Beating the market isn't easy. Even professionally-run hedge funds struggle to do so. Investors can match stock market returns via securities like the SPDR S&P 500 ETF (SPY). However, this relegates you to average gains, which have been virtually nil since 2000.
For more than 8 years, Pipeline Data has helped professional money managers to outperform the market by delivering proprietary quarterly reads on leading technology companies. Since 2009, we've been providing Seeking Alpha readers with emerging stocks that have the potential to triple.
Our complete investment portfolio is featured below. Take special note of the Classification column. Most picks fall within our Three-Stage classification system. Those that don't have a Three Stage classification are either Value plays or are riding the wave of a hot product and/or trend. An asterisk signals that the jury is still out on whether the classification is deserved, so conservatism is warranted. Stocks with a "Wait Time" classification should also be approached cautiously. Until upgraded to "Gold Mine", only a modest position is advisable. See our thesis notes below for further details.
The Poised to Triple Portfolio
PATIENT SAFETY TECH
October Updates: This month's updates largely focus on our future expectations based on recent and upcoming quarterly reports. Specifically, we have increased our positions in AAPL, ATTU, and RMKR. We have also increased our position in Facebook. However, we believe that various media outlets provided adequate analysis of its earnings. Thus, we aren't providing an update on FB this month.
APPLE (AAPL) posted its second straight earnings miss last week. We view those results as a lull before the storm. We believe Apple sales have suffered from purchase delays with customers anticipating a new slate of product introductions. Indeed, the company introduced five new products last week. Thus, Apple will be going into the holiday season with a major new product (iPad Mini) and two major upgrades (iPhone 5 and its surprise introduction -- the fourth-generation iPad).
Based on Pipeline Data's discussions with technology buyers, we believe these products will unlock pent-up demand and reinvigorate Apple's sales growth. Research from 451/ChangeWave corroborates our own. They recently published the results of a September survey that indicated extremely strong advance demand for the iPhone 5.
Accordingly, we view AAPL's recent correction as an attractive opportunity and have added shares to our portfolio.
ATTUNITY (ATTU) continues to sign new partnerships based on exploding demand for its Big Data solutions. Last month, we discussed ATTU's new relationship with Amazon (AMZN). This month, the company notched a new relationship with Big Data giant, Teradata. In conjunction with the announcement, ATTU announced a new product, Attunity Replicate for Teradata Big Data Warehouse.
In other recent news, IDC released research showing that infrastructure technologies for Big Data deployments (like ATTU's) are expected to experience 44% annual revenue growth through 2015.
ATTU has been growing in excess of IDC's figure, due in large part to its increasing number of Big Data relationships. ATTU has been building momentum and should continue enjoying market share gains. We expect this to become more apparent to investors when it reports earnings on Wednesday morning.
LEAPFROG (LF) hit a home run with its LeapPad Explorer. This "iPad for children" is a learning device that quickly earned the trust and admiration of American families. Unfortunately, lumpy execution held its full potential in check. LeapPad 2 was recently released, but investors are fearful that competing products like the iPad and Kindle will steal LF's thunder.
We focused our attention on this issue over the past month. Our findings confirmed that the iPad is certainly a threat to be respected and monitored. Specifically, feedback from the parental community suggests that the iPad offers a form factor their children are already familiar and comfortable with. In addition, Apple's App Store offers a wide variety of applications from popular brands like Sesame Street and Yo Gabba Gabba. Finally, with new generations of the iPad in the marketplace, parents are inclined to "ruggedize" their old iPads with child-proof protective cases and pass the aging iPads down to their youngsters.
We love LF's new management team and the company's excellent communications with shareholders. However, we continue to classify LF as a "Wait Time" stock until we see signs that the LeapPad can overcome the aforementioned headwinds. In addition, we decreased our small position to free up capital for this month's purchases.
RAINMAKER SYSTEMS (RMKR) could prove to be the most explosive name in our portfolio. RMKR has combined deep domain expertise in telesales and combined it with powerful Cloud-based software which enables large companies to create instant revenue streams by targeting small- and mid-sized customers. Its growing customer list includes the likes of AT&T (T), Cisco (CSCO), Intel (INTC), Microsoft (MSFT), and SAP (SAP). RMKR also outmaneuvered Digital River (DRIV) to win a piece of the lucrative Symantec (SYMC) business. Thus, despite its size, the company has established an enterprise-grade pedigree.
Last quarter, the company guided to sequential revenue growth for Q3 and Q4. We'll see if the company delivers on its promise when it reports on Tuesday. We believe the result will be positive based on its recently announced contract signings, which represent close to $40 million in future revenue. This compares to June quarter revenue of $4.7 million.
Based on its momentum and management's target operating model guidance, we see net income hitting $2 million in 2013, growing to $6 million in 2014 and $10 million in 2015. That would represent 37 cents per share. That level of growth would more than justify a P/E of 20, which would make the stock a 7-bagger from current levels. In the meanwhile, shares of RMKR have pulled back with the market, providing an attractive entry point for investors.