My Top Tech Ideas Beat the Market in 2019. Here Are My Picks For 2020

Favorite tech stock ideas (themes) for 2020 - Datadog (Kubernetes), Activision Blizzard (new gaming consoles), Taiwan Semiconductor Mfg. (5G) and Smartsheet (cloud software)

If you like this free tech investing email newsletter, subscribe HERE. Follow me on Twitter.

New technology product cycles often lead to positive earnings surprises.

The key is being able to foresee the new winners and losers before others. 

What is the differentiator? Domain knowledge and expertise built over time. The table stakes are reading all the industry blogs, websites, internet message boards and most importantly using the products and services themselves. Simply, the early (first) adopters who know more history, context and historic trends are more likely to figure it out first.

I am certain enthusiasts who were passionate about technology and had the proper historic context could have figured out 2016’s Nvidia step-function up Pascal product cycle by reading the right websites before the rest of Wall Street. The potential upgrade cycle from the Pascal lineup’s amazing price-to-performance ratio wasn’t rocket science. It led to triple-digit stock returns in 2016.

📉tae kim @firstadopter

On Jan.15 last year I tweeted some ideas to compete with 2016 Barron’s Roundtable picks (came out then). Final perf. tally: +81%, +62% alpha

Or AMD’s Zen 1 chip product cycle that drove its stock to become the best-performing stock in the S&P 500 in 2018. All the previews and reviews from industry blogs signaled it was a game-changer product lineup for the chip maker.

📉tae kim @firstadopter

My big 2018 stock idea was $AMD Its shares have risen 64% since the Jan. 5 column:

cnbc.comAMD is big winner from chip flaw fiasco as more than $11 billion in Intel stock value is wiped outCompanies will likely diversify their chip security architecture risk by buying more AMD server chips.

Same with AMD’s Zen 2 7-nanometer and Rome server chip product cycle that led its stock to again lead the S&P 500 in performance this year.

📉tae kim @firstadopter

$AMD is once again on my 2019 top tech stock ideas list (tho I expect some rough sledding in its next 2 quarters on weak GPU/chip sector downturn - AMD is more a big 2H-2019 server chip story), along with $GOOGL $PYPL $GRUB Read why here:

barrons.comHow to Play Tech’s Top 3 Themes for 2019Tech stocks have struggled in recent months, but the big drivers haven’t changed. Here are stocks benefiting from the multi-year disruptive trends.

Fundamental analysis and domain knowledge work. Figure out the big product cycles and which companies are kicking ass, taking market share.

So how is this in practice? My top four 2019 tech ideas have outperformed the market this year, led by AMD’s triple-digit return. 

📉tae kim @firstadopter

Looking back at the past year: Final tally for my top 2019 tech stock ideas from Dec. 14, 2018 -> $AMD +122%, $GOOGL +29%, $PYPL +27%, $GRUB -38%. Avg. +35%. In same time period: S&P 500 (including dividends) +26%, Nasdaq +30% (1/2)

barrons.comWe Chose AMD, Alphabet, and Other Tech Stocks to Win 2019. Here’s How Our Picks Did.From chip wars to trade wars, from antitrust to Kubernetes, the technology industry saw many twists and turns in 2019. Here’s how stock picks AMD, Alphabet, PayPal, and Grubhub performed.

For 2020, my top ideas are riding the themes of cloud software, Kubernetes, a new videogame console cycle and China 5G. The 4 picks are: 

1. Smartsheet (SMAR) - a leader in cloud workforce collaboration software. Its product enables employees to automate business processes and workflows with no programming skills.

2. Datadog (DDOG) - a leader in cloud workload monitoring software. It should benefit from the secular rise of Kubernetes.

3. Activision Blizzard (ATVI) could be the best way to play the 2020 videogame console cycle. Its new Call of Duty graphics engine in this year’s Call of Duty: Modern Warfare should enable a strong multi-year runway for the franchise and publisher, along with the upcoming Diablo and Overwatch sequels.

4. Taiwan Semiconductor Manufacturing (TSM) - unquestioned leader in chip manufacturing technology. It will benefit from strong demand for its bleeding edge processes. The chip manufacturer’s big customers are Apple, AMD and Huawei (China 5G).

Read my full Tech Trader column for all the details HERE.

—

Comments? What should I be covering? Let me know by replying to this email.

Tae Kim
Tech Reporter, Barron’s

—

If you like this content, please forward it to your friends and urge them to subscribe HERE.

I write about technology, the stock market and video games. You can also check out my bio and archive of stories on taekim.com. Follow me on Twitter.