It's Day Four of our March Madness stock-picking bracket, and
it's time to narrow the field to eight stocks on our way to
finding the next
Netflix (Nasdaq: NFLX).
began eliminating stocks
, trimming the field from 16 to 12. Now we'll cut it down to an "
." Tomorrow we'll slice the field in half and introduce our Final
Four candidates to become the next Netflix - a growth stock that
we believe could rise 432% in just over two years.
But first, we need to narrow the field to eight. Let's get
Cloud Computing and Data: Datawatch (Nasdaq: DWCH) vs.
Demandware (Nasdaq: DWRE)
Twenty-five years after it was invented, the Internet
continues to grow. Consequently, there's more data out there than
ever before. To consolidate and make sense of all that data,
companies need a little outside help.
That's where Datawatch and Demandware come in. Datawatch
provides data solutions to more than 40,000 customers, 99
of which comprise the Fortune 100. The company specializes in
unstructured data - PDF documents, Excel data, HTML reports web
tracking data, etc. Most of Datawatch's customers are in the
financial services and healthcare industries.
Demandware, meanwhile, specializes in cloud solutions -
specifically for retail companies. It helps retailers such as
Brooks Brothers and Lands' End differentiate their digital brand
experiences across multiple platforms.
Both Datawatch and Demandware shares have more than doubled in
the past year. Both companies' sales are growing by at least 29%.
Neither is profitable yet, though that hasn't stopped investors
from snatching up shares of both in droves.
The difference is that Datawatch is a smaller company, with
$250 million market cap compared to Demandware's $2.3 billion
valuation. It also has more near-term catalysts for growth than
For starters, its foothold in the financial services and
healthcare markets give it an advantage over Demandware, given
the ups and downs in the retail sector right now. It also has a
new management team on board and recently bought out a visual
analytics company called Panopticon.
In a close contest, those factors tip the scales in favor of
Internet Commerce: LifeLock (
) vs. Zulily (Nasdaq: ZU)
These two companies are relatively new to Wall Street. But
both stocks have taken off since going public.
LifeLock is an identity theft protection company with a market
cap of $1.7 billion. The company protects its clients from
identity theft and credit fraud, and alerts them when their
personal information is being used. Since going public in October
2012, shares have risen 124%.
Zulily is quite different. It's an online women's retail
company that specifically targets moms. It has a market cap of
$6.7 billion. Zulily shares have risen 46% since the company's
Nov. 15 IPO.
Zulily is in the midst of remarkable growth. Earnings were up
293% in the last quarter compared to a year ago, while its sales
doubled. The company also has over $300 million in cash and zero
LifeLock also has no debt and its quarterly earnings growth is
even stronger than Zulily's. But the company also has some
serious red flags
There are dozens of similar competitors in the identity theft
sector. Five years ago, Experian, a credit report and credit
score company, sued LifeLock for fraud and a judge actually ruled
LifeLock's primary business activity at the time to be illegal.
And company co-founder Todd Davis has 13 counts of fraud listed
against his name.
LifeLock may ensure its customers safety from identity theft.
But Zulily is the safer investment.
Food: The Fresh Market (Nasdaq: TFM) vs. SodaStream
Food doesn't sound like a novel category for growth. But
considering the rise of organics and gluten-free foods and the
increasing popularity of reality food TV shows, the food industry
has evolved greatly.
The Fresh Market and SodaStream are two companies that are
tapping into that change.
The Fresh Market is a chain of healthy and organic foods
grocery stores with more than 100 locations across 20
states. Essentially, it's a mini-Whole Foods … only cheaper. The
stock trades at just 18 times forward earnings, versus 27.5 times
forward earnings for
Whole Foods' (Nasdaq: WFM)
As interest in organics and local fresh foods has risen in
recent years, The Fresh Market's sales have improved greatly. The
company did $1.5 billion in revenue in its most recent fiscal
year, up 14% from the previous year and 36% from two years
SodaStream manufactures do-it-yourself soda and sparkling
water makers. It gives customers a chance to make their own soda
in a much cheaper and healthier way - without all the extra syrup
and additives of Coke or Pepsi. Like The Fresh Market, SodaStream
is benefiting from the move toward healthier food and beverage
options. Sales have increased 26% in the last year.
Lately, however, SodaStream's shares have hit the skids. The
stock has fallen 12.5% in the last year as earnings have
plummeted 91% year over year. Plus,
new deal with
Green Mountain Coffee Roasters (Nasdaq: GMCR)
to introduce a branded at-home soda-making machine later this
year could offer SodaStream some stiff competition.
The Fresh Market, on the other hand, has been in business for
more than 30 years and steadily expanding its national footprint
in recent years. With EPS expected to increase 50% this year, the
stock is well positioned for some serious growth.
Winner: The Fresh Market
Wearable Technology: Himax Technologies (Nasdaq: HIMX)
vs. InvenSense (Nasdaq: INVN)
Wearable technology is one of the hottest new sectors on Wall
The introduction of the
has helped send
Google (Nasdaq: GOOG)
shares to an all-time high well above $1,100. Meanwhile, rumors
of a wearable "
" have helped keep
Apple (Nasdaq: AAPL)
shares afloat of late.
But it's the companies that manufacture and supply the larger
companies with that wearable technology that are really seeing a
Himax Technologies is a key supplier for Google Glass, and
investors have taken notice: the stock is up 153% in the last
year. And Google hasn't even introduced the Glass to the general
public yet. If the Google device is the commercial success
analysts are expecting - some project the Glass will be a $10.5
billion market by 2018 - Himax's shares could really take
InvenSense's products are already all around us. The company's
motion-tracking sensors are used in smartphones, tablets, gaming
devices, digital cameras and Smart TVs. They're also used in
wearable devices such as pedometers, golf and tennis swing
analysis tools and remote patient monitoring.
Both companies are growing fast with the rise of wearable
technologies. But InvenSense's more diverse product portfolio
gives it the slight edge.
There you have it: our Elite Eight - eight stocks with a
chance to become the next Netflix.
Check back tomorrow when we unveil our Final Four.
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.