Category Archives: Growth Investing

How to Build a Position in Your Favorite Stocks

This article with an additional example using Tencent (OTCMKTS:TCEHY) first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Have you ever missed out on high-flying winners? Have you ever been stuck in a (seemingly) losing stock for a long time? I’ll use Amazon.com (NASDAQ:AMZN) and CVS Health (NYSE:CVS) as examples for illustration.

person with a question

How to Build a Position in Your Favorite High-Flying Winner

An investment in Amazon 10 years ago has become a 24-bagger. In other words, it delivered returns of roughly 37.5% per year. That said, we’ve been in a bull market since 2009.

In a correction, it’s possible that Amazon stock could fall 30-50%. In a normal market though, one of the best ways to build a position in a high-flying stock like Amazon is buying it periodically.

Some investors wait to buy stocks on dips. However, you’ll notice that in the last few years, dips in Amazon stock didn’t occur very often.

chart showing dips of Amazon stock between 2016 and 2018

Source: Google Finance with author annotation – Potential buy points when using the “buying on dips” strategy

If you waited for a dip in Amazon stock in June 2017, you wouldn’t have gotten one until April 2018. However, by then, the stock had already appreciated +40%.

At this point in the cycle, I’m leaning more towards buying high-flying stocks on a correction, whenever it may occur. Share in the comments below if you have a different opinion.

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Why This Growth Stock Went Up +10% on Monday

This first appeared in the Seeking Alpha Marketplace service DGI Across North America, from which you can get real-time buy and sell alerts (and explanations) when I make moves in my portfolio.

Summary

  • NetEase up 10.4% on Monday. My position is up nearly 17% in a little over 2 months.
  • News came out that it plans to buy ~$11 billion of inventory over the next 3 years from the U.S., Europe, and Japan to sell to the Chinese market.
  • NetEase is primarily a video game publisher in China that has been diversifying into e-commerce.
  • NetEase is reasonably valued after the pop based on the consensus low-end earnings growth estimation.
  • Interested investors can nibble here to start a position, but will be safer to buy on a meaningful dip — perhaps one will occur when the company reports Q3 results on Nov 15.

Occasionally, dividendfocused portfolios need some growth to spice things up. And NetEase Inc. (ADR) (NASDAQ:NTES) is a good candidate for consideration.

NetEase stock appreciated 10.4% on Monday. In the DGI Across North America service, I gave a real-time alert and the reasoning for buying NetEase, which is now up nearly 17% in a little over 2 months.

NetEase position November 2017

Source: Author

The following quotes are excerpts from my previous article that’s available in the service.

NetEase was founded in 1997 and has been listed on the NASDAQ since June 30, 2000. Even for an investment that was made at the end of 2007 would have delivered an annualized return of 32%!

This outperformed Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) which has delivered an annualized return of 10.8% in the period, Baidu (ADR)(NASDAQ:BIDU): 19.6%, and even Amazon (NASDAQ:AMZN): 27.2%.

NetEase is the second-largest video game publisher in China.

In 2016, NetEase generated 73.3% of its revenue from its online games.

NetEase PC games Q2 2017

Source: Company Q2 2017 presentation – Slide 6

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Should You Buy Open Text Corp. for High Dividend Growth?

This first appeared as 1 of 3 top US dividend ideas for September 2017 in the Seeking Alpha Marketplace service DGI Across North America.

Open Text Corp. (TSX:OTEX)(NASDAQ:OTEX) is a mid-cap technology company, which has been growing by acquisitions in the expanding industry of enterprise information management. It is a global leader that offers software applications and cloud services in managing data.

Open Text strong long-term total returns

Source: August presentation (pdf)

Shares Experienced a Meaningful Dip

The stock has dipped about 15% on the Toronto Stock Exchange since April. This is partially because of a stronger Canadian dollar against the USD, as the company reports in USD. So, interested Canadian investors should take advantage of a stronger loonie and pick up some shares for technology exposure.

For U.S. or Canadian investors, the stock offers above-average growth (and dividend growth) at a low multiple. At ~US$32.30, it trades at a multiple of roughly 15 and a forward multiple of roughly 13, which is attractive for the analyst consensus’s estimated 3-5 year earnings per share growth rate of 19.7% for the company.

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