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Click Commerce has been a favorite of mine since I first picked up some shares early last year, even though the stock seems to be subject to the whims of the momentum traders at times. My last detailed writeup on CKCM back when I added to my position in October covers a lot of the reasons why I think this company is an exciting investment.

The story hasn't changed ... Click still has a lot of things going for them, not least of which is growth at over 100% -- fueled by smart acquisitions of small software companies.

CKCM is pushing RFID as one of their main growth engines moving forward, and they recently opened a center to help with RFID advancement and began a seminar series to educate their current and prospective customers, but they are not completely subject to RFID growth for their success.

This "software as service" company helps with all kinds of data and supply chain management and has a huge range of offerings for such a small company -- from supply chain management, to research management in health care and academic institutions, to customer order management, parts and service management (which is what the Air Force contract is for), and management consulting. They're also now partnering with UNOVA to get into grid computing to handle the massive data handling that full rollout of RFID will require, though that part of their business is just now beginning and was just announced on the conference call.

Click Commerce fell quite a bit after their earnings release, partly due to the fact that they didn't "blow out" the numbers or issue blowout guidance, and the momentum folks were undoubtedly bored enough to move on to the next big thing ... but they did grow at a huge rate and beat the estimates of the two (I think) small analysts who follow them.

Due to taxes, it's predicted that their earnings for next year will be a bit lower than in the past year, but that still means we're getting a company growing at tremendous speed in an expanding sector at a bargain PE of just about 16 (forward) or 15 (trailing).

There are certainly plenty of risks that it would be worth anyone's time to investigate. This is a tiny company, and while they have a strong roster of customers and I'm confident that they'll be able to grow much bigger they could suffer if larger companies tried to drum them out of business. Frankly, I think it's more likely that they would be bought by Oracle or one of the other large players.

And there is a lot of competition in this space, and the hype surrounding RFID might be overdone. In my opinion, RFID is not going to go away, but it might take longer to be fully rolled out than any current hype would expect. I'm willing to wait if that's the case, and I like that Click has a huge and flexible array of products to sell aside from those that are tied in directly to RFID -- though RFID certainly makes many of their software solutions more valuable to their customers.

And finally, they are run by a charismatic CEO with a large personal stake -- Michael Ferro owns more than 20% of the company and has seen it touch bottom and nearly disappear, then recover over the past couple of years and become a strong, growing, going concern. He might make some dumb decisions, or he might decide to sell more of his shares, and either could disrupt the stock's progress. With very low institutional ownership of under 20%, the CEO has very little check on his control -- with his track record at this point, that's fine with me. And I think that it's safe to believe him when he says he has completed his recent selling of a small part of his holdings and has no plans to sell more this year.

So I recognize the risks of investing in this sector, with heavy competition, and in this particular company -- but I am very impressed with their execution, especially their fairly smooth integration of so many different small acquisitions over the years, and I really like the growth potential I'm buying at what I consider is still a bargain price ... even if it does again drop down to my last entry point under $15 sometime in the near future.


CKCM 1-yr Chart

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Source: Click Commerce Bets on RFID (CKCM)