Manny Backus and the folks at Wealthpire have been promoting a service they call Consensus Picks, which they say lets them zero in on the top picks of 800 top trading services and choose the best ones — those that are picked by several services and that they select as the best of that bunch.
There are several well-established newsletters that digest other newsletters and choose favorite picks from the universe of investment advice (like the Dick Davis Digests, the Bull and Bear Financial Report, or Hulbert’s Financial Digest to some degree), so that’s not a whole new concept, but this one is pitched as having an expensive and fancy computer system that’s fed these stock newsletters and then churns out the best ideas for Manny to select from. Wealthpire is an extremely active advertiser (including on this site sometimes, and far more widely in places like the Wall Street Journal and Barron’s), but the actual process is not particularly transparent — that publisher has grown quite a bit to offer a number of investment advisories and newsletters, but we’ve had few subscriber reviews and don’t know their track record at all.
There is still what looks like an older ad up for this Consensus Picks letter, from roughly a year ago if we go by the charts that are included in the ad, and that ad recommended MCP, MIND, CTCM, NM and V — if you had bought and held them a year ago you’d have done worse than the market thanks to bad years from MCP and MIND, but I have no idea whether this is a service that holds for a long time, what buy prices might have been, or, indeed, how they get to their sell recommendations at all.
But still, we like to sniff out ideas from every corner — and folks have been asking about this one, so what are those “consensus picks?”
Here’s how they’re teased:
- TOP STOCK #1: “The Niche Tech Dominator” – This micro tech firm is preparing to take over a $723-million cyber security market.
- TOP STOCK #2: “The Sales Generator” – This outfit develops proven tech-based solutions to help other companies boost sales.
- TOP STOCK #3: “Apple’s Secret Weapon” – Apple depends upon this company to manufacture a part that goes into every iPhone. Company insiders recently scopped up $700,000 worth of company stock.
- TOP STOCK #4: “Under The Radar Drug Maker” – This company opened up a hot new profit center worth hundreds of millions. Yet the company is valued at about half of its acutal sales.
- TOP STOCK #5: “Drilling For Big Profits” – This company is poised to profit from the surge in oil exploration as America presses towards energy independence.
OK … so that’s the big tease. How about some clues about these specific picks?
He pushes the first one as his favorite, so we’ll look at that, well, first:
“Top Stock #1: ‘The Niche Tech Dominator’
“This is THE one pick I’m most excited about….
“One of the primary sources of network infiltration and data leaks is… email.
“Approximately 123 million businesses in North America use email to transact business and communicate within the organization. Yet only 13 million of these businesses — or just 10.5% — protect their email correspondence.
“Those millions of unprotected corporate email accounts — and unprotected government and personal email accounts as well — are a gateway for criminals, spies and hackers.
“And THIS company offers the perfect solution…
“In fact, Google only sells this company’s email security products and services.
“Because the company has developed innovations that are second to none. It’s software-as-a-service solution allows the use of Internet-based email for sensitive information exchange. Messages are secured by a proprietary system. Users can then send their email message to ANY email address. The software determines the direct and appropriate means of delivery. So no unauthorized outsiders can read the message or any attachment….”
And then we get a laundry list of hints:
- “Revenues have grown for 15 straight quarters.
- New orders are up a stunning 58% for the last quarter of 2012.
- Profit margins soared to an unbelievable 58%.
- The gross profit margin is at 83%.
- The company boasts a 98% customer rate of retention.
- Approximately 80% of customers sign a 3-year contract.
- Dominant player in the healthcare, finance and government market.
- Spearheading new products in the fast-growing mobile market.
- Strategic partners with Google, Symantec, Code Green Network and Webroot.
- Analysts agree this stock is grossly undervalued selling at roughly half it’s real worth….
“Compliance initiatives… at the federal and state level like PCI, HIPPA Act, HITECH Act and Gramm-Leach-Bliley Act… all but mandate email security for companies. Healthcare, finance, government and other entities must, by law, implement these new regulations. Or face stiff penalties for data breaches.
“Based on my exhaustive research, this micro tech will dominate the $723-million email cyber security niche in 2013.”
So who is it? Thinkolator sez this must be: ZixCorp (ZIXI), which is a small cap email security company (market cap under $200 million) that I had never heard of before today. Gross margins are not all that meaningful for a technology company like this, since as you can imagine their selling and administrative costs are much higher than the actual per-customer cost to deliver the product, but that “gross profit margin” is at about 83%, they are very much dependent on healthcare, finance and government customers, with health care being by far the largest segment (as you can imagine — secure email is key for privacy, and healthcare information exchange is heavily regulated). The other clues match, too — though the very high profit margin (that 58% number) looks like it was really just for a tax credit in one quarter — their average “real” profit margin is wildly variable by quarter but has recently been in the high teens or low 20s.
They essentially operate a cloud based encryption network for emails, making it easier to send encrypted messages via email so they can’t be read by the unintended recipient, and they say that their solution is cleaner, easier and less of a pain in the neck than existing message encryption. I’ve never used it or any of their competitors, but their presentations make it appear delightful. Of course.
Analysts think they’re trading at about 15X what they’ll earn this year, and that they’ll grow earnings by 20%, so the valuation is reasonable and they are very small, so positive or negative news could easily move the stock quite quickly. They do have a large activist shareholder who was pushing for change, but that shareholder got a couple seats on the board so things seem to have settled down on that front — don’t know what changes they might have wanted, or if they’ll get ‘em with their board seats, but this does appear to be a company with a fairly high level of predictability in earnings (thanks to 3-year contracts and pretty high retention rates — the 98% is for customers actually fulfilling the second and third years of their contract, but they say retention is high between contracts, too, and their research indicates that growing numbers of potential clients are looking for this kind of service).
That’s about all I know, so feel free to go forth, researchify, and let us know if you think ZIXI is going to make you rich.
I’ve run out of time here, so I’ll just run down and give some quick answers to a couple of the others and you can provide some background analysis or thoughts if you like … then if the Thinkolator’s feeling stronger we may get the others named later as well:
“Hot Stock #2: ‘The Sales Generator’
“This company provides cloud-based software solutions to increase sales.
“Its products help companies hire the best sales professionals… and… help sales teams to identify and reach decision makers and close deals. In this economy every one wants more sales and this company has developed innovative tools to make that happen.
“The company serves 1,500 customers and more than 2.5-million users in the Americas, Europe, the Middle East, Africa and the Asian-Pacific.
“In the third quarter of 2012, the company signed on 157 new customers. Almost one new customer every single business day of the quarter. Including two of the largest telecommunications companies in the world.
“Company revenues are up 14% from a year ago.
“Making this the eighth consecutive double-digit growth quarter.
“Growth margins hit a record 65%… and… earnings per share are expected to soar by 144% next year. Five top analysts agree company shares should at least double next year.”
Thinkolator sez: This is Callidus Software (CALD)
“Hot Stock #4: ‘Under The Radar Drug Maker’
“The next company on our ‘hot list’ is a potential doozie.
“On the surface, it looks like an established specialty chemicals company.
“At its core, the company sources, markets, sells and distributes 1,100 different chemicals. Some of these chemicals are used by the pharmaceutical industry to manufacture different drugs.
“When you look below the surface, you’ll see something very exciting.
“The company has opened up a new profit center by making its own drugs from its own chemical supplies. This brilliant move resulted in the creation of a subsidiary which… at last count… is manufacturing and distributing 54 generic drugs in the United States.
“For 2013, nine new drugs are in the pipeline.
“Expansion is planned into China, India and the Far East.
“I’m confident this company will experience a big jump in it’s stock value because…
“It sells more than $400 million worth of products annually… but… the entire business is valued at only $264 million. Which means this company is valued below it’s own sales by about 50%.
“Which is why earnings growth expectations for next year are at least 23%.”
This one is, according to the Mighty, Mighty Thinkolator, Aceto Corp (ACET)
So there you have it — feel free to talk those up or down, I’ll see if I can get the other two named for you soon … and share those thoughts with comments below, please!
How do you make sense of it all?I check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.