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Jason Burack
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Investor, Entrepreneur, Financial Historian, Austrian School Economist, Investment Analyst, and Contrarian. Co-founded the investor education, financial education and consulting company, Wall St for Main St, LLC in 2009. I've taught beginners how to invest and also consulted for high net worth... More
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  • Has Tibco Bottomed?  0 comments
    Apr 2, 2014 1:22 PM | about stocks: TIBX

    Since 2009, many sub sectors within the broader technology sector have been top performers including 3D Printing, Biotech, Robotics, Cyber Security and others.

    Even in the last 6-8 months, it's become harder and harder to find conventional value as a number of technology sub sectors have continued to keep moving higher with loftier and loftier valuations.

    This is especially true when it comes to finding bargains in small and mid-cap technology growth stocks where there's reasonably priced or undervalued growth; these types of undervalued growth stocks become tougher to find by the day.

    Recently, Castlight Health (NYSE:CSLT) IPO'd and entered its name into the most overvalued IPO of all time discussion.

    The company IPO's for over a $1 billion valuation, climbed to a valuation over $3 billion in its first week of trading and yet the company only has annual revenues around $13 million a year, is in a highly competitive industry where it does not hold large market share or a major competitive advantage and the company doesn't have anything close to earnings.

    Frothy, 1999 bubble like valuations like Castlight Health are sprouting up all over the technology sector making it difficult to find a company in a high growth industry where, on a relative basis compared to companies like Castlight, another company may seem like a bargain.

    Very few technology analysts or technology investors would agree that it's easy to be a technology value investor at the moment and there are many technology related articles appearing on websites other than Zero Hedge referencing today's valuations to 1999-2000 with one valuation metric or another.

    Besides using conventional, numbers based fundamental value analysis like Warren Buffett prefers, some value investors have been known to also look for bargains that are trading at or near 52 week lows.

    One company close to a 52 week low, in a high growth technology industry, where the industry has major tailwinds, is Tibco (NSDQ:TIBX).

    TIBCO Software Inc. provides infrastructure and business intelligence software worldwide. The company offers products in the areas of integration and core infrastructure; business optimization; and process automation and collaboration.

    The company has a broad mix of business across major industries including: Financial Services, Telecommunications, Energy, Transportation & Logistics, Manufacturing, Government, Retail, and Insurance.

    Tibco is a company spearheaded by a visionary CEO, Vivek Ranadive, who according to a recent Forbes article profiling him, "Ranadive can perhaps be best described as a genius numbers guy who can meld mathematics and technology to solve problems and inform like no other... His success with Tibco, the software company he founded in 1985, transformed Wall Street by enabling traders to use data in real time by replacing batch processing with real-time processing. Today, Tibco's software powers most trading floors."

    Ranadive is responsible for making a lot of Wall Street trend trading, high frequency trading (HFT) hedge fund managers into billionaires.

    According to Ranadive on his latest investor conference call, "The world's leading companies are increasingly focused on not just big but fast data, and how to gain a real-time competitive edge from their information. Our unique combination of technologies allows us to create a true business advantage for our customers, or what we call the Two-Second Advantage."

    Tibco has growing market share in its Big Data segment (the company's fastest growing business segment) by a very wide margin compared to its other business segments and the Big Data industry has major tailwinds having a greater than 30% compound annual growth rate (OTCPK:CAGR) according to many industry analysts.

    For people not familiar with what Big Data is, this industry is the culmination of highly adaptive and customizable software algorithms that enable businesses in many sectors to find correlations in very large amounts of data quickly that were never found in the past.

    Big Data is a sector that many governments, technology companies and non-technology Fortune 500 companies are investing heavily into in order to improve sales or finding potentially profitable correlations.

    For a consumer company, like Wal-Mart or Target, this often means noticeable boosts in sales as these correlations found by Tibco's software often lead to different goods being placed next to each other on shelves that one might not think off-hand these items tend to be bought together by consumers.

    Sometimes, the correlations are quite funny, like buying Pop Tarts with bottled water, batteries and a flash light before or during a large storm in your area. Software programs like Tibco's Spotfire show companies that people who buy bottled water, flashlights and batteries in the past also tend to buy Pop Tarts and other treats when they purchase these other items so stores will redo their displays accordingly in the future based on these correlations found in the data to boost sales.

    Tibco recently announced earnings and beat on revenues and earnings per share (NYSEARCA:EPS). While revenues only grew 6% compared to the same quarter last year, the company had been having trouble for the last few years meeting or exceeding analyst expectations on revenues and earnings and the stock has languished for over 2 years because of this. So a beat on both the top and bottom lines, no matter how small, is a good sign that things are improving fundamentally at the company.

    2014 may have signaled the absolute lows in Tibco's stock price as the stock has begun making higher lows on its chart despite large amounts of recent insider selling the last few months.

    Tibco's got a rapidly growing Big Data segment buried within the company that more traditional value investors like Dan Loeb of Third Point have noticed in the recent past but other investors seem to have ignored because the company's other segments are not growing rapidly at all.

    Tibco offers longer term investors exposure to a major growth industry like Big Data at a reasonable relative valuation compared to many other technology stocks. The company is not too big or too small (can grow on its own without major financing or dilution), it's balance sheet is not bloated with debt, it's profitable, it's growing, it's generating considerable free cash flow and it's near a 52 week low with lower expectations from Wall Street analysts to surprise on the upside earnings wise.

    Tibco looks to have strong support above the $20/share range on its long term chart. Investors looking to protect downside risk while gaining long exposure to Tibco shares should consider setting a stop order around $20/share to protect in the event of a macro Black Swan as an additional precautionary measure but otherwise Tibco looks to be building a strong long term base before a potential upside breakout out of its trading range sometime in the next 12-18 months.

    Themes: Big Data Stocks: TIBX
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