Revolutionary Stocks Recap
How Shoveling Snow is Like Investing
The Tenth Revolutionary Stock
Missed Revolutionary Stocks #s 1-9? You can find the whole series below.
#1: BABA -- Alibaba
#2: CNC -- Centene
#3: GPRO -- GoPro
#5: ILMN -- Illumina
#6: LNKD -- LinkedIn
The past few weeks have brought more snow to the Boston area in less time than any period in recorded history.
So I’ve been shoveling a lot of snow.
Generally, I like shoveling snow, especially early in the morning when there are no noisy snow blowers fouling the atmosphere. It’s great exercise, and brings a sense of satisfaction for a job well done.
And luckily, I have plenty of yard to throw the snow into at home.
But at the Cabot office, it’s a whole other story.
While our little parking lot and sidewalk is typically cleared by a neighbor with a Bobcat, the street fronting the office has been taken over by a big snowbank.
And it’s just like that all over the city.
The problem isn’t a lack of manpower or horsepower.
The problem is that there’s no place to put the snow!
Here’s a picture of the Cabot staff on top of the pile last week.
So what does this have to do with investing?
Most people dislike snow. They dislike walking in it. They dislike driving in it. And they dislike removing it, whether it’s by shovel or snowblower.
But they find comfort in sharing this dislike with others. Shared experiences create a culture.
I, on the other hand, feel discomfort when I’m part of a crowd. I like being contrary. And so it’s easier for me to find the good in shoveling snow.
For example, I can say that the snow of the past few weeks has given me the opportunities to meet more of my neighbors. It’s provided great opportunity to exercise my arms, legs, core muscles and heart, thus making me stronger. And it’s provided a great excuse to eat a few more chocolates!
In short, I’ve found value where others mainly see trouble.
And that’s what I try to do in the stock market, as well.
You can find reasons not to invest every day if you’re looking for them. There’s bad news aplenty in this world and pitfalls galore in the market.
But every day there are young companies waiting to be discovered-like Sprouts Farmers Market (SFM), which has the potential to be the next Whole Foods (WFM).
Every day there are high-quality companies selling at bargain prices, like Fluor Corp. (FLR), which has dipped from 83 to 53 over the past year, and now yields 1.5%.
And every day there are companies working to revolutionize the world, and if you can invest in one or two of them early enough-and hold on long enough-these companies can change your life!
It’s not easy, and it often requires a certain ability to think differently from the masses. (Remember Amazon back in the beginning, or Netflix? Most people were hugely skeptical!) But once you taste success with one of these revolutionary stocks, there’s no going back!
Over the past nine weeks, I’ve spotlighted nine revolutionary stocks that were nominated by Cabot analysts. Today brings the last of the series, but by all means not the last word on the subject by any means.
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Zillow (Z) is the world’s largest online organizer of real estate information, with data on more than 110 million homes in the U.S.
Some of these homes are for sale, and some are for rent, but many are listed just for comparison. And the data is free to people like you and me!
What did we do before Zillow?
We bought newspapers, and were limited to reading the tiny print of local listings. Or we picked up free real estate magazines, and perused the glossy photos.
But with Zillow, you can look at real estate anywhere in the U.S. You can drill deep, you can scan broadly, and you can investigate mortgage rates-all for free!
Zillow gets its money from real estate agents, who have found over the past decade that if they don’t pay Zillow to get their homes shown to house-hunters, they miss out on a lot of valuable leads.
And the business, now 10 years old, is still growing fast.
In 2013, revenues at Zillow grew 69% from the year before to $198 million.
In the first three quarters of 2014, revenue growth averaged 68% from the year before-barely slowing at all.
And in 2015, the company is likely to grow faster, if one major acquisition goes through.
You see, Zillow has been trying to buy Trulia (TRLA), the #2 company in the business, since last summer. But it’s had to wait for the Federal Trade Commission to approve the merger. And it’s been a long wait.
But last week there were rumors that the FTC had approved the merger, and even though there was no official word, shares of Z and TRLA both shot higher.
As for earnings, Zillow has been profitable since 2011, but earnings growth is uneven, simply because the company is still in investment mode, working to sign up as many brokers as possible.
Yet the company is still small-revenues were $89 million in the third quarter- and thus ripe for years more growth!
As for the chart:
Zillow came public at 20 in July 2011, and topped 60 in its first week. Six months later it was back down to 21.
But in the three years since then it’s been trending generally higher (sometimes with high volatility), and last July (on news of the Trulia merger) it hit a peak of 164!
Since then, both stocks have been deflating slowly as the government review dragged on, and today Z is selling at roughly a third off that old high-which to me looks like a decent long-term entry point.
So, you could simply take the plunge and buy Z here. You could wait for further signs of strength from the stock. Or, better yet, you could become a regular reader of my Cabot Stock of the Month, where every month I recommend the one best stock previously recommended by a Cabot analyst, and tell you exactly how to play it.
Yours in pursuit of wisdom and wealth,
Analyst of Cabot Stock of the Month
And Publisher, Cabot Wealth Advisory