Author

Tom Taulli

Browsing

While the bull run has been amazing, the returns have still been concentrated among the mega-cap tech companies like Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). So then what might be some of the other growth stocks to consider — perhaps those that have not received as much attention? Well, one place to look is mid-cap stocks. These are companies that have market values that generally range from $2 billion to $10 billion.

Such companies often have considerable runway for growth. They also may be more nimble and have modern products. Thus, mid-cap stocks can be fertile ground for finding some very interesting opportunities.

And hey, some of these companies may one day become the mega-cap companies — which means the returns can be off the charts.

So then which look good right now? Let’s take a look at seven that offer great growth potential:

Alteryx (NYSE:AYX)
Appian (NASDAQ:APPN)
Plug Power (NASDAQ:PLUG)
HealthEquity (NASDAQ:HQY)
BlackLine (NASDAQ:BL)
Elastic (NYSE:ESTC)
Fiverr International (NYSE:FVRR)

Mid-Cap Stocks: Alteryx (AYX)

Source: Shutterstock

Alteryx operates a platform that helps companies improve their use of data, such as for analytics and machine learning. But the summer has been cruel for the company’s shares. On news of its latest earnings report, AYX stock plunged from $178 to $109 or so.

Yet it seems more like an overreaction. And yes, AYX stock certainly looks like a much better value now.

Granted, the company has experienced delays with sales because of the novel coronavirus. As a result, AYX provided not-so-good guidance for the second half of the year. The third quarter is expected to see growth of only 9% and the following quarter may be negative. It is a big fall-off from the sizzling 50%-plus ramp in 2019.

However, AYX appears to be taking a fairly conservative approach with its forecasts — which is smart. Besides, when it comes to a company like this, the long term still looks bright. The fact is that digital transformation is a megatrend and companies will need to spend more on their data so as to be more competitive.

Appian (APPN)

Source: JHVEPhoto / Shutterstock.com

It’s extremely difficult for mature companies to transition to new technologies like cloud computing, microservices and artificial intelligence. But there are emerging new approaches to help out. One is called Low-Code, which involves less intensive methods for customizing existing IT systems or creating new apps.

A growth stock to buy in this space is Appian. The company’s technology often can be implemented successfully in weeks, not months. The result is that there is generally a high return on investment.

During the second quarter, revenues jumped by 30% to $29.6 million and the gross renewal rate was 98%. The logo wins were actually double the rate in the first quarter.

Covid-19 has been a catalyst, as companies have had felt urgency to embrace automation. Appian has also recently acquired a company in the robotic process automation (RPA) industry, which is one of the hottest areas of enterprise software.

All in all, the momentum should help to continue to propel APPN stock.

Mid-Cap Stocks: Plug Power (PLUG)

Source: Halfpoint/ShutterStock.com

Fuel cell provider Plug Power has been around for over two decades. For much of the time, the company has struggled.

But lately, things have been perking up. Keep in mind that PLUG stock has been one of the hottest for the year — and the momentum should last.

The company’s strategy has evolved, in which there has been an expansion of its target markets. The result is that PLUG has been able to see a nice acceleration in growth. For the second quarter, billings increased by 24% to $72.4 million. The key driver was the GenDrive fuel cell, which has an install base of more than 35,000. As for this year, the company has deployed about 5,000.

Note that fuel cells are more than about clean energy. They also provide significant cost efficiencies. This is why companies are looking to use them even while the economy falters. Consider that PLUG has customers like Kroger (NYSE:KR), Amazon and Walmart (NYSE:WMT).

Another key to the success has been a smart acquisition strategy, with deals for operators like United Hydrogen and Giner ELX. Moreover, with PLUG’s market capitalization expanding and its balance sheet getting stronger, the company will be positioned for even more dealmaking.

HealthEquity (HQY)

Source: Shutterstock

HealthEquity operates a platform that allows employers to provide cost-effective healthcare options to employees. The offerings include health savings accounts (HSAs), flexible spending accounts (FSAs), health reimbursement arrangements and and commuter benefits.

Among all these, the main one is HSAs. HQY administers roughly 5.4 million accounts, with $11.5 billion in assets. The company’s market share has gone from 4% in 2010 to 16% in 2019.

Covid-19 has negatively impacted HQY stock, which has gone from $87 in March to $60. Some of the factors have included lower interest yields as well as the inability of customers to spend on healthcare during the extended lockdown and the spike in unemployment.

Yet despite this, HQY has still been able to find growth. In the latest quarter, there were 104,000 new HSAs.

In the years ahead, the prospects for HQY stock do look bright. There is a trend toward consumer-directed health benefits — and the company looks ready to ride that wave.

Mid-Cap Stocks: BlackLine (BL)

Source: Pavel Kapysh / Shutterstock.com

BlackLine is not a particularly exciting company. It develops cloud-based software that helps with accounting functions such as closing the books, account reconciliations and control assurance. But then again, such things are absolutely essential. They have also meant that BL stock has been fairly solid.

In the quarter, revenues increased by 20% to $83.3 million and the operating cash flows came to $9.6 million, up from $8.6 million in the same period a year ago. The company added 82 net new customers for a total of 3,138. The user base was at 277,426.

To deal with the Covid-19 crisis, BlackLine released a system that allows for remote audits. According to CEO Therese Tucker on the earnings call: “As priorities continue to shift and budgets contract, companies must figure out how to automate and transform. We believe these challenges present an opportunity for finance leaders to move beyond legacy accounting processes and prepare their organizations for the future of work with changes that will outlast the pandemic.”

In other words, this should make it a good choice among mid-cap stocks to buy for growth

Elastic (ESTC)

Source: Shutterstock

Elastic is a search engine for the enterprise. The software started as an open-source project, which allowed for global distribution. Elastic was also smart enough to acquire various other projects.

To generate revenues, the company has developed a proprietary version of its software. This has allowed the company to greatly expand its market opportunity. And yes, ESTC stock has certainly benefited.

In the fiscal fourth quarter, the revenues soared by 53% to $123.6 million and the total subscription customer count was over 11,300, up from 8,100 during the same period a year ago. The net expansion rate was over 130%, showing the strong momentum behind the business.

By using the open-source model, Elastic has been able to leverage a large community to allow for much more innovation. In the quarter, the company released its latest version of its platform, which allows cleaner and simpler search, alerts for workflows, asynchronous search and case management.

Keep in mind that Forrester estimates that there will be a 3x increase in the enterprise search market during the next three years. The firm also believes that Elastic’s Workplace Search is a top solution in the space.

Mid-Cap Stocks: Fiverr International (FVRR)

Source: Temitiman / Shutterstock.com

Fiverr operates a digital marketplace that allows people to buy and sell services. There are over 300 categories, called Gigs, that cover areas like logo design, website creation, blog writing and so on. The prices for Gigs start at $5.

The growth has definitely been strong. In the latest quarter, revenues spiked by 82% to $47.1 million and the number of active buyers increased by 28% to 2.8 million. The average spending per buyer was $184, up from $157 on a year-over-year basis.

But the growth is likely to continue for some time. Here’s what the CEO and co-founder of the company, Micha Kaufman, said on the earnings call:

“The inflection point on the adoption of remote work — which many of you have asked us about in the past — is within sight. The awareness, openness, and emphasis on remote work and digital transformation has taken a multi-year leap for the entire business community.”

On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Author: Tom Taulli

Source: Investor Place: 7 Mid-Cap Stocks to Buy for Massive Growth

Aurora stock could be on the verge of a turnaround

Lately some cannabis stocks are showing improvement like Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:CRON). But these are really outliers. The market remains fairly rough right now. Just look at Aurora (NYSE:ACB) stock. Since September, shares of Aurora stock have gone from $6.50 to $1.57.

Of course, a key reason for the grueling drop is that the Canadian market opportunity was overhyped.

Keep in mind that there have been nagging problems with the permit process to launch retail outlets. And in the meantime, black market activities have taken a toll. In other words, the Canadian authorities have proven to be far from proactive.

But the deterioration of Aurora stock has also been due to management issues. Let’s face it, the skillsets for the startup phase – which requires much risk-taking and innovation– are usually not right for when a company starts to mature, and this is where Aurora is now. The company needs a CEO who has hands-on-experience with building strong infrastructures and how to scale products.

Interestingly enough, with CGC, we’ve seen this type of leadership transition. The former CEO, Bruce Linton, was standout in aggressively building the company. But his largest investor, Constellation Brands (NYSE:STZ), stepped in when he started to falter. The result was that STZ’s executive vice president and chief financial officer David Klein was brought in.

So might we see something similar with Aurora? I think so, actually. Yes, the company’s founder and CEO Terry Booth has departed and the interim replacement is Executive Chairman Michael Singer. For the most part, it does look like Aurora is looking for someone with a solid background in operations.

Yet Singer is not wasting any time making changes. In his earnings call, he was very clear in his goal is bringing fiscal discipline to the company. To this end, Singer has initiated layoffs and cost-cutting. The goal is to get to reduce expenses by $40 million to $45 million to reach EBITDA profitability by the fiscal fourth quarter of this year. He has also amended the credit facility to provide more flexibility.

Other Positives

To get Aurora back on track, there will certainly need to be more than just cost cutting. There will also need to be more growth on the top line.

And I think this could be the case for 2020. Part of this will likely come as the Canadian government allows more retail locations to emerge and cracks down on black market activities. There should also be less competition for Aurora as marginal operators shutdown.

Then there is the Cannabis 2.0 movement, which is the legalization of edibles and beverages in Canada. The market could easily be worth over $2 billion in the next couple years.

The good news for Aurora stock is that the company is positioned to benefit. Here’s what Singer said on the earnings call:

“We began loading-in small volumes in Q2 2020 with positive market feedback from distributors and retail customers about our product quality. Those products include vapes, concentrates, gummies, chocolates, mints and cookies and they are available in markets across the country. We have selectively partnered with a variety of organizations, prioritized our resources and built the inventory to ensure that our consumers across Canada will have access to our high-quality derivative products.”

Bottom Line on Aurora Stock

Besides Cannabis 2.0, there are other catalysts that should gin up buying for Aurora stock in the coming months.

For example, we’ll likely see an announcement of a new CEO as well as improvement on the bottom line, and there is the possibility for a strategic alliance with a consumer products company. Keep in mind that Nelson Peltz, who is a renowned activist investor and has taken positions in companies like Procter & Gamble (NYSE:PG), Mondelez (NASDAQ:MDLZ), and Wendy’s (NASDAQ:WEN), is a strategic advisor to Aurora. He could certainly be critical making key introductions.

So while the risks remain considerable, Aurora stock could be an interesting speculation.

Author: Tom Taulli

Source: Investor Place: It’s Probably Time to Consider Speculating on Aurora Stock

In the new book The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution, Gregory Zuckerman tells the fascinating story of the rise of Simons and his investment company, Renaissance Technologies. Keep in mind that its flagship fund — called Medallion — has racked up average annual returns of 66% since 1988. This performance has beat other legendary investors like Steven Cohen, George Soros, Peter Lynch and Ray Dalio. In fact, Medallion’s gains have amount to a staggering $100 billion!

How to Use AI to Beat the Market

How did Simons pull this off? Well, it was not about hiring smart investors. Instead, Simons mostly hired mathematicians, physicists and computer scientists (by the way, he started his career as a prominent mathematician). And they would create sophisticated artificial intelligence (AI) models that used sophisticated approaches like Markov chains, Baum-Welch algorithms and stochastic equations.

Thus, by crunching huge amounts of data and engaging in short-term trading, Simons’ team was able to essentially beat the stock market in a big way.

No doubt, Wall Street has taken notice — and is focused on finding ways to leverage AI. However, it has been very challenging. Note that Renaissance Technologies is highly secretive and has its employees sign 30-page nondisclosure agreements.

Despite this, there are more and more examples of how AI is transforming the investment world.

Changing the World Of Stock Market Analysts

Morgan Stanley (NYSE:MS) recently published a report on a sophisticated AI project that focused on more than 41,000 research reports from its own analysts. By using sophisticated deep learning algorithms, patterns emerged that showed when a report was truly bullish or not. Hey, as is common, analysts do not like to come out and put “sell” signals on stocks.

But for AI, this does not matter. The technology can read the true intentions. The bottom line: When looking at bullish sentiment, the stocks performed 9.6% better than the average. This was back-tested from January 2013 to May 2019.

Another example to consider of the power of AI is from Morningstar (NASDAQ:MORN). The company had been struggling to cover the large number of mutual funds and exchange-traded funds (ETFs). So MORN spent four years building an AI model to essentially replicate the actions of its analysts. To do this, the company used the “random forest” algorithm and regression. The data was back-tested for 14 years and, for the most part, the results were in-line what the analysts would have used for the ratings.

AI-Driven ETFs

Okay, then, what about AI-driven investment vehicles for retail investors? There are definitely some interesting offerings available, such as the AI Powered Equity ETF (NYSEARCA:AIEQ). It is powered by IBM’s (NYSE:IBM) Watson platform and mimics the work of 1,000 research analysts (who, by the way, don’t work 24/7).

According to the fund’s prospectus: “Each day, the EquBot Model ranks each company based on the probability of the company benefiting from current economic conditions, trends, and world events and identifies approximately 30 to 125 companies with the greatest potential over the next 12 months for appreciation and their corresponding weights, while maintaining volatility (i.e., the range in which the portfolio’s returns vary) comparable to the broader U.S. equity market.”

Currently, among the portfolio’s 132 holdings, the top stocks include Alphabet (NASDAQ:GOOGL), Intuit (NASDAQ:INTU), and Amazon (NASDAQ:AMZN).

Similarly, there’s the AI Powered International Equity ETF (NYSEARCA:AIIQ). It also uses the Equbot/Watson tools, but that’s pretty much where the similarities end. Its more-global portfolio of 154 stocks share very few of the top 20 names in AIEQ’s holdings. Instead, investors will find names like Brookfield Asset Management (NYSE:BAM) and Toyota Motor (NYSE:TM).

What about the performance of the AIEQ and AIIQ ETFs? While they’ve only been around since October 2017 and June 2018, respectively, for 2019 so far, both funds are up about 26% (by the way, MORN’s AI-based rating is “Negative”).

Then again, when it comes to the availability of AI for retail investors, it’s still early days. But given the advances and innovations in the industry, expect more investment options to emerge in the coming years.

Author: Tom Taulli

Source: Investor Place: How to Use AI to Beat the Market

Ad Blocker Detected!

Advertisements fund this website. Please disable your adblocking software or whitelist our website.
Thank You!