The Three Horsemen

by | Nov 1, 2013 | General

These tech giants aren’t slowing down

Several years ago, Jim Cramer of Mad Money fame christened the Four Horsemen as the tech stocks every investor needed to own: Apple, Google, Amazon, and Research in Motion. The last one makes the Blackberry smartphone and will no longer be a public company sometime next month, which illustrates the risks of owning technology companies.

However, we own the other three and they’ve become even more powerful companies than they were when Cramer was hitting the “Buy” button. All three are disrupting traditional ways of doing business and they all enjoy a tailwind of growth in the markets they dominate.

Apple: The company continues to lead the mobile computing revolution, while developing a powerful, high end consumer brand. The market for mobile devices is growing at 25% per year and Apple will get the most profitable share of that growth. iPhone sales in the latest quarter were up 26% over last year and earnings growth will return in 2014.

Google: This company dominates advertising on the Internet in general and now on mobile devices. Spending on Internet advertising grows at 18% per year, while traditional TV advertising grows at 3%. Advertising on mobile devices increased 145% in the first half of 2013. In Google’s latest quarterly report, the company surprised everyone by increasing its growth rate.

Amazon: Amazon has become the place to look first when buying just about anything online. The service is so convenient that more and more users buy without comparing with other retailers since they know that Amazon will give them a reasonably low price, if not the lowest price. Today Amazon is about the same size as Wal-Mart was in 1994. We think its prospects for the next 20 years are as good or better than they were for Wal-Mart.

As investors in public companies, we believe we are fortunate to be able to be partners with the people who operate these extraordinary businesses. 

October was a very good month for the market and our portfolios, which probably means stock prices need to take a breather. But we continue to identify enticing opportunities, so much so that picking and choosing which ones to buy has become a real challenge. 

Best regards,

Daniel A. Ogden


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