Happy New Year, my fellow technophiles. I hope you had a wonderful holiday, and that the worst January start to the market in many long years hasn’t put too much of a damper on it. But in all honesty, we’ve been expecting this kind of negativity for a little while. With the split between small- and large-cap stocks in the US continuing right through Christmas, eventually the large-cap-laden indices that the media follow blindly would eventually have to give. After all, most of the gains came from increases in multiples, not from underlying earnings. Whether this slide continues is the realm of market timers, not long-term fundamentals investors like us.

That said, I can tell you that the small-cap shellacking an overreaction to $50 oil and the new year slump have conspired to create some amazing deals in a handful of technology companies most unfairly caught up in the market’s mess. If your resolutions include beating the market, like mine (fingers crossed for the seventh straight year of it), then I suggest you grab a risk-free trial to Casey Extraordinary Technology to see just what I’m talking about. You can get instant access to our current list of best buys, some of which are trading at amazing values right now.

The First Trillion-Dollar Company, and Other Bold Calls for the New Year

Apple (AAPL) becomes the first $1 trillion company, predicts Doug Cass of Seabreeze Partners. Apple’s current market cap is $621 billion, so the trillion-dollar target implies a 61% increase in share price. The big move higher, according to Kass, will be fueled by analyst optimism ahead of the release of the next-generation iPhone. Kass sees the 2016 consensus earnings estimate rising from $8.60 to $10 per share. At $10 per share and a trillion-dollar market cap, Apple would trade at around 17 times forward earnings. At $8.60 per share and a trillion-dollar market cap, Apple would trade near 20 times forward earnings. Those aren’t exactly ridiculous valuations, but they are a bit of a stretch for a company of Apple’s size. I’d hate to be the last fool holding that hot potato when people realize the dividend would take 25 years to earn out that share price just to break even and no one is going to acquire a trillion-dollar company.

Rising interest rates and falling oil price will bring tremendous stress to global capital markets, says Fred Wilson, a high-profile venture capitalist. So where should investors seek shelter? Not in your typical safe havens, claims Wilson: “Safety used to mean gold, US treasuries, and blue chip stocks. Now it means Google, Apple, Amazon, and Facebook”.

Our take: First, low oil prices tend to mean higher equity prices outside that sector, though with energy an increasingly lower portion of variable costs for companies, we don’t think the correlation will be all that high this latest round. Few actual experts are expecting rapidly rising rates in the US either. And while I have much respect for Mr. Wilson as a bar none VC, many a man has stepped out of his core market only to find himself clearly out of his depth. I’m very bullish on long-term technology, but falling oil prices mean little for Facebook or any of its competitors. Let’s pick those stocks for the right reasons: when they’re growing revenues and earnings.

It will be a banner year for Internet companies, claims RBC Capital’s Mark Maheney. He cites several reasons why, including…

  • Mobile ad spending will start to catch up with the growth in mobile usage;
  • With only 22% of the world’s population on Facebook and/or Twitter, the social media market is nowhere near saturation and will continue to experience significant growth;
  • Ad budget dollars will continue to migrate from TV to online; and
  • Huge cash balances held by large-cap Internet companies are apt to lead to mergers, acquisitions, and dividends.

We often find ourselves at odds with Wall Street. But in this case, we agree with much of Maheney’s thinking and foresee strong revenue and earnings growth for Internet companies in 2015. But tread carefully: many companies in this sector carry high valuations with anticipated growth already priced into their shares, including several of RBC’s top picks. Therefore, stock picking (pairing good growth prospects with fair valuations) will be paramount to profiting from investment in the sector.

In the November edition of BIG TECH, we recommended a stock positioned to benefit from many of the market forces that Maheney identified, and priced at a price/earnings to growth (PEG) ratio of less than 1. Also, the company has a big catalyst on the horizon with the potential spinoff of one its high-profile subsidiaries, which would likely fetch a pretty penny if taken public. If that doesn’t happen, this Internet company still has several solid cash-cow businesses to fall back on. A 50% return in the next 12 months could certainly be in the cards. For more information, click here.

Look Out, Cable: Here Comes Google Fiber?

Few would argue against Google Fiber’s big potential. After all, Fiber offers an average Internet speed 100 times faster than standard US connections. Also, it offers consumers an alternative to the likes of Comcast and Time Warner, which always top the list of America’s most despised companies. Unfortunately though, the Fiber rollout has been a slog. It was launched nearly four years ago and is currently only available in a few select cities. But that may soon change, thanks to regulation that could kick into effect this year.

As you’ve probably heard, the FCC has proposed treating broadband Internet providers, such as Google, like telecoms. What would that mean? Greater oversight, for starters. Rates and service quality, for instance, would be regulated. And Google would have to ask permission to discontinue some services. But the upside is that Google would be allowed instant access to existing infrastructure, such as ducts, conduits, and utility poles, which are currently reserved for telecoms.

“Connecting homes via utility poles would cost Google about a tenth as much as it spends to dig trenches and lay pipe for the service”, says former FCC Chairman Reed Hundt. With the time and costs associated with deploying its fiber network potentially greatly reduced, Google might ramp up the rollout. That would be good news for millions of broadband subscribers… but the same can’t be said for incumbent Internet service providers.

Wearables Insanity Continues

In a sign of things to come as unrealistic expectations mount for the wearables space, Under Armour, not content to be left behind by Nike’s Fuel Band and other smart gadgets, bought MapMyFitness and launched yet another fitness tracking app. The company plans to follow up with gadgets to match from struggling phone maker HTC (which just posted its first sales growth in three years).

These companies aren’t alone with the new wearable gadgets. The dawn of yet another Consumer Electronics Show (which we’ll summarize for you next week) has seen dozens of announcements in the space. After a weak reception for Google Glass, traditional military equipment maker ODG has decided to hop into the fray with its own Android augmented-reality headset (here’s hoping it works as well as the one from Daemon!). Intel, always one to push new form factors that no one adopts, invested a cool $25 million in a smartglasses startup.

Apple’s even planning to push ads to your smartwatch as you walk down the street, with plans leaked for a beacon that any retailer can buy to sense nearby devices and send ads to them. This market has been pushed along by researchers predicting these “hyperlocal” ads to be a booming multibillion-dollar business in just a few years. Many of these are the same researchers who called for billions in home 3D printer sales by this year or next. We see the hyperlocal ads as a quick way to kill the market before it even gets started if they get pushed too hard.

One cool use for wearables we have seen: car keys. Apparently, Hyundai is going to allow you to unlock your car remotely using your smartwatch. Granted, I haven’t owned a car that required me to take my key out of my pocket in quite some years now, and I’m loath to wonder when hackers will use it to steal a whole lot’s worth of cars in one go. Still, at least it’s an app we can see people using.

We’re obviously very skeptical on this first generation of wearables. Few in the way of apps—none with anything close to killer status—probably means they’ll go the way of the first desktops. Many early Apples sold only a few thousand devices, so maybe the Apple of this generation has already arrived. But the same can be said of Tandy’s and Commodore’s early models, and you don’t hear much from those companies any longer. The wearable might became the next desktop. In fact, we’re betting on it long term. But in the next few years, we’re likely to see a whole lot of failed efforts to break into to a market that just isn’t ready for that kind of volume.

Bits & Bytes

It’s hardly a secret that big tech companies use fancy footwork to avoid onerous taxes. The European Union intends to stop that. Under new rules, taxes on digital goods like apps, e-books, and MP3s will now be determined by where consumers live, rather than where the company selling these goods is headquartered. So an Amazon e-book, for example, sold in the UK will be taxed at 20% rather than  the 3% rate in Luxembourg, which is where Amazon’s European headquarters are located. The financial impact will be felt by consumers, producers, and perhaps most of all Luxembourg, home to Amazon, Microsoft, and Apple’s digital operations. “Luxembourg is going to lose an enormous amount of revenue,” said Karen Robb, a tax expert. “There will be fewer compelling tax reasons for companies to stay in Luxembourg.”

In 1995, Microsoft launched Internet Explorer, and it became an instant hit. But the once beloved web browser has lost its luster in recent years. And now, Internet Explorer is on its way out. Later this year, Microsoft will reportedly release a new web browser with Windows 10. It will likely be speedier and more secure than prior versions. It will also likely come with voice command capabilities and extensions. With the new and improved browser, Microsoft is hoping to gain ground on Google’s Chrome, which is the new top dog in the browser market, with 48% share.

With the technology that the US military has at its disposal, it’s not even a fair fight. Take the new self-guiding bullets, created by the Defense Advanced Research Projects Agency. These bullets, called EXACTO, are equipped with sensors, internal electronic systems, and external fins that work together to guide the projectile toward a target, greatly increasing a sniper’s accuracy. The concept is similar to laser-guided bombs that were first developed by the US at the height of the Vietnam War… just much smaller.

China’s air pollution is at alarming levels, recently reaching 20 times the safe limit in northern parts of the country. In response, the Chinese government is providing financial incentives for green technologies. In fact, China just announced hefty subsidies of up to $8,800 for buyers of electric cars. But it only applies to cars manufactured in China, which means foreign electric carmakers like Tesla and Nissan are left out. China-based electric car company Kandi Technologies Group jumped on the news.

In its continuing struggles to please regulators, Uber has seen five of its six bases in New York City shut down for failure to submit trip records.

Twitter has its sights on YouTube, launching a video upload service for shortish (up to 10 minutes) movies directly on its service. No more than 140 characters for text still, though.

BitTorrent’s attempts to turn itself from a piracy hub to a commercial venture continue to make odd twists and turns. This time, it’s in the form of a way to “pay what you want” for a movie. Who wants to bet most users pay $0.01? Though with Radiohead apparently pulling in $20 million with BitTorrent’s commerce tools, maybe I’m wrong to be skeptical.

New York City is lifting the ban on cellphones in schools.

Despite evidence to the contrary, the FBI still thinks North Korea hacked Sony Pictures, because they were apparently sophisticated enough to squeeze hundreds of gigabytes of data out of the company in a few weeks over the world’s slowest internet connection, but too sloppy to cover up their IP address. They even sanctioned an arms dealer (?) for it. Either way, one of the two administrations deserves a cut of that $31 million Sony has made in streaming revenues so far.

The FBI is arguing that its own form of hacking—the false cell towers called “stingrays” that intercept calls and identify users—are fine to use so long as they’re set up outdoors. Apparently they don’t think you deserve privacy on a phone call if you’re sitting in a park… or that wireless signals go through walls in people’s homes.

Who needs to hack? Apparently the UK’s National Property Register was happy to basically give away millions of records on who owns what around the country, along with lots of juicy personal details to make stealing said property as simple as possible.

According to app tracker Flurry Insights, mobile app usage jumped an astounding 76% last year, as the mobile web continues to become the mobile app store.

Developers are beginning to realize just how bad a business move putting yourself at the mercy of giant app stores really is—huge fees, one supplier of marketing push, and even a loss of contact information for customers.

Next week we’ll be back with a whole bunch from the Consumer Electronics Show and more, but until then, enjoy the future of the desktop computer: the Intel Compute Stick. The name needs some work, but this device—reminiscent of the many streaming media players of the same form—is a full-fledged PC… well, so long as you can live with a measly 32GB of storage, which is barely enough to hold the Windows or Linux version it will run on. Still, it’s where we’re headed, and it starts at $89:

Now go off and have some fun playing one of the thousands of old MS-DOS video games now available free on Internet Archive. It won’t be long before earnings season is back in full swing and you can’t spare the time—oh wait, that’s probably just us.