Give This E-Mail Stock Full Attention

04/06/2011 3:34 pm EST

Focus: STOCKS

Timothy Lutts

Publisher, Cabot Heritage Corporation

E-mail manager Constant Contact has been a constant market winner of late, and the success looks likely to continue, writes Timothy Lutts, chief investment strategist of Cabot Wealth Advisory.

Today I want to discuss a new stock that looks like a great investment.

It’s Constant Contact (CTCT), a company that helps more than 415,000 small businesses, associations, and nonprofits connect with their customers.

The medium is e-mail. The tools include customizable templates to aid in e-mail creation, tools to import and manage contact lists, and e-mail tracking and reporting tools to analyze overall campaign effectiveness.

Constant Contact helps companies avoid having their correspondence treated as spam, helps them avoid Internet service provider volume limits, and generally helps them understand what happens to their e-mail after it’s sent. (I know a lot about this stuff, because that’s part of what we do at Cabot, though we don’t use Constant Contact.)

The results have been terrific. In fact, Constant Contact has grown in every year of the past decade, and in the Great Recession it didn’t even blink, growing 73% in 2008 and 48% in 2009. Last year it grew 35%, posting revenues of $174 million.

And the bottom line has begun to fatten up nicely, with profit margins hitting a record 11.2% in the third quarter of last year, followed by 9.3% in the fourth quarter.

This year, the company has added new features that integrate with Facebook and Twitter, promising that Constant Contact will maintain its leadership in the age of social networking.

Looking ahead, analysts are projecting that earnings will grow 68% in 2011 and 39% in 2012, but I find those analysts are typically conservative.

And most important to me is that the stock is hitting new highs.

Constant Contact was first recommend by Michael Cintolo, editor of Cabot Top Ten Report, back on December 13, when it was trading at $31. [Shares traded above $35 Wednesday—Editor.]

Mike recommended buying between $27 and $29, and his subscribers had many chances to do that, as the stock built a textbook base over the next three months.

And patient investors have been rewarded, as the stock broke out—on big volume—two weeks ago and blasted ahead to new highs. Notable—at least to me—was the fact that there was no news to account for the strong performance. That tells me there’s something good that most investors don’t know about yet, and I like that.

So you could just step in and buy it here, or be patient and wait for a better buying opportunity—perhaps a pullback of a few points away from resistance at $35.

[Another of Cintolo’s recent picks tied to the Internet, Open Table (OPEN), is up 24% since he suggested it two months ago. A month ago, he recommended Manitowoc (MTW), and shares of the crane supplier have since jumped 14%—Editor.]

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