The following is designed to give a general assessment of a general assortment of the most popular stocks on the market, with a focus on the long-term. Taking asset classes as a whole, there is nothing out there that looks particularly attractive. As mentioned in a separate post, nominal returns of equities are around 6.5%-7% annually going forward over a long-term time horizon. Balanced portfolios that limit drawdowns (or the length of drawdowns when using leverage) could expect to return 4.5%-5.0%. Moderate risk portfolios fall somewhere in the 5.0%-6.5% range. AAPL – A-/B+ Apple is the most valuable company because it created perhaps the most commoditized, yet most difficult to precisely replicate, products ever. While smartphones are produced by various companies throughout the world, the iPhone easily remains the most popular, particularly in wealthier countries, with an ecosystem and brand-name product that differentiates itself. At the same time, with around two-thirds of the company’s revenue dependent on the iPhone, there is risk inherent in such a single bet and its financials (and therefore stock price) will go through cycles. FB – A Strong margins, cash flow, true monopoly. If one were to nitpick, the company relies predominantly on a low-leverage monetization strategy (advertisements), causing lifetime revenue per user is relatively low compared to Netflix (for example), but its revenue model is safe and monetization beyond ads will boost Facebook’s value that much more. AMD – B+ AI, machine learning, autonomous cars – those betting on these trends and believing AMD has a strong future role to play in these areas likely love the stock. Financially, AMD has work to do (negative EBITDA, ROIC). This makes the stock highly volatile and the company has many disbelievers (~20% short float), but the long-term potential is clear with its role in emerging technologies. NVDA – A- At the moment, NVDA is even more geared to the AI, machine learning, and autonomous car trend than AMD. NVDA gets credit for its positive margins and ROIC. TWTR – B Twitter still loses money (profit margin of around -18%) and the short-term primitive of its platform (160 or 280 characters, whatever it decides on) makes it less compelling as a social network than Facebook. Twitter’s strength is more likely in the realm of broadcasting and media rather than as a genuine social network. The most compelling bull case resides in Twitter being a buyout candidate for another media conglomerate. GOOG / GOOGL – A Similar to Facebook, strong margins, cash flow, and true monopoly. Google may have the best business model in the world. GPRO – C GoPro is another smaller tech company with high expectations a few years ago, but fell due to concerns that its technology was replicable. The company also doesn’t make money (profit margin = -28%) and accordingly has a volatility 7x-8x that the broader market. Similar to many smaller tech companies, the most beneficial outcome is probably a buyout by a larger peer that sees value in their technology. SNAP – C No doubt it has many users, but its cash burn is concerning and monetization, though in the early stages, will be difficult due to the age make-up of its user base. If you’re long SNAP, it’s another company that must be viewed with a very long time horizon. MSFT – A- MSFT is transitioning from a PC-heavy company to one more focused on newer enterprise technologies (cloud), where its longstanding network of corporate clients could help in its competition with AMZN, ORCL, CRM, among other players in the space. MSFT’s financials and balance sheet are stellar with a 24% profit margin and debt as a percent of total capital at just 13%-14%. It is one of the more underappreciated dividend stocks on the market with a yield of 2.2%, above the S&P average. Forward P/E currently stands at approximately 20, which reflects its slowing growth prospects. DCTH – D Delcath Systems is a specialty medical device company that is a micro-cap penny stock. Having some small portion of your portfolio dedicated to micro caps can be fine, as the occasional home run will be nice for returns. DCTH is not a particularly safe pick with a market cap of $20 million at the time of writing, with $12.6 million in debt and just $1.8 million in cash. This stock is mostly for day traders. MU – A- MU has strong financials and has ridden the semiconductor boom to new heights over the past 1.5-2 years. Increased confidence in the pricing of DRAM and NAND chips has generated higher expectations for its growth prospects. Western Digital’s acquisition of SanDisk will nonetheless invite more competition into the NAND space. Micron is also highly active in the M&A market, which means the business is always changing but poses integration risk for management. PLUG – D PLUG focuses on the development of hydrogen fuel cell systems. PLUG’s stock rose from pennies to over $8 over the course of 2013 to early 2014 but has faded since. Its financials are a mess and stands as one of the more speculative plays in the market. INTC – B Intel is cheap compared to most chip stocks, especially the ones that haven’t proven themselves yet financially. But in the realm of mobile, QCOM is beating INTC badly; AMD and NVDA’s recent surges have materially been a consequence of Intel losing market share in other parts of the chip market. The PC market decline is the biggest threat to INTC’s business model, though the company remains the market leader in the microprocessor market. BBRY – B Blackberry is reinventing itself through a focus on software in lieu of hardware development. The company has struggled to increase revenue to expectations, but by FY2018 could see positive earnings to lend better credibility to the business. Blackberry, through its joint venture PT BB Merah Putih, carries about 50% of the mobile device market in Indonesia, the world’s fourth-most populous country at over 260 million people. GRPN – C Groupon is in the process of transitioning its business model from a “deals and coupons” company – i.e., a middleman between local merchants and consumers – to a marketplace company. To do so, it is in the process of phasing out non-core markets and bringing its participation in 47 countries at its peak down to 15. Groupon’s consumer discretionary focus makes it heavily reliant on the macroeconomic backdrop. Revenue growth is slowing, competition is heating up, and restructuring costs will hurt the company finances in the near-term. XGTI – D Speculative nano-cap stock mostly for day-trading among retail investors. CSCO – B Cisco, once the most valuable company in the world around the dot-com peak, is undergoing a transition as it shifts from routers and switches (a mature business with significant competition) to a greater presence in the cybersecurity market. Its increasing focus on subscription-based revenue model is designed to enhance the lifetime value of each customer. Cisco expansion in the security market provides an opportunity for growth, but competition in its core business will keep investors lukewarm on the stock, which provides a moderate-high dividend (around 3.5%) in exchange for only mild capital appreciation. IBM – C IBM enjoyed a recent run-up in price, though is still down year-to-date. The company’s main hurdle is widespread competition in all segments, including mobile, security, business analytics, and cloud. The company’s work in the blockchain market is broadly positive and one of the more intriguing modern technologies highlighted by the cryptocurrency boom. IBM is maintaining profits, but doing so by cutting costs on lower revenue. Additional cost cutting is probably unfeasible and counterproductive. With IT spending growth at just 2%-3% per year and competition in all core segments, IBM is still likely to underperform the market. TWLO – C- The global communications market is saturated, which leaves Twilio with little competitive insulation. Moreover, Twilio’s lack of customer diversification also presents risks to the company’s revenue. Losing Uber as a customer is one prominent case, though the company is working to build its portfolio of enterprise customers. FEYE – C+ FireEye provides cyber-security solutions to corporate and government clients. It’s in the midst of turning to a subscription-based model, which may hinder near-term revenue but benefit financials over the long-run. While the security space is robust and growing, competition is high and FEYE’s negative cash flow could hinder its investment plans. FSLR – C Solar companies are risky as business is highly dependent on government subsidies and tax credits. Traditional energy businesses have a leg up in the free market, and installation and depreciation costs often make the technology uneconomical. ATVI – B+ Activision specializes in online and consol games, though is looking to become a fully integrated media company with newly announced video game and television units. Digital games are highly margined products, and the e-sports market is growing as a form of mainstream entertainment. In ATVI’s case, four games make up about three-quarters of its revenue, leading to concentration in a small number of franchises. Video game production is a saturated industry and future performance is largely dictated by hitting a home run with a game that becomes massively popular. Cyclicality can also cause an ebb and flow in financial performance, as game software and hardware are periodically upgraded. NFLX – B+ Netflix’s international subscriber expansion is occurring at around 5x the pace of its domestic expansion. The ongoing trend of cord-cutting and de-bundling provides industry-level tailwinds in favor of Netflix and similar services. And despite competition from Amazon, Apple, Disney, and tradition media and cable companies, the general cheapness of the service (under $20/mo, dependent on where you live) can allow consumers to buy multiple services. The key is differentiation in its offerings relative to other services. With the subscription-based model, Netflix’s lifetime value per customer is high. But with the investment into original content, the company’s cost structure is still high. How Netflix eventually pans out will largely be determined based on how well it can manage its expenses and pricing. SPY, QQQ, DJIA, SPX Forward nominal returns on the S&P 500 are likely slightly less than 7% y/y on a long-term basis. In the past the S&P has returned about 7% annualized in real terms. Accordingly, if we strip out inflation from the current forward estimate, stocks at their current level offer around 2.0%-2.5% lower annual returns than they have in the past. GLD, IAU, JNUG, NUGT, GDX, GDXJ – A I give gold itself an A through its use as a diversification asset. If we are ever in a stagflationary environment where both stocks and bonds lose value (as in the 1970s), gold can provide a hedge against losses. Gold is basically an alternative version of cash. I believe as world debt increases and more strains are put on the fiat monetary system that we largely have today, gold becomes a more alluring alternative. It’s not a great investment with an expected return of about 2% annualized (nominal terms) if held over the course of several decades. But in about a 5% allocation in a portfolio it can lower volatility more than it will adversely impact expected return, thereby improving a portfolio’s reward-to-risk ratio. The gold thesis, nonetheless, can come in a variety of different forms: 1) a hedge against inflation when uncertain about its future trajectory 2) a bearish or safe haven asset, similar to US Treasuries, the yen, and Swiss franc 3) a different type of cash or alternative currency 4) a commodity (i.e., subject to supply/demand forces like Indian wedding season) 5) a reserve currency for central banks 6) a hedge against potential devaluation of fiat currencies during money supply expansions 7) a means of diversifying a portfolio For those who believe in it as a portfolio diversifier, the case is generally made to hold it in most or all circumstances in a small allocation. DUST, JDST – N/A I can’t give a letter grade here as “short gold” ETFs are instruments one would trade likely temporarily, especially those of the leveraged variety. VIX, UVXY, SVXY, TVIX, VXX, VIXY, XIV – N/A Volatility will remain low as global interest rates remain low – and essentially a decent way’s negative in Europe and Japan – and the global economy is growing steadily and with little variance among countries. Nearly everybody agrees that volatility will increase eventually as the VIX hovers around all-time lows since its January 1990 inception, but it could remain there a while as recession risks within the next 12 months remain low.