Alex Daley of Casey Research on Finding the Best Technology Stocks

The Investing News Network spoke with Alex Daley of Casey Research about investing in the tech sector. Finding the best technology stocks can be tough, so Daley spoke about what he looks for when investing in tech stocks, what red flags he watches out for, and what he thinks about the amount of attention being paid to funding raises in tech. Daley admitted that, for tech companies, successful capital raises provide a form of validation, while also making for a good marketing opportunity. "For them its free marketing, so they understand the value of pushing it," he said. However, Daley also suggested when looking for the best technology stocks, it's important to keep in mind that there are two types of tech companies out there. Some companies are raising money because they have a great business model and are growing revenues. Daley cited Uber as an example, noting that the company was doubling its revenue every three months. On the other hand, he stated that some companies are better at raising money than they are at selling product. "So you'll see this kind of love-hate relationship with venture capital and technology," he said. In terms what he looks for when trying to find the best technology stocks, Daley pointed to growth as the predominant factor. More specifically, he said that a company should have the ability to reach a larger market, with a good product and a strong management team that will help the company grow. He also said that the best technology stocks have a "competitive moat," or "something that can actually stop somebody from just copying them six months later, coming into market and destroying their margins." For example, companies might have a patent in place on their technologies, or may keep some parts of their process as trade secrets. However, while it can be easy for investors to fall in love with new technologies, Daley stressed that it's more important to look at growth and revenues, since new technologies can take longer to get to market than one might think. For example, he noted that Plasma TVs were patented in 1938, and that the first one wasn't built until 1964. "It’s the revenue graph you should fall in love with, not the underlying technology itself," he said. Keep an eye out for part 2 of our look at investing in the best technology stocks with Alex Daley.

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