By Robert Baillieul
Ken Fisher is betting big on Big Data. Based on 13F filings in the 1st quarter, the billionaire investor and founder of Fisher Asset Management has positioned himself to exploit this trend by building large positions in EMC Corp (EMC) and IBM (IBM).
Big Data is the hot buzz word in the technology industry. The term refers to the exponential growth of digital data from multiple sources including social networks, biological and industrial sensors, the internet and email. Organizations are using new data analytic tools to analyze sales, cut costs or conduct market research.
In a recent report by JMP Securities, analysts estimated the Big Data solutions industry to be worth $9.1 billion in 2011. This is predicted to grow to $86.4 billion by 2021. The large data influx is creating new opportunities for companies that can help organizations capture, store, and analyze data.
So where is Ken Fisher finding opportunities in this space?
In the 1st quarter of 2012, Ken Fisher owned a $650 million stake in EMC, the world's largest supplier of enterprise storage systems. EMC represented the 5th largest position in his portfolio.
As previously noted in an article on Insider Monkey, EMC is well positioned due the company's ability to serve the cloud computing boom, successful acquisition strategy and host of new product offerings. The company has posted robust earnings growth driven by the increasing demand for data storage hardware.
The stock also offers a compelling valuation with the stock is trading at 14x forward earnings. With an estimated 5 year growth rate of 14%, EMC has a very attractive 1.0 PEG ratio, well below average compared to other large cap technology stocks.
EMC is also popular amongst other institutional investors. Bain Capital subsidiary Brookside Capital owns a $205 million stake in the company. Steven Cohen of SAC Capital Advisors increased his position size by 66% in the 1st quarter of 2012. This brought Mr. Cohen's total investment to $52 million.
Ken Fisher also owns a $460 million position in IBM. The blue chip software and consulting company has been expanding aggressively into the data storage space. In September, 2010, IBM paid $1.7 billion to acquire data warehousing company Netezza. During the 4th quarter, Netezza posted an eye popping 70% YoY revenue growth and grew the segment's customer base by 40%.
Big Blue's growth strategy also includes a push into data analysis with recent acquisitions of predictive analytics firm SPSS, business intelligence specialist Cognos, and sales analytics firm Varicent.
IBM is trading at an attractive valuation. Shares are valued at 11.3x forward earnings. With an estimated 5 year annual earnings growth rate of 10%, the stock is trading at a 1.1 PEG ratio, in-line with its industry peers.
IBM's attractive growth prospects and a compelling valuation have attracted the attention of other large investors. Last November, it was announced that famous value investor Warren Buffett purchased an $11 billion stake in the company (see Warren Buffett's new stock picks). Other big investors include Legg Mason Capital Management and D.E Shaw.
Other companies leveraged to the Big Data trend include Teradata (TDC), NetApp (NTAP), Qlik Technologies (QLIK), Alliance Data Services (ADS), and Tibco Software (TIBX). As a group, this segment has been one of the top market performers. Ken Fisher had smaller positions in TDC, NTAP, and TIBX as well.
Big Data is an attractive investment opportunity for growth investors as it is one of the few market segments with the potential to deliver double digit growth. We think investors should be following Ken Fisher's example by adding companies like IBM, EMC, TDC, NTAP and TIBX to their watch lists.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.