Cabot’s “Next Amazon” and “why it could jump 50% on earnings”

What's being hinted at by Cabot Growth Investor?

By Travis Johnson, Stock Gumshoe, February 14, 2018

Time for another look at a growth stock being teased by Cabot — this time, it’s a pitch for Cabot Growth Investor ($99/yr) from Mike Cintolo, and he’s following in the footsteps of a great many folks in predicting “The Next Amazon.”

And who could blame you for being interested in that, right? Amazon has been a ludicrously successful investment for 20 years, and we’d all like to be able to go back in time and buy some shares of that little bookseller in the late 1990s. Those “you missed it” pitches are common, and always tempting — Cabot often references the “next Tesla” or the “next Priceline” or whatever similarly tantalizing growth stock you didn’t invest in early, and it does get you to thinking about those 10,000% gains that early investors enjoyed.

Which is the point, of course — once they’ve got you daydreaming about wealth, you’re halfway to pulling out your credit card. Now all they need is a secret or a catalyst to push you over the edge.

This time, it’s both — they say the stock “could jump 50% on earnings” and, of course, that this secret little company will only be revealed to Cabot Growth Investor subscribers (“Free,” of course, because technically this is probably a “free report” that you get as a bonus along with your paid subscription… and like many of the lower-priced newsletters, they do offer refunds and a trial period).

So what hints do we get? Enough to ID the stock? Here’s more from the ad:

“It’s already growing its earnings 29% faster than Amazon and has outperformed it by 155% over the past two years.

“… it could jump 50% on earnings and double soon after that.”

OK, so that helps to narrow it down. What does this company do?

“Ironically, few people saw the huge potential in Amazon in the beginning. But you can do yourself (and your grandchildren) a favor by investing in the next Amazon.

“That’s why I’m writing: to tell you about another company that’s revolutionizing the delivery service in the food industry….

“This company created a strong mobile platform that allows users to get the delivery of their favorite meals.”

OK, so more of that “you missed out, here’s your second chance” excitement — but food delivery, that certainly shrinks the field. Any other clues?

“I’m not the only one who sees this company becoming the next Amazon. Wall Street’s top institutional investors do too, owning millions of shares worth close to $1 billion.”

So that’s another one of those hints that doesn’t really mean anything — “institutional investors” own the vast majority of almost every single stock in the market, both the successful ones and the duds. You’ll see the same major investment banks and asset manages at the top of the list of holders of almost every company, so that kind of info only really gets meaningful when there are outliers — big investors that you specifically think have the best analysis or track record who are big buyers, that kind of thing. All this really tells us is that this is at least a billion-dollar company.

Another clue?

“Over the past year this small company has started to zoom past Amazon in earnings growth (35% vs. 6%) and where it counts the most: investor profits (363% vs. 142% in the last two years).”

So who is this? Well, the numbers don’t match up very precisely with the data in the systems I’m using, so that means we have to leave some room for the possibility that the Thinkolator could be wrong in this case… but there’s really only one relatively high-profile meal delivery company that trades in the US, so odds are awfully good that the Thinkolator is accurate in telling us this must be… GrubHub (GRUB).

GrubHub is a mostly app-based delivery platform for restaurants — they got their start back in the mid-2000s by offering up just a technology platform to let restaurants accept takeout orders online, but have grown to offer up more services to their restaurant clients, including actual fulfillment of deliveries in their core markets. They earn their money with both delivery charges that might be passed on to customers, and with a fee paid by the restaurant that’s sort of similar to a sales commission (their drivers seem to be like Uber drivers — independent contractors who deliver on their own schedule).

And the timing of the next earnings is quite a ways off… because they just announced their Q4 earnings, and they were fantastic, delighting investors. They reported accelerating revenue growth and beat analyst expectations, and also