3 Disruptors to Buy Now
Jan 8th 2013 12:05PM
Updated Jan 10th 2013 11:35AM
Shares of Zipcar soared 48% last week, racing to life after Avis Budget Group agreed to pay a healthy premium to buy the leading car-sharing service.
It was easy to see this coming.
Zipcar is the undisputed top dog in this growing field. Zipcar's membership has grown 18% over the past year to 767,000 Zipsters looking to rent conveniently located cars with gas and insurance included for as little as an hour.
Avis Budget is as much a dinosaur as the fossil-fuel source that powers its old-school rentals. Analysts see flat revenue in its latest quarter and a meager 4% uptick in 2013.
Zipcar was acquired at a premium because it was a disruptor. Avis Budget paid a premium because it was being disrupted.
The deal makes sense, and savvy investors should've seen it coming.
Invest like John Derek
Six years ago, I urged investors to approach stocks the way that John Derek approached women.
Derek himself wasn't a superstar in Hollywood. He had small roles in big movies and big roles in small movies. His directorial career later in life wasn't very successful. However, he did marry Ursula Andress, Linda Evans, and Bo Derek just as each actress was an emerging box-office bombshell.
I certainly don't want to condone Derek's lifestyle. I've been happily married to the same woman for 22 years.
However, when it comes to growth-stock investing, it certainly pays to hit on pretty young things.
My inspiration for the Derek article at the time was that many of the young budding starlets that David Gardner was singling out for Rule Breakers newsletter subscribers were getting gobbled up.
- Archipelago was making waves as an electronic trading exchange. Click! New York Stock Exchange arranged for a merger combination.
- Pro Flowers parent Provide Commerce was making waves with its unique method of delivering fresh flowers in bloom. Pop. It became another clipped prize on John Malone's lapel.
- Click Commerce was raising the bar in the way that RFID technology improves inventory control. Check. It got snapped up at a premium.
If we dig into the stocks from Rule Breakers and David's Stock Advisor picks -- the recommendations that we now collectively call the Supernova Universe -- you'll find deals for PayPal, Marvel, Pixar, LoopNet, Ancestry.com, and many more.
These companies didn't get taken out as charity cases. They were acquired because they were doing things in game-changing ways. They were threats, and larger companies or private equity firms wanted to turn them into opportunities.
Things haven't changed in the Supernova Universe, judging by last week's Zipcar buyout.
3 potential buyouts for 2013
You didn't come here to hear me simply sing David's praises, though I am certainly qualified to do exactly that. I've been here since 1995. I wrote portfolio recaps for the original Rule Breakers real-money portfolio in the 1990s. I have been a member of the Rule Breakers analyst team since the growth-stock newsletter service's inception in 2004. I am the portfolio lead for one of the two original missions of the new Supernova service.
However, like most Supernova-minded investors, I'm more excited about the future than I am interested in celebrating the past. There are plenty of stocks that are part of David's Supernova Universe that have the disruptive traits that will make them compelling to desperate acquirers at higher prices.
Let's dive right into three of them.
- SodaStream -- The company behind the popular beverage-making system that's taking the world by storm is doing better than you think. Sales of its water-fizzing starter systems rose 37% in its latest quarter, and these aren't novelty items collecting dust. Sales of the carbonators and soda flavors rose a sharp 55% in its latest quarter. Even in the wobbly Western European economy -- where SodaStream has a longer tenure and a larger presence -- revenue rose 33% in its most recent quarter. Clearly SodaStream's message is getting through, but don't look at Coke or Pepsi as potential sugar daddies here. The real potential buyers here are either the kitchen appliance makers that see this as an untapped growth opportunity or the food giants that want to get in ahead of SodaStream's push into grocery store distribution in the next year or so. SodaStream already has deals in place with two food giants. Don't be surprised if a growth-starved behemoth stops to take a sip.
- Tesla Motors -- Electric cars are as disruptive as you can get in the automotive industry, but investors are worried. Even those $7,500 federal tax credits to subsidize the fuel-efficient vehicles aren't helping populate the road with Leaf and Volt cars. Tesla, on the other hand, can't keep up with demand. It's the aspirational electric car. It's the iPhone of electric cars, only there's no Foxconn cranking out Tesla Model S sedans with lightning precision. Production constraints have been the stumbling blocks as Tesla tackles its long waiting list, even after a recent price increase. Any car company would love to own the cool brand behind the car of the future, stepping up to bankroll the assembly line.
- Netflix -- Don't let anyone tell you that Netflix stopped being a disruptor when its stock crashed in the latter half of 2012. No one is even close to Netflix with its streaming subscriber base of 29.4 million video buffs worldwide. Netflix is serving 20 times more content than its closest rival in premium streaming. The game is over. Netflix won. It can pay more for content than anybody else, and distributors know that they need Netflix to get noticed. Is Netflix the new gatekeeper or tastemaker for filmed entertainment? It doesn't matter. For the first time in nearly nine months, Netflix broke into the triple digits this week. Expect an online juggernaut, a cash cow service provider, or a media giant to make a move at Netflix before it's too late.
Master of the Universe
The Supernova Universe is a pretty fertile ground in which to find 2013 buyout candidates, and Supernova is a premium service with real-money portfolios based on David's market-thumping growth stocks. He's always hunting for revolutionary disruptors, even though he would prefer if they grew on their own instead of getting hitched. If you want to take advantage of the premium research service click here to get instant access to a personal tour behind David's Supernova experience.
The article 3 Disruptors to Buy Now originally appeared on Fool.com.Rick Aristotle Munarriz owns shares of Netflix, SodaStream, and Zipcar. The Motley Fool recommends Netflix, PepsiCo, Inc., SodaStream, Tesla Motors , The Coca-Cola Company, and Zipcar. The Motley Fool owns shares of Netflix, PepsiCo, Inc., SodaStream, Tesla Motors , and Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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