MAKE MONEY BUYING "CLOUD" STOCKS

There is a tremendous amount of buzz about the cloud almost everywhere you turn. Apple's announcement that it is bringing iCloud to you by the end of this year has only magnified all the attention this type of technology is getting.

While cloud computing isn't new, it is ramping up in importance and it appears to be the real future going forward. It won't be long before most or all of what you do will be stored in the cloud rather than on your desktop or laptop. Whether you like it or not and whether you think your information will be safe or not, everything is going to be moving to the cloud.

Over the next 10 years, businesses everywhere are going to be investing in and making the move to the cloud. This leads investors to the question: what stocks should I buy to take advantage of this trend and what stocks are poised to make the most money?

The purest stock play on cloud computing is Salesforce.com (CRM) but by the looks of it's chart it is probably much too late to get in. Here is the chart for CRM:

One thing is clear with stocks and the stock market: you have to get in early if you want to make the big money and that means being very good at figuring out what the future holds and what companies are poised to take advantage. By the time something like "cloud computing" is all over the news, it is probably already too late to find a stock that will profit and get your money in at a low price.

There are many other companies that will make money from the cloud as they are involved one way or another. Stocks like Apple, Microsoft, EMC, Google, Amazon, IBM, and Accenture among others will be involved in the cloud and should benefit from it. They all have other products though so their stock prices are not as directly connected to the success or failure of cloud computing.

I personally own EMC and it has more than doubled in the last two years. How much of that is attributable to it's involvement with setting up equipment for the cloud I don't know, but I am glad I have the stock and don't plan to sell.

ANOTHER DOT COM BUBBLE COMING OUR WAY?

The Dow and Nasdaq are two indexes that track the progress of the stock market and they are the two that are most often quoted. When you watch the business news every night, read the newspaper in the morning, or watch any business show on television during the day, those two averages are the ones that you will see prominently displayed.

The Dow Jone Industrial Average is comprised of 30 stocks that are thought to be a representative sample of the market in general. It is an average of those 30 stocks which are all large established United States companies. In other words, if the Dow goes down on any one day, chances are that the stocks you own will also have gone down. I have included a graph of the DJIA since about 1983 below:



The Nasdaq Composite is a different index that includes companies from all over the world. The NASDAQ is an average of all the stocks in the index and they are often more growth oriented than the stocks on the Dow. The NASDAQ has many more technology companies, Internet companies, and companies that are in new industries than the Dow does which is why it's graph looks somewhat different over the same time period:



The biggest difference between these two historical graphs of the Dow and NASDAQ is seen between the years of 1999 and 2002. That was the time period known as the Dot Com Bubble when all the enthusiasm for Internet companies quickly changed from euphoria to pessimism and people were rushing to sell their Internet stocks.

The NASDAQ had climbed to over 5000 and you can see that it was going straight up at one point, a trajectory that spelled doom because of too much enthusiastic buying. When things crashed, they REALLY crashed for all the Internet companies and since the NASDAQ had a much higher percentage of such businesses, you can see the big difference between the two charts. While the Dow did go down, it didn't go down nearly as much because it had many more companies that were in "traditional" industries.

If you take out the 1999 to 2002 period, the charts of the two indexes look a lot alike but technology stocks seem to be getting hot again. There is a lot of enthusiasm for Internet companies right now and stocks that come to mind are Netflix and Apple as well as all the IPO talk from Groupon, LinkedIn, and Facebook. Heck, they are even talking about doing an IPO for the company that makes Angry Birds (Rovio Mobile)!

The NASDAQ has climbed back up to reach it's highest point since the Dot Com Bubble and you have to wonder whether people are valuing these Internet companies too highly. Things change quickly on the Internet and while these companies may be doing well now, it hardly guarantees the kind of success people are hoping for in the future.