, and all three are forecasted to have a good run with their cloud services. However, there’s no question that Amazon is leading the way--the company outranks the other two in performance by a large margin.
Even so, Paul notes that it’s impossible to know the exact margin gap, due to the way the companies conduct their cloud figure reports. Thanks to the fact that Microsoft is reserved in it’s cloud results, it’s impossible to have an accurate comparison between other similar businesses. Despite this lack of transparency, Paul believes that Amazon is and will remain number one when it comes to their cloud service businesses.
So what does all that mean for tech investors? According to Paul, keeping watch for a few factors will be key. First, look for a change in profitability in the international segment. Second, watch for a boost in momentum from Microsoft Azure. Lastly, investors should keep an eye on the valuation of all these companies.
For cloud-related businesses, Paul recommends using two methods for determining valuation.
Price/Earnings to Growth Ratio (PEG)
Company growth and positioning relative to its Total Available Market (TAM)
Overall, Paul believes stock in these companies are simply “holds.” It can be difficult for investors to have or hear something that’s not actionable, but Paul believes that all three of these cloud-related stock options have opportunities.
Paul ended his segment on CNBC by providing an inside look into his personal formula for purchasing stock in cloud-based businesses: he tends to buy them on the dips.