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01/08/2014 8:00 am EST
The company I have selected as my top pick for 2014 is truly a disruptive play; it is a R&D-focused, wireless networking company, suggests small-cap stock expert Tom Bishop, editor of BI Research.
The company I have chosen is Ubiquiti (UBNT). By “wireless networking,” I mean products that deliver carrier-class wireless networking performance for video, voice, and data.
These products can support both indoor and outdoor wireless networks, and can scale to hundreds of clients per base station. Its products also include the world's first sub-$100 router capable of one million packets per second, a line of wireless backhaul products, and enterprise level products including Wi-Fi systems.
Finally, it offers AirCam video surveillance cameras and its mFi line-up of machine-to-machine remote monitoring/control products.
By “R&D-focused,” I mean a whopping 65% of its employees are engineers that are hands-on and actually developing and designing networking products.
And by “disruptive,” I mean that the company identifies a market/product, includes only the design features actually used by about 85% of users, and uses its proprietary technologies to design a better product.
This process skips all the bells and whistles that most don't use; these unnecessary extras drive up the price of competing products. This process also skips a lot of the top-heavy corporate overhead structure. As a result, Ubiquiti prices its products way below the competition…like, up to 80% below the competition.
And its products are so good that it has sold over a billion dollars' worth of them in the past few years…even without a sales force (which also helps it price its products lower). Rather, its products are sold via word of mouth and through its 100,000 member Ubiquiti Network Forum.
So, how's this working for them? Well, EPS was $0.91 for Fiscal Year ending June 2013, and the consensus sees that doubling to $1.83 in Fiscal Year ending June 2014, on 70% sales growth to $545 million.
And, just in Q1 alone, the company generated $52 million in free cash flow. Oh, and the vice president of Qualcomm recently forked over more than $1.1 million dollars to double his position in the company at around $38.
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