Where to Look for the Biggest Investment Potential
Wednesday, March 21st, 2012
By George Leong, B.Comm. for Profit Confidential
Amazon.com, Inc. (NASDAQ/AMZN), with over $7.0 billion in free cash, added Kiva Systems, Inc., a company that would increase its material handling process at its warehouses. Kiva manufactures robotic machines that handle material, which creates a more efficient process—something a high-volume business such as Amazon.com demands. The $775 million in cash to be paid is not an issue, as it is capital that will be spent.
The example of Kiva demonstrates why I like small-cap stocks with a special technology or niche. These kinds of companies are open to takeovers and price appreciation, offering a top investment opportunity.
Apple Inc. (NASDAQ/AAPL), which closed above $600.00 for the first time, announced a dividend and $10.0-billion stock buyback on Monday. For the maker of the “iPad,” money is not an issue, as the company has close to $100 billion in cash. The company is a strong investment opportunity and could easily gobble up some of its rivals, but there is really no need, as the company is clearly on top of the tablet and smartphone markets with a cult-like consumer following. With its massive war chest, Apple could also acquire some key developers of technologies used in its products; but again there is no need, as companies fight hard and innovate just to sign on with Apple.
The NASDAQ has been the top investment opportunity so far in 2012, up over 18% and showing some strong technical strength. In late 2011, I said that technology would be a critical area for investment opportunity, as this sector has provided much of the leadership over the last several years.
The key investment opportunity in small-cap technology is innovation along with a massive potential market. I like semiconductor stocks, especially those with a focus on mobility applications, as tablets and smartphone gain in market share over laptops and PCs.
For instance, in the small-cap special situations area, an investment opportunity that I may take a closer look at is Glu Mobile Inc. (NASDAQ/GLUU, $3.96; Market Cap: $254 million).
Founded in 2001, Glu Mobile is an interesting small-cap tech play that holds promise in the growing area of mobile gaming on smartphones and tablets. Spending on mobile applications is estimated at around $56.0 billion by 2016, according to Forrester Research.
Mobile platforms supported include “iOS,” “Android,” “Windows Phone,” and “Google Chrome.” Revenues from smartphone applications accounted for about 75% of the Glu Mobile’s fourth-quarter revenues, according to the company. The games are developed in-house and in conjunction with key companies such as Activision, Atari, Caesar’s and Fox.
Glu Mobile is not meant as a recommendation to buy, but only as an investment opportunity that has some traits I look for in small-cap growth stocks.
The reality is that big-name technology continues to look positive; but, for higher gains, you need to look in the small-cap area for your own top investment opportunity.
You can read more of why I feel Apple could be the stock of the decade in The Thorn in the PC Market Leader’s Side.