Earnings season got aggressive this week. Sure, last week we wrapped up much of the financial space, but now we dance with the information technology sector. For joy, the land where fortunes are both won and lost overnight. Overnight? Better change that to a matter of minutes. Many tech names are extremely volatile and will see their market value change in a matter of seconds upon the fast money reaction to their quarterly earnings reports. Just take a look at the market reaction to the corporate performance of Netflix (NFLX) - Get Report and Alphabet (GOOGL) - Get Report . What will the markets react to? PE ratios? Not likely. Growth, or the possibility of growth? Very likely. You don't need to know much more than that if for you these names are simply a trade. That said, what if one wishes to invest in the space? That's a little trickier, and hanging on to huge gains going into an earnings release can certainly be an extremely stressful event.
Why I Like Nvidia, Lam Research and Intel
When I look for investment opportunities in tech, I have to see engagement in the development of what I consider to be relevant (or hot) segments of the industry. Artificial intelligence, autonomous cars, block-chain mining and cyber-security come to mind. What other factors figure into my decision making? Treasury yields? Well, yes, that always matters. A tax-reform inspired repatriation holiday? Again yes, but that's sort of like watching the chimney to see if Santa Claus arrives. U.S. dollar valuations? Bingo!
Dollar Bill, Y'all
Cheap dollars will boost earnings for large U.S. multinationals. We have been pounding that table all year, especially since fellow columnist and currency expert Douglas Borthwick told the world that the U.S. currency was over-valued. He told us that right here at TheStreet, and he told us that many months prior to anyone else I heard say it in the industry.
Did you know that the tech sector, broadly speaking, generates 57% of its revenue outside of U.S. borders? Did you know that within the tech sector, semiconductor names, again broadly speaking, are exposed to an even greater degree than the sector itself? For semiconductors, that exposure is an incredible 87%. What? Yup, really. See, the things you can figure out when you're just a guy scouring the financial universe for an edge.
So, What Do We Want?
1) Engagement in the development of relevant of hot business lines.
2) An edge.
These two ingredients are all that's really needed to invest in the tech space in and around earnings. Seems simple, right? Until it's not. As an investor, though, unlike with a trader, time is your friend. Even if you're wrong, you can adjust, hedge, and re-allocate. A trader wins or loses. It's fast. An investor plants a flag, and develops as does the stock. What am I? I am both, and I keep the two separate. Different books for different strategies. How much easier it is to organize your thoughts once you learn that little trick.
Semi-Conductors That Have the Edge
Lam Research (LRCX) - Get Report reports tomorrow afternoon. Consensus is for $3.02 a share. The whisper number is roughly a nickel higher than that. The street is looking for revenue of $2.31 billion. This is perhaps my favorite name in the industry. What do they do? They design, manufacture, refurbish, and service wafer fabrication equipment. In other words, these guys make the stuff that the rest of the industry needs to do whatever it is that they do. Cellphones, tablets, computers, storage, networks... all need what LRCX provides.
Intel Corp. (INTC) - Get Report reports Thursday afternoon. Here, the industry is looking for EPS of $0.68 on revenues of $14.41 billion. This is my sleeper. Not much in the way of performance for a very long time, yet the name provides a dividend yield of 3.1%, while you wait for something good to happen. Long involved in computers, the firm has spread its wings into the cloud, cyber security, not to mention the acquisition of Mobileye (MBLY) in order to make a splash in the growing autonomous vehicle industry. CEO Brian Krzanich usually presents very well, and I look forward to the call on Thursday evening.
Nvidia Corp (NVDA) - Get Report does not report until August 10, so you have some time. Consensus is for earnings of $0.69 a share on revenue of $1.96 billion. Whispers are up above $0.75, and possibly already priced into the last sale. I love this name. It's hard not to. I joined the party late, and it's already one of my best trades over the last couple of years. It is hard to imagine a company more squarely focused on everything that is relevant right now than NVDA. Artificial intelligence, big data research, cloud-based computing, the ability to integrate an entire computer onto a single chip. What? Yup. That means gaming, designing, entertainment, drones, autos, and robots. Did I mention the mining of block-chain? I don't know about you, but when I write this article next year, I hope I'm still long NVDA.
... which brings us to Amazon
It's not that I do not like Amazon (AMZN) - Get Report . I do. It's certainly not a semiconductor name. It's more of an everything name. I have already been long AMZN twice this year, and made significant gains both times. This time, it could be different. Call it intuition, but my spider sense is tingling. Amazon reports this Thursday. Expectations are for EPS of $1.38 on revenue of $37.2 billion. Whispers are for an EPS number a nickel higher than that expectation.
Why am I iffy on Amazon? You all know that I am a Walmart WMT fan. That is not it, though. I have no problem being long both of these names. The stock is trading $45 above its 50-day simple moving average SMA. Think that's cool? Just look at things in perspective. NVDA is a $165 stock, while AMZN is trading $166 above its 200 day SMA. See what I mean? That's possibly outlandish.
I will not know if I am willing to take a shot in AMZN prior to Thursday's close, but I do know that I will not be long the shares at that time. If I short any, it will be within five minutes of that closing bell, and I will be flat long before 5pm. This would be a trade for me, not an investment.
That, my friends will depend on just how bold I feel in 48 hours. Buying one put option with a strike price around the last sale that expires this Friday will run the average home gamer around $2400, and could be almost worthless immediately if you're wrong. Not a warm and fuzzy option.
Eat, Drink and Talk Money with Jim Cramer
Meet Jim Cramer at an exclusive reception at his Bar San Miguel in Brooklyn, N.Y., on Tuesday, July 25, from 6:30 p.m. To 9 p.m.
The evening will start with a screening of Jim's CNBC show Mad Money. Afterwards, Jim will join the party fresh off of the CNBC set to mingle, take photos and answer your investing questions.
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Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.
When: Tuesday, July 25, 6:30 p.m. to 9 p.m.
Cost: $395 per person
This article originally appeared at 10:43 ET on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer and other writers even earlier in the trading day.
At the time of publication, Stephen Guilfoyle was long LRCX, INTC, NVDA, although positions may change at any time.