Investment Climate October 2017: A Paradigm Shift

In our last Investment Climate, we suggested that the “correction” many growth-oriented companies experienced in the second quarter would be short-lived and business merits would drive the values of those companies higher in the future. While some technology-related companies remained under pressure, as of the end of the third quarter, values resumed their up trend amongst broader growth companies. TFCM growth portfolios reached the highest quarter-end values in the history of the firm! While the drumbeat of “record highs” continues and the financial punditry gnashes its collective teeth over that fact, we remain convinced that values are still not fully reflected in most of the companies throughout our portfolio. And while 5-10% corrections should be expected at any time, barring a major external event, market values should continue higher over the coming months and years.

Income investments have been in much more of a subdued pattern in the last year as these types of investments grapple with higher interest rates and the actions on the part of the US Federal Reserve to “normalize” monetary policy. For investors who require ongoing cash flow and a more stable underlying value to their portfolio, the values represented in certain income securities, particularly high-yield energy-related issues and certain “special situation” securities, offer very good opportunities. While we believe interest rates will rise in the near and longer term, we believe the move will be gradual and won’t derail economic activity. With that in mind, we continue to prefer equity-oriented income securities and avoid most long-term, fixed-income investments currently.

What we want to convey to our clients today is that we are experiencing some of the most important shifts in our investment paradigms and themes that we have witnessed in the last 20 years! We believe there is a major transformation happening in the way computing is done and in the way the internet operates. Much of this is centered on “blockchain” technology and the re-emergence of distributed computing. The disruption that this will create will be as massive, if not more so, as the advent of the internet of the 1990s, which was built upon the centralization of data and computing power. Every company is either susceptible to this transformation or will benefit from this transformation, and you can be assured that we are feverishly researching and positioning our portfolios to take advantage of this monumental phenomenon. Stay tuned for much more in the coming quarters and years as we wade through this exciting time in the history of the world!

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. 
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Big Announcements from TFCP holdings, Otoy and ASOCS


It's been a big week for Taylor Frigon Capital Partners, LP as two of its holdings, ASOCS and Otoy Inc.,  have made major announcements recently. Just last week, Otoy's Jules Urbach announced his contribution to the new Render Economy, Rendertoken.com. To learn about this revolutionizing technology it's best to read his articles in Medium.com,  HERE and HERE.


And today, ASOCS announced its launch of Cyrus, an "on-premise mobile cloud for enterprises that addresses the mobile connectivity, capacity and security challenges associated with true digital transformation. By giving enterprises ownership and control of their mobile networks, Cyrus fundamentally changes how users wirelessly connect with and leverage the internet inside large buildings and venues such as corporate offices, sports arenas, mixed-use buildings, retail establishments, hotels, hospitals, and more." Read the announcement HERE.

Disclosures: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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Don't Fear Investment in Israel


Chief Investment Officer, Gerry Frigon, yesterday posted a blog, "Don't Fear Investment in Israel," in the Times of Israel discussing the advantages of investing in Israeli companies.  As the blog explains, "We never set out to invest in Israel just for the sake of investing there.  Quite the contrary, we simply follow the most important investment ideas and themes we could find, which led us to the vibrant country of Israel." READ MORE

Disclosures: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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The State of Technology


We have referenced Bret Swanson's work in the past in this blog.

In his latest article he reinforces the research he recently conducted with Michael Mandel and debunks two extreme, and opposing views on the state of technology offered by Economist Robert Gordon, and Tesla CEO Elon Musk.  Gordon argues that innovation is dead, and Musk argues we need to regulate the fast pace of technological growth, lest we kill all the jobs.

As Bret brilliantly argues, both are wrong!  And as we have stated so many times in our writings over the years, one solution to the "roadblock" that is hindering the economy is less burdensome taxation.  This would unleash capital spending by the part of the economy that has underspent on technology investment and has relegated the majority of industry to an inefficient existence.  We would also add that a reduction in the regulatory burden on these businesses would also help greatly.

Nonetheless, Bret hits hits the nail on the head, in our view, and we would urge all investors to read his pieces and understand these issues thoroughly.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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A Correction Is Here

With all the news about escalating tensions regarding North Korea, which finally seemed to gain the attention of the market this week, much has been lost on what appears to be a correction going on in some of the highest growth-potential companies in the economy.

The second quarter earnings reports from many companies were stellar, in some cases, and good in others.  Rarely were they poor; at least in companies we follow or own in our portfolios.  The number of companies in our portfolios reporting favorably, as far as actual second quarter earnings, were plentiful.  However, when referring to guidance for the third quarter, expectations were running very high for many companies and any sign of "delays" or "transitions" in business activity caused violent reactions in a number of the best-performing businesses in the market.  Even in companies whose guidance was positive, the old "buy on rumor, sell on fact" phenomenon kicked in and many of those stock prices were met with healthy declines.  A sure sign, in our view, that we are in a correction.

In our recent Investment Climate we pondered the likelihood of a correction in the market and even suggested it would be healthy.  Given that we have seen some really significant moves up in prices, it does not surprise us that we are seeing this correction, even if it is somewhat "stealth" at this point.  It may well be that it is not fully complete since it has not been clearly evident in the major stock market indices.  It should be emphasized that these are normal and healthy actions, and while there are often "hiccups" in business activity over the course of any company's life span, we are quite encouraged by the underlying business trends we are seeing with respect to most companies in our portfolios.

We stand ready to take advantage and become more aggressive as prices "back and fill" and recommend that investors do the same over the coming weeks as we move through this correction, recognizing one rarely chooses bottoms.

Lastly, returning to geopolitical circumstances, North Korea has been a disaster for over 25 years and four different U.S. presidential administrations, from both political parties, have failed to adequately handle the situation.  While we have no way to accurately predict how this will play out, we are extremely confident that the U.S. will prevail should it be necessary to take military action in order to neutralize the North Korean regime.  We believe that military action remains remote at this point and serious diplomatic efforts are underway to address the situation, involving South Korea, Japan and most notably, China.  We would consider any further weakness that develops in stock prices as a result of this situation another buying opportunity.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.


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