Before I get into my 10 favorite stocks for 2013, we'll take a few minutes for broader trends.
Collaborative Consumption has crossed the chasm and is now a massive mainstream trend. 2013 will be the year when this economic paradigm-altering mega trend attains a pace that starts to completely transform the economy. Remember, humans have difficulty thinking in a non linear fashion. Collaborative Consumption is about to hit a point on the growth curve where each step begins to look pretty large. While Airbnb is the poster child, I'm bullish on everything from DogVacay to Getaround and Car2Go. The interesting thing about these companies is that they aren't natural acquisition targets so it's hard to play momentum in public companies like we can right now with PayPal (EBAY) and Square. These companies will necessarily cannibalize whole industries which makes it hard for large public companies to acquire them, they are such a dramatic shift in business model.
A close cousin to Collaborative Consumption is what I like to call verticalized remnant labor pool apps (note to self: come up with catchy name, that one sucks). I'm talking about stuff like Uber, Cherry, Skillshare, Get Maid, apps for selling your home cooked food to your neighbors, and many other platforms which basically allow people with specific skills to make a ton of money in their free time by providing that service or teaching that skill. As the traditional labor market continues to break down, more and more people will make more and more of their income from these platforms, being their own boss, using their skills. If I were a VC I would be focused almost exclusively on investing in these companies right now. This trend isn't as far along as Collaborative Consumption, but it's coming and you better pay attention.
And payments, specifically Square, which is taking over the world right now. When everyone carries a smartphone around there is no reason for a wallet anymore. Square is getting close here with their Pay With Square app which may end up winning not only the mobile payment war but the mobile wallet war as well. I am so unabashedly bullish on Square it's not even funny.
3D printing is still so incredibly early as a mass market consumer product. Think the very first computers that people had in their homes which didn't do very much and were hard to operate. How fast will 3D printing technology accelerate to the point where we can't believe we ever lived without it a la a MacBook, that's anyone's guess. But, there were fortunes to be made even in the early days of the computer revolution, and 3D printing is just as powerful. It will revolutionize manufacturing, and if the technology gets as far as some believe it can, it may completely change the way we think about a consumer society.
Ok, now let's get to my favorite 10 stocks for 2013, in no particular order. Instead of posting charts below there is a video at the bottom which includes deeper technical and fundamental analysis of each stock.
1. On Assignment (ASGN)
This was a favorite for 2012 as well and performed amazingly well. The trend in outsourcing as much of your workforce as possible is extremely strong, especially in the medical industry. The goal of a company is not to hire people, it is to get work done, and if you can focus on building the core value of what your company offers while outsourcing the other parts, you'll do it all day. Still only a $1.2B company, ASGN has a lot of room to grow.
2. Computer Task Group (CTGX)
I'm doubling down on the trend of outsourced staffing this year by adding CTGX which plays a similar role in the tech industry. With a $350M market cap trading at 22x P/E this one is just getting started. Growth has been a little slower in the past three quarters than I would like to see but that will provide ample room for the company to beat those comps in the second half of the year when I believe we're going to see a huge surge in the economy, specifically coming from tech and healthcare. Management still owns 22% of the company and funds own only 38% of it. This will be a stock accumulated by institutions throughout the year.
3. Bancolombia (CIB)
Colombia is the next great growth story. Brazil is currently suffering from a serious case of Dutch Disease and has been dramatically effected by the slowdown in China. Money is flowing into Colombia which is years behind Brazil but has the opportunity to become a huge hub of finance and trade in Central and South America. The stock has sold off hard 3 times in the past 2 1/2 years and tested this same $70 level now for the 4th time. I believe we're going to see this one break through this year as Colombian GDP surges past 6% growth and a real estate boom takes hold.
4. Bitauto (BITA)
China is making a monumental mistake in encouraging the growth of its domestic auto market. They had the opportunity to build cities from scratch that didn't rely on fossil fuels for transportation. While central planning does cut through red tape and allow for the quick implementation of economic strategy, it also opens you up to huge errors. Bitauto is one huge way to take advantage of this error. The company provides a web site that allows Chinese to get transparency on auto pricing. This is a huge theme of mine, where there is the opportunity for more pricing transparency it will take place eventually. The Chinese are buying autos hand over fist and this site will be widely used.
The company had its IPO in 2010 and hasn't fared well since as all things China, especially on the internet have been thrown out with the bathwater. This one has a real business behind it and has been growing revenue consistently at around 60% YOY for the last 8 quarters and is well profitable now. At a $300M market cap and trading 16X earnings it's not richly priced.
5. Three D Systems (DDD)
DDD was a huge winner in 2012, but as I said above, we're just getting started with the 3D printing revolution. This is one of those buy the trend not necessarily the stock plays. So much money is going to flood into this space as institutions smell the future. DDD may not be the Microsoft or Apple of the 3D printing revolution, but it has a good shot to make a ton of money before it is dethroned by the company that will come along later. Ride the trend in asset flow into this industry and try not to be too smart about it. Close eyes and buy.
6. FEI Co. (FEIC)
At a $2.2B market cap FEIC has a lot of room to grow as the data storage and scientific research markets it supplies equipment for surge. Their comps get a bit easier this year after being quite tough the last few quarters. They've continually beat EPS and Revenue estimates and their industry as a whole has shown strong growth.
7. Geospace Technologies (GEOS)
These guys make seismic instruments for the oil and gas sector. Talk about selling shovels in a gold rush. $1.1B in market cap with good EPS and Revenue growth and a chart headed to the moon. Money is going to flow heavily into their industry of which they are undoubtedly the leader. Everyone is going to look for secondary plays on the domestic energy boom in the US, this is it.
8. Michael Kors (KORS)
I was hugely bullish on KORS in 2012 but I'm even more so in 2013. They are doing everything right in the premium apparel market and have grown intelligently. Revenue growth has even accelerated in recent quarter to north of 75% YOY. Maybe the best thing here is the chart which has been consolidating for several months and looks ready to pop as the company has consistently crushed earnings estimates. Kors is the down to earth aspiration brand.
9. LinkedIn (LNKD)
LinkedIn owns the most defensible social graph on the web. It does one thing really really well and it doesn't try and do too many others which is why it's a winner. The company has just begun to turn on the revenue spigot but has already destroyed its competitors in the recruiting space. They continue to crush estimates while growing revenue at over 80% YOY. But here's the most important part. Their reputation graph is getting huge and could end up being the backbone for much of the new economy. I believe this is the year when the market really starts to understand the power in their graph and the stock flies.
10. Under Armour (UA)
Up against some real tough comps UA had a slow second half to 2012 which sets it up real well for the next leg of its growth towards competing with Nike on a global level. UA was a pick of mine in 2012 and I'm sticking with it here as this is a long term trend that I won't back away from. This company is the next Nike, they have superior products, a superior brand, and will continue to command a significant multiple as their growth continues.