2 Quietly Emerging Growth Stories
09/20/2012 11:23 am EST
Old-line tech companies—and even some of the new ones—may be household names, but they aren't really where the money is to be made, says Jon Markman.
My guest today is Jon Markman. We’re talking about some interesting opportunities you may not have considered in emerging growth stocks. Jon, I know emerging growth you said doesn’t get a lot of attention, but what should we be looking out for here now?
You know, the old growth stocks of the past—the Hewlett-Packard’s, Intel, Autodesk down 15% yesterday—those stocks are really not finding a lot of success, because of the fact that they are so dependent on European growth as well as U.S. large companies’ reinvestment, particularly from banks.
Yet, there is still a lot of growth in this country, particularly from young innovative companies. So in my newsletters, Strategic Advantage and Trader’s Advantage, I’ve been explaining to people where to look for the young new growth in this economy and in the stock market.
And it is in emerging growth? Is that where it is?
I say emerging growth, because most of the stocks I’m looking at have recently gone IPO, that is to say within the last three to twenty-four months. They’ve already gone through the lock-up period. They’ve already gone through a couple of earnings reports. So, we can see which of the new emerging growth stocks are being successful and which are the ones not to trade.
Talk about some of the ones you like right now. Are there some specific tickers you can talk about?
Sure, I like the company Ellie Mae (ELLI). They make software for the real estate business. So, anybody who has gone through the real estate buying process, you know there’s a hundred forms you have to fill out. It’s a hassle for the real estate sales person, and it’s a hassle for the buyer.
Ellie Mae makes a terrific platform that unifies all that and eliminates a lot of the paperwork. It’s been very, very successful now that the housing sector is coming back. So, Ellie Mae is up about 80% this year. It trades extremely well. You can buy it on pullbacks. Right now, it’s on a pullback so it’s pretty much in a buy zone.
Okay, what else are you looking at right now?
Well, I’m glad you asked. Some of the other stocks I like a lot, one is called Thermon (THR). It’s an industrial stock. It makes valves and processes by which companies with pipelines, or in factories which have long pipes for water or other things to travel through, you want to make sure they’re the same temperature every port along the line. You would think that would be an easy process, but it’s not.
Thermon has come up with a terrific solution for that. It’s been very successful mostly with oil and gas companies. The stock doesn’t trade super actively, but as it comes into pullbacks it’s the one you want to pick up.
What symbol is it?
The symbol is THR.
Alright, so when we see newer companies like a Facebook that’s having trouble, or any of those social media types of stocks that have been in the news quite a bit, do you discount all the social media stocks like those lately or are there any opportunities there?
Well, I think there’s a lot of value in social media, but the way that the companies such as Facebook are going about their business is wrong. In fact, it’s injurious and stupid, because Facebook if you think about it, all it really is is a platform for people to put their photographs on and also to interact with their friends. People are very excited about the fact that they have a billion users, but if you think about it, all they’re really doing is they have an open party and they’re providing the free food and booze.
If you say you’re going to have an open party and have free food and booze, you’re going to get a lot of people; probably a billion people to your house. That’s what Facebook is doing. What they need to do is charge for it. Until they charge for it, it’s not a real company. I don’t care if they have a media strategy or an advertising strategy in place, it’s not working.
They need to pivot and try to find a way to get all those freeloaders to start paying for all the bandwidth that they’re using. That’s the reason I don’t like most of these social media companies. They don’t have a real business plan in mind, as opposed to an Ellie Mae which charges for its software, etc.
Jon, thanks for your time today.
Thanks for having me.