Time to take profits from high-flying tech stocks?

By Chris Lau for Kapitall.

Characterizing the initial public offering (“IPO”) of unique premium camera maker GoPro (GPRO) as a phenomenon is an understatement. The stock returned more than 100% from the first day of trading up until July 2 2014. Investors should be cautious: if the euphoria ends, so will its recent highs. There are other reasons to be concerned.

Short selling in GoPro shares are so high that the cost of borrowing shares is expensive for investors. The bearish bet is reminiscent to that made on Twitter (TWTR) on its IPO day. Investors figured Twitter’s business model would collapse, and that it was a “no brainer” to bet against the stock.

The heavy short selling ended up pushing Twitter shares to a high of $74.73 in December 2013, up from the low $40’s in the previous month. It would take a few months before Twitter finally fell below its IPO price. It is too early to say if GoPro shares will squeeze short sellers in the short term.

GoPro’s product offers a unique solution for capturing video and still photos. This would partly justify its high valuation. Conservative investors might want to look instead at conglomerates. Companies that rely only partially on the photography and video capture market would be less risky. Canon (CAJ) and Sony (SNE) come to mind.

Sony generates revenue from movies. Its latest title, 22 Jump Street, generated $50 million at the box office on its opening weekend. In the TV segment, the firm might earn its first profit in over a decade. Sales from TVs are set to rise to $2.15 billion, thanks to a focus on high end models. In the gaming segment, Sony will release a TV version of PlayStation for $99 in North America in the Fall.

Canon entered the 3D printing market last year in October when it formed a reseller deal with 3D Systems (DDD). Canon and 3D Systems expanded a partnership. Canon will distribute advanced manufacturing 3D Printers in Japan.

 

Click on the interactive chart to view data over time. 

 

1. Canon Inc. ( CAJ): Canon, Inc., through its subsidiaries, manufactures and sells network digital multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras, and lithography equipments primarily under Canon brand in the Americas, Europe, Asia and Oceania. Market cap at $35.22B, most recent closing price at $30.66.

 

 

2. GoPro Inc. ( GPRO): GoPro, Inc. develops hardware and software solutions to alleviate consumer pain points associated with capturing, managing, sharing, and enjoying engaging content. Market cap at $4.95B, most recent closing price at $39.00.

 

 

3. Sony Corporation ( SNE): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $18.05B, most recent closing price at $17.40.

 

 

3. Twitter, Inc. ( TWTR): Twitter, Inc. is a global platform for public self-expression and conversation in real time. It provides various products for users, including Twitter that allows users to express themselves and create, distribute, and discover content. Market cap at $20.23B, most recent closing price at $55.78.

 

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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