I promised I’d keep sniffing around this latest Hilary Kramer teaser for you, so we’ll jump right in.
But first, I should note that yes, the headline is stolen from her ad — the lovely Ms. Gumshoe works with lawyers, and I lived in Washington DC for 17 years, which means that some of my friends are lawyers … so I may laugh plenty hard at your lawyer jokes, but I can’t hate ’em all.
Not that I’m against making money, of course. So how are we suposed to do this?
Here’s the pitch:
“Finally, you get a chance to get even with the most disliked profession in America: Attorneys.
“One company is making sweet profits by putting the ambulance chasers on the run… because it’s developed a hi-tech software that detects fraud and abuse in insurance claims.
“They use incredibly sophisticated math models and formulas that are fair for the good guys — yet detect and root out the sleaze-bags….
“Simply put: their software helps eliminate system inefficiencies by bringing all involved parties together in any insurable situation.
“In any accident, there are victims… the perpetrator(s)… the potential for litigation… each of these are powerful forces that play a role.
“Plus, in the aftermath of an accident, you may have hospitals… doctors… physical therapy…
“And, of course, there are adjusters, collision shops, and repair shops.
“This one company’s software brings all the players together, and coordinates them into one team, working together. They share the latest industry technologies, market intelligence, and industry best-practices with everyone involved.”
Hmmm … OK, that all sounds pretty good, but doesn’t definitely point to a particular company. We’re going to need to set the Thinkolator on “pulverize” for this one, and throw in a couple extra clues:
“Their business model has been so effective in changing the insurance industry in America, they are now on a drive to expand to global markets.
“Serving still-developing countries gives this stock explosive growth potential, backed by a history of solid sales and a proven industry blueprint.
“This company is one more reason we are on the brink of a billion-dollar global industry change in Big Data.”
So who is it? Well, the Thinkolator is smoking a little bit but I think we’ve got a pretty solid answer out of it: This is probably Tibco Software (TIBX)
Which I mentioned yesterday, actually, as a cautionary tale for what can happen even to a hot company in a growing sector with a reasonable valuation if they disappoint, TIBX has hit a few big downdrafts in recent quarters.
Still, it does count insurance (and other financial services) as a key customer sector, and at heart they are a business process integration company — trying to create more efficiency in and between businesses, and to turn huge and amorphous groups of data points into actionable knowledge (maybe even wisdom) as quickly as possible.
I know that Kramer has recommended this stock at least once in the past, so that helps me to be pretty sure that the Thinkolator’s on the right trail here — it’s also recently a Motley Fool Stock Advisor pick (they’ve been teasing it again recently — I last wrote about it here). The company has a visionary leader who owns a major stake (Vivek Ranadive), though he has sold big chunks of his (still large) holding in the last few years, mostly at prices substantially above where it is now.
And no, it’s not just focused on sniffing out insurance fraud — though that’s one thing that a good integration software platform can do. Tibco is a major player in the business intelligence sector, with the strength, from what I can understand (it ain’t much) of having a fairly agnostic platform that can work with the different big enterprise software providers (Oracle, IBM, etc.), and it’s a fairly large company with a market cap of about $3 billion. You can see their basic investor presentation here (no numbers) that outlines what they do and the sectors they work with (and the growth areas they foresee). The “story” recently has been sagging growth, with revenue flattening out recently and earnings dropping.
Still, the company is certainly aware of the need to grow — they’re a serial acquirer, so they’ll probably keep buying small companies, and they also are looking for additional expansion both overseas and in the US. They’ll need it to reach analyst targets, which have them getting back to 20% earnings growth by 2014 and continuing to grow in the 10-15% range after that.
I don’t know how Tibco is positioned competitively — I expect it’s probably a challenge that there are so many dozens of business intelligence/big data/data analytics companies that have started up and become venture investing darlings in the last five years, because that’s likely both to push innovation and to create pricing pressure. Still, they’ve built a big business and they do have strong leadership and they’ve been at this for far longer than the upstarts, so it’s not as though they’re necessarily a dinosaur on the way out — it’s really just an internal debate being waged in investors’ minds about whether growth will resume. “Growth” stocks that get repriced as “value” stocks can fall pretty hard even if the underlying business is just fine — all it takes is for growth expectations to go from “wowza” to “meh.” As we’ve seen with Apple (AAPL), though that’s a pretty unique (and over-covered) story.
So are the recent stumbles by Tibco a chance to get in on a stock that you missed in its run from $5 to $30+ in the years after the financial crisis? Or are we looking at something much less exciting, a return to the obscurity and slow growth that marked the five years before the crisis for TIBX? I like the sector, I’m very impressed with the company, but my few minutes looking at them don’t leave me with a high level of confidence that they should be worth $10 or $50, they seem to be in a bit of a restructuring, at least of their sales operations, so make sure you’re comfortable with what they’re doing and how fast they think they’ll get there if you dip your toe in these waters. A good starting point for understanding where they are is reading the latest conference call transcript, at least the CEO’s introduction and the Q&A from analysts, and you can see that here.
And of course, if you’ve got an opinion or a better solution to this clue-light teaser we’d like to hear it … that’s what the friendly little comment box is for down there, so share away!
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