Several readers have been asking recently about the “Power Portfolio 2021” pitch from Investorplace (previously known as Power Portfolio 2020), so I thought I’d dig into that for today’s edutainment episode. The service is a two-pundit “upsell” product, currently being sold at $2,499/yr (no refunds) and boasting regular picks that combine the “top down” trend picking from Matt McCall with quantitative “bottom up” stock selection from Louis Navellier… the idea being, naturally, that the combination of good numbers and hot trends should lead to good stock picks. They say their picks in this newsletter will be unique, ideas that they haven’t shared in their other services.
And, frankly, I’m a little exhausted after ending a lovely vacation and being back at work for a few days, so I’ll skip over some of the big picture silliness (I write every weekday, really? all day? But the couch is calling!).
Yes, McCall and Navellier have both made lots of good picks in the past, and probably had fantastic years in 2020, as you’d expect for growth investors (anyone who stuck with stocks with strong revenue growth and high or rising growth expectations should have made a lot of money last year). I’m sure they’ve picked lots of stinkers in the past, too, every growth investor has. They don’t have public track records in any meaningful way, but back when Navellier was being tracked by Mark Hulbert, before Hulbert Interactive fizzled away, I recall that the general tendency was for his quantitative services to outperform in bull markets and give back most of that outperformance in bear markets. Kind of what you’d expect — growth and momentum stocks go up faster than the market, by definition, and when the manure hits the air circulation device they go down faster, too.
Navellier used to manage a some publicly available mutual funds under his name and others, and still has a managed accounts business, and the mutual funds, at least, tended to be expensive disappointments from what I remember, and have mostly disappeared (as you’ve probably noticed by making your own investment decisions, consistently managing a portfolio is a lot tougher than picking a hot stock or two each month… partly because the impact of the losers doesn’t just disappear once you’ve sold them). You can also use his free portfolio grader service to see how particular stocks rank with his quantitative methodology, in case you’re curious.
So let’s just get to the few hints they toss our way, shall we? The general idea is that they’ve launched this service with a “Hypergrowth Portfolio” of ten stocks, and will be adding to it if and when they find more ideas that they can agree on. There are only two that are at all hinted at with any specifics in the ad, so we’ll focus on those.
And I should warn you, this will be a bit of a challenge for the Thinkolator, because they don’t drop a lot of clues… here’s the pitch for the first one:
“These stocks are stretched across various industries with a lot of growth potential in 2021.
“For obvious reasons I can’t just give you the names and ticker symbols of all of them, but here’s what I can say…
“There are two specifically I’m personally excited about.
“These companies are hands down the best at what they do.
“For the most part, they’re small and their revenue is growing at breakneck speeds.
“One of the companies is a truly innovative software company that will absolutely be a huge benefactor of the “work from home” trend.
“It’s the perfect picks-and-shovels play.
“They’re cutting out the middleman and helping companies scale their remote capabilities and voice messaging needs.
“And their current client list is really impressive.
“Google, Microsoft, Zoom, and RingCentral all depend on their software.”
Thinkolator sez this is very likely to be Bandwidth (BAND), a small company that I admit to not having heard of before. Here’s how they describe themselves:
“Bandwidth is a software company focused on communications for the enterprise. Companies like Google, Microsoft, Cisco, Zoom and Ring Central use Bandwidth’s APIs to easily embed voice, messaging and 911 access into software and applications. Bandwidth is the first and only CPaaS provider offering a robust selection of communications APIs built around their own nationwide IP voice network – one of the largest in the nation.”
Yes, we can add AAS to pretty much everything these days, right? I’m thinking I should start calling Stock Gumshoe a BaaS company (Blatheration as a Service). CPaaS is “Communications Platform as a Service” — basically, the voice and telephony network that software providers can build on to provide their own branded and managed video conferencing, VOIP telephone service, etc. They describe themselves pretty well on their website, if you’re curious to dig in a bit. They’ve been public for three years or so, recently made a substantial acquisition (Voxbone) to expand their network globally, and, no surprise, the stock roughly tripled in 2020 as revenue growth from their big customers (including Zoom) picked up.
All of the numbers will sound pretty familiar if you’re used to looking at subscription based businesses — they had revenue growth of 40% last quarter, most of it from CPaaS business, active customers grew at 25% (they now have 2,015), and they had “dollar-based net retention” of 131%. They also raised their forecast for the fourth quarter, which we’ll hear more about in six weeks or so when they next report.
There is not a lot of analyst coverage for Bandwidth, mostly because they’re small, but they are profitable on an adjusted basis, they’re probably lowballing their guidance for the fourth quarter because of uncertainty about the acquisition, and the average analyst expectation is that they will grow revenues by 38% next year, and that they’ll earn 35 cents in adjusted earnings per share, which would be lower than the likely 45 cents+ they’ll probably end up with in 2020. That means we’re looking at a PE of roughly 300, but, with their acquisition, also perhaps more growth potential as they expand more internationally.
And yes, they do rate an “A” grade in Navellier’s portfoliograder. The shares dropped a bit after they