The Next SOHU – 4 Tech Stocks which could BOOM in 2012

Fact: There’s Big Money To Be Made In Tech Stocks…

It’s no secret that technology has always been (and always will be) one of the most lucrative sectors of the stock market. What investors always want to know is “Why?” and “Which Ones Should I Buy?”

I’ll get to the second question in a minute, but first I want to briefly explain why savvy investors need to be invested in tech stocks.

You see it’s simple really.

Technology is everywhere- and new technology has the potential to make our lives better. Maybe it’s an advancement that makes a cell phone more robust, or a computer more powerful… or open-heart surgery a little safer.

Of course, the actual list of potential benefits due to new technology is too long to list here. But trust me when I say…

Technological innovation moves our world forward.

New technology is being developed all the time. If a new technology fills a much-needed void, or even if it’s just wildly popular with consumers, companies can make a fortune.

And so can investors…

Investors who hitch a ride on surging technology stocks can quickly see their portfolio rise to unimagineable levels. You see, tech stocks are true “growth” stocks. Which means they can produce spectacular gains when momentum shifts into the sector.

To show you what I’m talking about, here are a few examples from the last “tech boom” that occurred in the late 90s:

Company	% Return
EMC	+34,559%
DELL	+16,450%
Microsoft	+8,979%
Semtech	+19,515%
Tellabs	+7,627%

Imagine what would happen to your portfolio if you had one or a few of these in it!

Take Dell for example. A mere $500 invested in the early 1990s would have been worth a cool $82,750 when the run came to an end in 2000. I don’t know about you, but that’s exactly why I invest in stocks… to get life-changing profits when I hit it just right!

And keep in mind Dell is just one of hundreds of lucrative examples. In fact, I’ll show you an even bigger winner in a minute.

The takeaway here is technology stocks offer potential that few other investments rival. When things heat up in the sector, these stocks can make astronomical moves VERY quickly.

The key to making the most money is to understand what drives these stocks… and more importantly, when they’re most likely to explode higher.

Why Do Technology Stocks Produce Such Quick, Enormous Returns?

The simple answer is really two-fold: future expectations and rapid earnings growth.

What exactly does that mean?

First of all, investor expectations are key to every market sector. But they’re even more important in the technology space. You see, once a new technology makes it onto investors’ radar screens, the company’s stock can explode higher in no time.

Why?

If a company has a new technology with the potential to change the world we live in, everyone will want a piece of it. Shares will get driven up very quickly, and then fear kicks in… but not in the way you think!

If a company has a revolutionary product, many times investors will buy the company’s stock simply because they fear missing out on the next ‘big thing’. It doesn’t even matter if the company is profitable, if investors see a big future for the company’s technology product- they’ll bid up the shares.

But that’s not all…

Technology is one of the few sectors with rapid earnings growth potential. Once a new technology gains traction in the marketplace, a company’s revenues can accelerate extremely quickly. And if management controls costs effectively, those revenues can turn into big profits.

At that point, the sky’s the limit…

So if a tech company has high investor expectations and surging earnings, there’s no telling how high the stock can go. It’s these two factors that make technology one of the few sectors loaded with true “growth stocks”.

How Do You Find The Next Great Technology Stock?

The first (and most obvious) step in finding the next great tech stock is to identify a company with something new on the horizon.

Now let me be clear, the company doesn’t necessarily have to produce a new technology. Plenty of great technological innovations are simply an improvement of an existing product, service or process.

But the technology must have one essential characteristic…

It must have potential for huge market growth.

In other words, the more customers the new technology can reach the better. If the technology is something that can create value in the lives of millions of people- you could be onto something big.

But that’s just the first step…

You also need a visionary management team with specific tech industry experience (or great experience with the product or service they’ve created).

The tech space evolves rapidly… it’s the nature of the beast. And if a company doesn’t have a management team capable of seeing new tech trends before they happen, they’ll be left in the dust.

Apple (AAPL) is the perfect example…

In 1985, founder and CEO Steve Jobs was fired after a dispute with Apple’s board of directors. But after Jobs left, the company went into a decade-long downturn of lackluster products and inferior ideas.

Without Jobs at the helm the company nearly went bankrupt.

But in 1996, Jobs returned to Apple and turned it into the wildly successful company we all know today. His visionary ideas turned a downtrodden computer maker into one of the largest and most profitable tech companies in the world.

Apple is just one of many examples illustrating how effective management is key to staying ahead in the world of technology. Look at any top technology company and you’ll see a strong management team that’s critical to their success.

Now don’t get me wrong, finding companies with these traits isn’t as easy as it sounds.

It requires hours and hours of painstaking research.

And once you do find a company, you have to constantly monitor their progress. It’s imperative to keep tabs on the company’s income statement, balance sheet and sales figures to ensure management isn’t making mistakes.

Nevertheless, astute technology investors have made, and will continue to make obscene profits investing in technology stocks.

In fact, let’s look at a specific example of just how much money you can make when you get everything we’ve talked about 100% correct…

One Tech Stock Can Turn $500 Into $104,600!

To show you exactly how these essential traits can come together to create huge profit opportunities, let’s take a look at one of the biggest tech winners of the last decade.

In 1996, Internet Technologies China Incorporated launched China’s first ever internet search engine… Sohu.com (SOHU). But it wasn’t until the company did an initial public offering (IPO) in mid-2000 that US investors could buy shares.

Uponits release to the public, SOHU traded for a robust $13 a share. But it didn’t take long before the initial enthusiasm wore off… and the stock quickly sank below $1.

From 2001 to mid-2002, most investors overlooked SOHU. It was a small upstart Chinese internet company with no track record and no earnings. What’s more, technology was a hated sector after the dot-com bubble burst a year earlier.

But astute investors who put aside their emotions and did proper research realized something spectacular about SOHU. It had all the traits capable of turning a small technology company into an insanely profitable industry giant.

Here’s what happened…

First of all, the company was taking big steps in 2001 to establish itself as the premiere internet company in China. Sohu.com provided then (and still does today) search, news, sports, business and finance news, entertainment, chat, and email for website visitors.

Thanks to this wide range of information and services, over 12 million Chinese consumers visited Sohu.com on a daily basis in 2001.

But that was just the start of their long-term plan…

In late 2001, the company started rolling out internet marketing services, paid listings, and classified ads. And in early 2002, they took their revenue model to the next level by developing business to consumer (B2C) e-commerce services and enterprise service platforms to serve corporate clients.

At that point, astute technology investors realized something essential…

SOHU had the first trait of a superstar technology stock… a product that was wildly popular with consumers. Their website allowed millions of first time Chinese internet users to surf the web, use email, and play online games.

The company also had the second trait… a huge potential market. With over 1.3 billion people in China, the potential for growth was phenomenal.

And finally, the company had an effective management team capable of identifying new, high-profit potential business trends ahead of time.

It was these traits that would eventually send shares of SOHU to unbelievable heights-and give early investors absolutely astounding returns.

In fact, mid-2001 was a prime opportunity for tech savvy investors to put SOHU in their portfolio. And early investor’s didn’t need to invest their life savings to do it.

Since SOHU was trading for a mere $0.52, a $500 investment would have bought you just under 1,000 shares… 961 to be exact. Buying high potential tech companies when shares are under $1.00 can lead investors to outstanding investment returns.

Take a look at what happened to SOHU in late 2002…

Shares of SOHU exploded!

The steps they took in 2000 and 2001 were starting to pay off. And that small $500 grub stake investors put to work in early 2001 ballooned to a hefty $5,650… a 1,130% gain in little over a year’s time.

But that was just the beginning…

Investors who realized the Chinese internet revolution was just getting started weren’t in a hurry to take profits. They knew that once investor expectations and rapid earnings growth entered the picture (two aspects I mentioned earlier) SOHU would likely surge even higher.

And that’s exactly what happened…

By July of 2003, SOHU was trading for over $40.00 a share! Those early investors who purchased a conservative $500 position at $0.52 were now sitting on just over $37,900… a 7,592% return in just two years’ time.

Of course, after a run like that, it’s natural for stocks to correct as investors take profits. And it’s clear by looking at the chart above that some investors did just that.

But astute technology investors held their ground…

Both top and bottom line numbers were still growing at SOHU. And website viewership was hitting new highs nearly every quarter as China’s economy boomed.

What’s more, the company added real estate search functionality, new games, and additional content to their website in order to push revenues even higher. The potent combination of surging viewership, exploding earnings, and high investor expectations kept pushing shares of SOHU higher.

Investors who had the patience to hold onto their shares were richly rewarded.

Take a look…

By early 2011- just a few short months ago- shares of SOHU were trading at an all time high of $109.37.

Early (and patient) investors who identified the three essential traits of technology leaders saw their meager $500 investment turn into $104,604… a phenomenol return of 20,932%.

Now many of you will think this was a once-in-lifetime event that rarely ever happens…

The truth is, it isn’t!

While SOHU’s return over the past few years is certainly incredible, there are plenty of other tech stocks with similar stories… and similar returns. But more importantly, there’ll be many more tech stock growth stories like this in the coming year.

You can bet on it.

The Next SOHU?

As you can see, technology stocks offer massive profit potential for investors. You just have to know how to separate the potential superstars from the wannabes.

To help get you started, here’s a couple I think could be in for big things in the months and years ahead. All 4 of these could benefit immensely from the big tech stock boom we see coming VERY soon…

VMware (VMW) is a market leader in computer virtualization and cloud-based infrastructure solutions. Their virtual software solutions are revolutionizing the computer industry. This large-cap US based company is already saving corporate clients the world over millions of dollars in computer hardware costs… and the trend is just getting started.

Sebring Solutions (SMXI) engages in reselling software products in North America and South America. It serves various industries, including automotive, aerospace and defense, health care, manufacturing, financial institutions, insurance companies, the public sector, retail, and service providers.Basically….they offer iCloud solutions which improve data search productivity for companies.

Acme Packet (APKT) is an up-and-coming communications technology leader. They provide a multitude of session delivery network solutions (I won’t bore you with the definition of that one!). Needless to say, data transfer efficiency is paramount in today’s internet-dependant world… and this mid-cap company’s technology is leading the way.

EZchip Semiconductor (EZCH) is a small-cap Israeli semiconductor company focusing on Ethernet network processors. EZchip’s revolutionary network processors are delivering next-generation performance via Task Optimized Processing (TOPs).

One interesting thing to note about these companies is their size. When it comes to investing in tech stocks, you can make money with both big and small companies.

You don’t necessarily need to find some obscure company with a ground-breaking new technology that’s going to change the world (although it’s not a bad thing when you do!)

How To Secure Your Retirement With The Coming Boom In Tech Stocks In 2012…

By now it should be obvious that technology stocks can and will generate substantial profits for investors. When you combine the growth characteristics of these stocks with a bull market like the one we saw in the 1990s… the results can be EXPLOSIVE!

It’s happened before… and it will happen again.

But, as many of you know who invested at that time, the tech stock market can be difficult to navigate. You’ve got to have a firm grasp of the underlying businesses and know the right time to buy.

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