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Yesterday, we set the field. Today, we begin dwindling it down.
Over the coming three days, we will narrow a field of 16 growth stocks down to a “Final Four” on our Road to the Next Netflix. The purpose is to identify the next stock that could fetch a 432% return the way Netflix has since we added shares to our $100k Portfolio in December 2011.
Today, we eliminate four stocks in trimming our field of stock mania contenders from 16 to 12. Tomorrow, we’ll eliminate four more stocks to cut the field down to an “Elite Eight.” And so on.
Let’s get started!
Internet Content: Trulia (Nasdaq: TRLA) vs. Spark Networks (Nasdaq: LOV)
Anyone who has shopped for a new home in the last few years is familiar with Trulia.
It’s a leading online residential real estate site showing properties for sale and rent anywhere in the U.S. The company attracts 35 million visitors to its website every month, and revenues have more than doubled in the last year. Riding the wave of the U.S. housing recovery, the company went public in September 2012. Since then it has posted a solid 44% gain.
With 90% of all prospective home buyers now starting their real estate search on the web, Trulia has the makings of a decent long-term play on that burgeoning sect of the housing market. But in the short term, the company has too many question marks.
Still in its nascent stages, Trulia has never turned a profit and the stock trades at a very pricey 102 times 2015 earnings. It also has to deal with fierce competition from fellow real estate websites Zillow, Redfin and Realtor.com.
Spark Networks doesn’t have that problem. It occupies a niche market: religiously based online dating sites. The company owns and operates JDate.com, an online dating site for single Jewish people, and ChristianMingle.com, an online dating site for single Christians. Both sites boast strong subscriber growth and expanding revenues. And neither has to deal with any significant competition.
Unlike Trulia, Spark Networks dominates its space. That means there’s very little standing in the way of rapid and immediate growth.
Winner: Spark Networks
3-D Printing: 3D Systems (NYSE: DDD) vs. The ExOne Company (Nasdaq: XONE)
Wall Street loves innovation. That’s why these two 3-D printing stocks have thrived.
Three-dimensional printing – the ability to replicate almost any solid object – is a relatively new technology that only recently went mainstream thanks mostly to companies like 3D Systems and ExOne. 3-D printing allows companies to reproduce everything from human organs and body parts to simple consumer objects such as clothes, musical instruments and pizza.
That type of groundbreaking technology is tantalizing. And that’s why investors have been buying these two stocks in droves.
ExOne shares have risen 49% since the company went public in February 2013. DDD has been on a much bigger tear, rising 360% since its May 2011 IPO.
Both stocks appear tantalizing. But ExOne is the better long-term play.
3D Systems’ biggest gains may be behind it. After more than two years of rising upwards in a straight line, shares have run into a brick wall since the calendar flipped to 2014. The stock has fallen 30% the last three months. Even after such a sizable pullback, DDD shares are still trading at 47 times forward earnings.
ExOne appears to be in a similar position to where 3D Systems was two years ago – on the brink of becoming profitable (the company all but broke even last quarter for the first time ever), and with sales improving 38% last year. It’s also less than one-tenth the size of DDD, so there’s plenty of room left to grow.
Bottom line: ExOne appears to be on the brink of making the same kind of run 3D Systems made the last two years.
Winner: ExOne
Energy Tech: Ormat Technologies (NYSE: ORA) vs. First Solar (Nasdaq: FSLR)
With America pushing toward energy independence in 2020, alternative energy has rarely been more important … or more profitable.
Companies that supply wind, solar and other forms of renewable energy stand to benefit most. Ormat Technologies and First Solar are prime examples.
Ormat Technologies is a leading provider of geothermal and recovered energy. The company has a market cap of $1.4 billion and did $533 million in sales last year.
First Solar is rather self-explanatory: it develops solar panels, operating many of the world’s largest grid-connected solar power plants.
While both stocks are strong plays on the alternative energy market and energy technology, First Solar is the better buy. First Solar is cheaper than Ormat Technologies, trading at 16 times forward earnings (ORA has a forward P/E of 25). It also has the wider profit margin at 10.7%, versus 7.7% for Ormat.
It’s close. But First Solar is the energy tech company that advances to our “Elite Eight.”
Winner: First Solar
Gaming Technology: Glu Mobile (Nasdaq: GLUU) vs. Zynga (Nasdaq: ZNGA)
The video game industry is one of the fastest growing sectors in the world. U.S. sales alone have tripled in the last 15 years thanks to the rise of new gaming platforms and software.
With the rise of mobile, now people can play games beyond the comfort of their homes or the local arcade. People of all ages can now play games on their iPhones while riding the subway or standing in line at a deli.
Glu Mobile and Zynga are two of the leading manufacturers of mobile games. Based in San Francisco, Glu Mobile develops popular mobile games such as Pirates of Everseas and RoboCop. The company’s sales grew by 32% in 2013.
Thanks to its partnership with Facebook, however, Zynga is the gaming company with the most potential. Anyone under the age of 18 with a Facebook account is familiar with FarmVille, Zynga’s signature game. As Facebook continues to expand its global footprint, Zynga will continue to profit from social network subscribers around the world.
Facebook currently has over 1 billion users worldwide. That number is projected to swell to 1.8 billion users by 2017 as the social network establishes a foothold in emerging markets such as Brazil, Russia and India.
That type of worldwide exposure should fuel Zynga shares in the years to come.
Winner: Zynga
That’s all for today. As our bracket shows, we’re down to 12 contenders on the Road to the Next Netflix.
See you back here tomorrow as we trim the field to eight.
Until then…
Editor’s Note: Next week, Ian Wyatt is investing $10,000 in the winning stock of our financial March Madness – the stock with 5-bagger potential he’s calling the “Next Netflix.” And you can join him! You see, he’s revealing all the details of this stock and providing a full analysis of its business in a brand new report that’s being released just after the market opens on Tuesday, April 1st. To make sure you get your hands on this report — for FREE! — the instant it’s published… click here for all the details.