Paul Meeks, Sloy, Dahl & Holst CIO and portfolio manager, recently discussed cloud-related business stock with the traders on CNBC’s Fast Money Halftime Report. During his appearance, Meeks discussed his thoughts on the leaders in this industry, cloud figure reports, the valuation of these companies, and his personal stance on purchasing this type of stock.
According to Meeks, companies that are leading the way in this industry are Microsoft Azure, Google Cloud, and Amazon Web Services. Although Microsoft Azure and Google Cloud are doing well, Amazon Web Services stands out from the pack by a large margin. Additionally, this gap between Amazon and other cloud-based businesses is forecasted to remain quite large.
Despite Amazon’s success, some question its popularity and wonder how long it can continue. At what point will another cloud-based service take up the reins? Meeks suggests that investors keep an eye on the international segment and look at a turnaround in profitability. Meeks also believes there could be a rise in momentum in Microsoft Azure.
When determining the best valuation method for cloud-related stock, Meeks recommends using a price/earnings to growth ratio (PEG). This ratio gives you a complete picture of a stock’s fundamentals, rather than just its price to earning (P/E) ratio alone. A PEG ratio is calculated by dividing the P/E by its projected growth in earnings. Another tip from Meeks is to review the company’s growth and positioning relative to its total available market (TAM).
As Amazon blazes forward and is forecasted to become a four-figure stock, investors would be wise to cut back a bit. This may be particularly important for those who have the stock heavily weighted in their portfolio. And when it comes to Meeks personal advice on when purchase cloud-based stock, he notes that his method is to watch for the dips and then snatch them up.