Best Companies Reaching for the Cloud
10/03/2013 9:00 am EST
In the technology sector, some investors might be partial to giants like Apple and Microsoft, but Jon Markman, of Markman Capital Insight, likes to root for the little guys.
SPEAKER: Hi, and thanks for joining us. My guest today is Jon Markman. Hello Jon, and thanks for being here.
JON MARKMAN: Hi Nancy, great to be here.
SPEAKER: Well, you know the market's done pretty well up until this past week. Of course here we are mid August and we've had a little pullback, but most people that I've talked with here at the Money Show are talking that we're still in a bearish market as far as they're concerned, and there are certain sectors that some people like and technology is one of them, and I think that's a sector that you're pretty involved in.
JON MARKMAN: Yeah, you know, the neat thing about technology is that it's still an area where companies can innovate, create new products that people didn't know that they wanted, companies didn't know that they wanted.
SPEAKER: Create demand.
JON MARKMAN: And they can create demand for things that didn't exist before, and when you can do that you can charge high margins, and so what the companies are really going to succeed in a low growth environment like this where the GDP is kind of bumping along at 1-1/2 to 2-1/2% are going to be the companies who create new products and can command high prices, and also have great growth paths in front of them, and so when you say technology you're probably thinking Apple, Microsoft, Intel, Google. That's not really who I'm thinking about because those are companies that are really in relatively mature markets. I'm thinking about smaller software companies that have new markets to blaze into.
SPEAKER: Like new markets in terms of geographic markets?
JON MARKMAN: So the big new market for software companies in particular is the cloud.
JON MARKMAN: The cloud is sort of a metaphorical term for the computer, the servers and the storage space in the sky. So for instance if you have Spotify which is a music subscription software, if you have Spotify on your desktop and you have an iPad and you have Spotify on your iPad and you have Spotify also on your iPhone, if you make the change on any one of those devices it instantly shows up on all of the others, and it does that by automatically without asking you, well it asks you in the beginning, but automatically broadcasts any changes you make in any one of those places up to the cloud and then the cloud syncs with all those other devices and allows you to -
SPEAKER: Does it automatically.
JON MARKMAN: - allows you to keep your software with you at all times.
SPEAKER: Is that like Pandora, the Spotify?
JON MARKMAN: Spotify is really you choose which music you want to listen to.
JON MARKMAN: And they've got five million plus tracks to listen to. Pandora is more like radio, you choose the station you want to listen to.
JON MARKMAN: And it broadcasts the music that it thinks you want to listen to.
SPEAKER: Okay. Now, I know a lot of companies in the cloud have been concerned with security. Do you have any of those kind of companies on your buy list?
JON MARKMAN: Yes, so the kind of companies I'm looking at for the cloud are really more oriented towards the enterprise, companies like Wage Works, WAGE, which provides a cloud based employee benefits to large companies such as Morgan Stanley and General Electric and places like that. Another one is Workday, WDAY, which is a company that supplies HR solutions out of the cloud, founded by a guy named Dave Duffy who had created People Soft which was a great HR software company back in the 1990s that was bought a Oracle. He saw an opportunity to do the same thing in the cloud and he's done that with this terrific new company.
SPEAKER: Well, super, and are you doing any kind of technology ETFs at all?
JON MARKMAN: Unfortunately most of the technology ETFs that are of any size are weighed by the largest market cap companies, so they're weighted down by Apple and Microsoft and Google and Intel.
JON MARKMAN: Not bad companies, but not the kind of high growth techs that I like to talk about, I like to describe and recommend to my readers.
SPEAKER: Super. Well, thank you, Jon.
JON MARKMAN: Thanks for having me.
SPEAKER: And thanks for being with us at the MoneyShow.com video network.