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Don Douglas' Top Tech Stocks for 2015


A seasoned tech investor issues his top trades and themes for the year.

With 2014 in the books, it's time to look forward and see if we can exceed last year's results.

Let's start with the M&A picture for 2015, which should continue to be strong as long as interest rates stay low. The tricky part now is that the valuations have continued to rise in this cycle and there are fewer undervalued names from which to choose.

To further complicate things, we have the fragile world economy, oil dropping 50%+ in a few months, which has a bigger impact than most people think, then add in copper prices at 5-year lows, and it smells like deflation. With that in mind, we could be in for a very tough year.

Let's start with our M&A picks for 2015:

Twitter (TWTR) Talk about a company not living up to its potential. Management is basically loathed by almost everyone. New talent ought to be able to better leverage the company's assets. Maybe this year someone will.

Nokia (NOK): The company has a turnaround underway and a number of competitors look like they may have topped out. I also like Nokia's investment and research around haptic technologies. While it would have been much cheaper to Nokia two years ago, it is still possible a big player will still look to merge or acquire them.

Nuance Communications (NUAN) - Repeat from last year but the story stays the same. Move to recurring revenue should have been largely digested. Tremendous underperformance with the CEO on the hot seat. The pressure will be even greater on the company to get it together or get the company sold.

Maxwell Technologies (MXWL) Growth has stalled but the market for ultracapacitors appears to still have major growth prospects. Maxwell could be a great tuck-in for a bigger player.

Lumos Networks (LMOS) Lumos has been unloved for some years now but is sitting on some great assets and appears to have a very motivated management team. The company can do fine as a standalone but with all of the fiber consolidation going on it seems like they would be a great fit for a number of larger providers. Like this one a lot especially on any pullbacks.

Now, let's move onto my forecast for trends, technologies and products:

1) Shadow IT

The consumption of cloud services without any oversight will continue to grow putting many companies at risk. In turn, C-Suites will start to feel the heat and IT departments will have to do something constructive about the issue.

2) Augmented/Virtual Reality Hype Turns to Actual Reality

Augmented and Virtual Reality have yet to do much for the masses. Though I am down on Google (GOOG) Glass, I am very excited about this space. Facebook definitely thinks the space is worth having a seat at the table, buying Oculus Rift for $2 billion. Low cost, high bang-for-the-buck products such as MergeVR could entertain the masses. Your kid could be asking you to buy one of these in the near future.

Higher cost products from Samsung and Oculus will help provide the marketing dollars to get this category noticed, but it is still way too early to pick a winner. The question is, who can deliver in mass with a killer app in 2015?

3) Security of Thing

The Internet of Things will have a host of new privacy and security issues to deal with as hackers look to exploit some of the early roll-outs.

Wearables will become the next frontier for BYOD, and many industries will have to grapple with managing new classes of products in order to leverage staff productivity. This will create a new set of headaches for corporate IT departments.

4) Mobility Pushes the Cloud

Companies already have incorporated push mobile devices in mass, but what type of ROI are they getting? Can they prove it? W

ith newly designed cloud applications available, recognizing the benefits of mobility and quantifying them will become much easier.

5) Xiaomi

Haven't heard of them yet? Well you will as they have a huge war chest to try and invade the west. Look for them to try and exert their muscle on the mobility front as they are skilled copyists, just like Samsung was a few years ago.

Sound far-fetched? Well, just 4 years ag,o this company wasn't even on the map and now they are #1 in China. Here is the crazy part -- they run Android but have made their phone look and behave more like an iPhone than Samsung has ever come close to doing.

6) The Skill Shortage Continues

The world economies will likely continue to face a number of issues keeping the labor market soft, but key skills are in high demand. Just try hiring a Senior Big Data Analyst or a Chief Marketing Technologist. Many other highly skilled positions will continue to be in high demand with many slots going unfilled for more than 12 months.

7) Samsung Runs Out of Steam

Samsung helped lead the Android revolution as they have been great at copying features from competitors and delivering a quality product. Given that they lost market share this year, they will need to come up with something new. Can they finally innovate? I am doubtful and feel the company has hit a wall. This is part of the reason I think Nokia and others have a chance to rebound this year.

8) Wearables

2015 appears so far to be more of the same. Lots of products are coming out which include quite a bit of cool technology. The problem is that many of these lead to gadget fatigue, and it is still really hard to leverage all of the data. Many products miss key features and to get everything you want, you would have to wear 10 products at once. Even then, the overall benefits are minimal.

Until someone really figures this out, we won't be able to see how disruptive this category could really be.

Could Apple (AAPL) have the answer?

9) Startups

Look for a couple of things this year. Money should flow into a range of security related companies as major breaches continue to make headlines throughout the year. Also, look for more specialization around verticals. Many companies will be created to attack vertical industries and continue to disrupt them. Previously, potential customers for these products were stuck developing their own code or having to purchase a major vendor's product before spending millions to customize it to their needs. This will keep many of the big players on their toes and potentially looking for acquisition targets.

10) Apple

You know I can't leave this company out.

So here it is: Apple Watch is a hard sell. So far I have seen no compelling applications that make me want to buy one. Factor in the faithful and they will probably still sell 7-10 million of them in 2015. Can this product get legs and really redefine a category? Will this product release define the post-Jobs era? For now, prepare for disappointment.

On to other things. How about an overhaul of the Macbook Air and finally a new Apple TV. The watch better not be the only new thing Apple is banking on if it wants to start building momentum beyond 2015. But show me a killer app and I might change my mind.

I hope you enjoyed this year's forecast.

What did I miss?

What big things do you see happening in 2015?
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Position in LMOS, NUAN
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