Just about two years ago — December 2016, to be exact — I was just about finished adding cloud stocks to the Wealth Advisory portfolio.
Now, I know I bust on the cloud fairly often. And I’m not going to stop, either, because it’s a stupid name. Cloud is just another name for internet, and I don’t see why we need two names for the same thing. Especially one that needs explaining…
But this is what marketers do. Pharma companies pay big bucks for dingbat marketers to invent names like Excelplantha and Dorlastamyn, so I guess I should probably be happy they toned it down for the cloud.
The reason investors have been somewhat slow to get on the whole “cloud stock” thing is that the cloud/internet has been part of our daily lives for nearly 20 years. What’s the big whoop?
Well, the big whoop is quality. Businesses are offering more and more stuff online. And more comprehensive services, too. So there’s streaming, AI, mobile and location services, etc. The net result is an incredible surge in the amount of digital traffic flying around. That’s meant a surge in data centers, servers, chips, software, etc.
It’s also meant changes to efficiency and costs (think profit margins) because stuff on the cloud is kind of “set and forget it.” Once Microsoft has Office available on the cloud, it doesn’t really cost more to sell 1,000 copies than it does 100.
So, the very first cloud stock I told The Wealth Advisory to buy was a data center REIT in January of 2014. It’s up 231%, and the dividend has quintupled (quintupled is actually a word, not a marketing term — I looked it up).
We bought Micron at $15 in 2015. We made 85% but sold too soon. Same with Ciena (+8%) and Cypress Semiconductor (+43%) in 2016.
We still have the Cisco (+58%) we bought in September 2016. Twitter (+90%), too. Then I started digging into a fairly new cloud stock that had recently IPO’d…
We Have a Winner
I don’t buy many IPOs. It’s a tough gambit because the big investors (venture capital and investment banks) that brought a new company to market are gonna get theirs. That’s why you often see big ramp jobs right out of the gate, followed by big drops after a few months.
I do, however, check out the IPO list every so often because you can find some real gems.
And that’s what I found in December 2016…
It’s been a couple years, but I remember words like “mobile app messaging platform” got me interested. Then, digging through its filings, I learned that this is the company that makes Uber work. As in, it provides the platform where the Uber app uses your cell phone GPS to tell the driver where to take you and also offers up an ETA.
That’s when I knew Twilio (NYSE: TWLO) was one of those rare gems…
Because it’s not just the cloud. It’s the mobile cloud.
I’ve got a pretty nice Apple laptop. I barely use it, except when I work from home. Checking the news, trading, checking quotes, getting driving directions, ordering food or shoes — that’s what my phone is for. And Twilio is one of the main companies that’s making those apps on my phone so damn useful.
I recommended Twilio at $31. Today, after yet another wildly bullish earnings report, Twilio is up 30%, hitting $93 a share.
How sweet it is. But I’ll tell you: The road to big gains is not always smooth. You have to have patience and conviction. And I have reviewed this investment many times over the last two years. Like when Twilio gapped down from $33 to $24 on news that it was lowering 2017 revenue estimates because Uber was moving some of its business to a competitor…
Wealth Advisory subscribers were writing in, asking if my partner Jason Williams and I had taken leave of our senses. It’s times like those when we really earn our pay.
Do Your Homework
Other than Uber diversifying its providers, nothing had changed for Twilio. It still had top-tier clients like Amazon, Airbnb, and WhatsApp. It had just grown its customer base from 28,000 to 40,000. And if you ignored the Uber impact on revenue, Twilio was forecasting an increase in revenue (something most investors missed).
And so on May 8th, we wrote to Wealth Advisory subscribers:
I’m not a fan of the loss we’re looking at in the portfolio right now. But I’m also not ignoring the amazing sale price we can get on Twilio stock, either. I’d take this as an opportunity to add more shares to your position or start a new one if you haven’t already.
The Uber-related sales weakness is likely to continue for a few quarters, but it’s not going to continue forever. And neither are these low prices.
Then in June 2017, Twilio got Morgan Stanley Wealth Management as a client. The stock had already recovered around 20% from those May lows. And we wanted to make sure our subscribers were buying this stock, so we wrote them again and said:
I don’t mind shouting from the rooftops that Twilio is on the verge of something HUGE.
I see this stock easily hitting my 12-month price target of $45!
So, if you don’t have a position yet, I urge you to take advantage of the super-low prices. Even after this month’s bull run, Twilio still has a long way to climb.
The final plea came in August 2017, after Twilio posted a really nice earnings report:
We’re sitting just below our initial entry price. But that’s not going to last. I see shares breaking through the $35 level in short order. And when they do, the next resistance level is near $40. By that time, we’ll be looking at a 26% gain. And we’ll also be looking at a stock that could double our money within the year.
If you haven’t started a position yet, I highly recommend you do while we’re still near the initial entry level. Once we get to $35, there’s not going to be any looking back. And I’d hate for you to miss out on the potential in Twilio stock.
Now, why am I telling you all this? It’s not bragging, exactly. Think of it as a promotion. Jason and I don’t get paid by the companies we recommend. We are not beholden to hedge funds or brokerages, either. We make our salaries from the people to whom we recommend great stocks, like Twilio.
And we’re good at what we do. That’s why we keep our jobs. And for today and today only, we’re celebrating government gridlock (the best environment for stocks) with an Election Special for The Wealth Advisory: $19 for a year. Crikey! Click below to get access today.