Daily Archives: December 4, 2018

Technology

7 Big Data Stocks to Buy for 2019

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The Big Data market is likely to grow for the long haul. Let’s face it, the world is undergoing an explosion of data, such as from smartphones, IoT (Internet-of-things), wearables, AI (Artificial Intelligence) and machine learning.

Actually, for just about any company to compete and thrive nowadays, there needs to be a Big Data focus. It’s a strategic imperative. According to research from Statista, global spending is expected to go from $42 billion in 2018 to $103 billion by 2027.

In other words, there is substantial opportunity for investors. But what are the best stocks to buy in the category?

The good news is that the recent wave in IPOs has provided investors a group of next-generation players to choose from. So here’s a look at seven:

Yext (YEXT)

Yext (NYSE:YEXT) operates a knowledge platform, which includes a network of about 150 data providers like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL). For the most part, the company organizes data in ways to help businesses achieve goals, such as getting more customers or providing a better service.

At the heart of this is intelligent search, which is based on context and intent. There is also AI (Artificial Intelligence) that helps provide more relevant results.

The next generation of this technology, called Yext Brain, launched in late October. The system allows customers to sync their data with AI-enabled services like search, voice assistants and chatbots.

In terms of growth for YEXT, it has been robust. During the latest quarter, revenues jumped by 33% to $58.7 million. The company also snagged nearly 80 new enterprise customers.

Big Data Stocks to Buy for 2019: Alteryx (AYX)

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Alteryx (AYX)

Alteryx (NYSE:AYX) was an early player in the Big Data industry, having been founded in 1997. The company also bootstrapped its operations. Note that AYX did not raise any venture capital until 2011.

But this did not hamstring the company. Now AXY is one of the top Big Data stocks in the world. Then again, it has built a platform that is fairly easy for businesses to leverage analytics, such as by using visualizations. Keep in mind that Big Data systems are often focused on specialists like data scientists.

AYX’s strategy has helped to expand the market opportunity. In fact, the company believes that the spending on the category will go from $19 billion in 2016 to $29 billion by 2021.

During the latest quarter, revenues shot up by 59% to $54.2 million and the number of customers rose by 41% to 4,315.

Big Data Stocks to Buy for 2019: Talend (TLND)

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Talend (TLND)

With the rapid growth in new technologies, data integration has gotten even more mission critical. Yet the tools have tended to lag. It is often the case that there needs to be professional services and custom coding.

But Talend (NASDAQ:TLND) is changing this with its innovative platform — called Talend Data Fabric — that integrates data and apps in real time across Big Data systems, cloud environments and on-premise installations. The result is that there is a unified view of data.

To bolster the product, TLND acquired Stitch, which operates a cloud service that moves data into cloud warehouses and data lakes. The service has more than 900 customers.

Granted, TLND stock got crushed on the latest earnings report. But it does look like it was an overreaction. Note that the company continues to grow at a strong pace — with revenues up 36% to $52.1 million in the third quarter.

Big Data Stocks to Buy for 2019: Cloudera (CLDR)

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Cloudera (CLDR)

Cloudera (NYSE:CLDR) has built a sophisticated Big-Data platform that uses machine learning and analytics. It is also optimized for cloud environments.

But CLDR is in the process of a major transformation — that is, the company is merging with Hortonworks (NASDAQ:HDP), which is another of the major Big Data stocks. The combined entity will be a powerhouse, which will have services for the multi-cloud, on-premise environments and the Edge. Consider that HDP has an expertise with streaming and IoT while CLDR’s focus has been AI.

There will also be significant scale, which should help provide a competitive advantage. The merger of CLDR and HDP will result in annual revenues of $720 million, with over 2,500 customers.

Splunk (SPLK)

Founded in 2003, Splunk (NASDAQ:SPLK) is a pioneer in developing systems to analyze machine data, such as from websites, apps, servers, networks and smartphones. The focus was on helping companies gain “operational intelligence.”

Despite the emergence of fierce competitors, SPLK has been able to maintain its leadership. Then again, the company continues to invest heavily in R&D. Consider that at its most recent conference — .conf18 – it had the largest number of new releases. For example, the company now has solutions for areas like IoT and Industrial IoT.

Growth has also remained strong. During the latest quarter, revenues increased by 49% to $325 million. The company also generates strong cash flows, which came to $59.1 million in Q3.

Big Data Stocks to Buy for 2019: Elastic (ESTC)

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Elastic (ESTC)

Elastic (NYSE:ESTC) is essentially a sophisticated search engine for businesses. At the core of this is open-source software, which is downloaded for free. This has not only allowed for rapid adoption of Elastic — which is critical for any search engine — but ongoing innovation.

The platform also allows for searches of structured and unstructured data, say from databases, mobile apps, log files and so on. There is also AI features and machine learning.

And what about the growth ramp? Well, it has been torrid. During the latest quarter, revenues spiked by 79% to $56.6 million. The company has over 5,500 customers across more than 80 countries.

Big Data Stocks to Buy for 2019: Mongodb (MDB)

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Big Data Stocks to Buy for 2019: Mongodb (MDB)

Relational databases have been around since the 1970s. The technology is also at the core of Oracle’s (NYSE:ORCL) database franchise.

But the problem is that the technology really does not meet the complicated needs of today’s Big Data needs.

So yes, there is an alternative, called NoSQL. And the leader in the category is Mongodb(NASDAQ:MDB). The company’s database has been downloaded over 40 million times and there are more than 7,400 customers across over 100 countries. MongDB also has a thriving ecosystem, which has more than one million members in the MongoDB University.

All this has turned into a standout business. During the latest quarter, revenues soared by 61% to $57.5 million. Actually, given the critical nature of databases to Bid Data, it would not be a surprise that a larger company — say Oracle — would eventually try to buy the company.

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Dividends

These 8 High-Yield Dividend Stocks Are About to Disappear for Good

At the core of stock values is the economic fact of supply and demand. You know how that works. Yet in the world of stocks, supply is generally open-ended. The financial world is happy to put more supply of individual stocks or shares of funds or ETFs into the market. Share price changes are almost 100% driven by changes on the demand side.

However, upcoming changes in the MLP sector will produce a significant supply reduction. The market doesn’t seem to be aware that there is also a supply side to supply and demand. This provides an attractive opportunity to pick up some unavoidable value gains.

Master limited partnerships and other companies operating in the midstream/infrastructure energy subsector have been implementing a range of financial maneuvers since energy prices and related stock prices crashed in 2015. Now late in 2018 it seems the group is at the end game of the path that has been followed for the past three years. The remaining problem is that the stock market has not yet recognized the stronger fundamentals in the sector with higher stock or unit price values.

The final step to the midstream sector restructuring is now taking place. This involves taking out of the market those midstream companies where the sponsors do not believe keeping these companies as publicly traded entities makes financial sense for the long term goals of the sponsor entities.

For example, at the beginning of 2018, there were eight publicly traded MLP general partner stocks. When this current consolidation phase is over, there will be none. Over the last few months the mergers or buy-ins of four midstream companies have been completed. Over the next few months, these stock symbols will meet the same end and no longer be publicly traded companies: SEP, EEP, AM, ENLK, WES, EQGP, VLP, DM, TLP.

This list accounts for about 10% of the index tracked MLP universe.

With one-tenth of the sector disappearing, MLP focused mutual funds, closed-end funds, ETFs and ETNs will have cash from the transactions that must be reinvested into the remaining stocks in the sector. ETFs and ETNs will be forced to follow the new weightings put out by the index providers. The closed-end and mutual funds won’t be forced to buy specific midstream stocks but will have significant amounts of new cash to put to work.

To give you an idea of the amount of money at stake, the MLP ETF and ETN groups have $18.5 billion in assets. Mutual and closed-end funds have assets of $38 billion. Rough math gives approximately $6 billion in loose cash that will soon be chasing the remaining companies in the MLP space. The Alerian MLP Index has 36 component companies. The Alerian MLP Infrastructure Index just 21 component MLPs. The adjusted market cap of the entire MLP sector is about $170 billion.

The bottom line is that the amount of supply coming out of the MLP sector will produce a large amount of cash that will be chasing the reduced amount of remaining supply. This demand imbalance could be the trigger event to start the MLP sector climbing out of its 3-year long bear market.

Here are three investment ideas to participate in the supply vs. demand imbalance coming over the next few months.

Enterprise Products Partners LP (NYSE: EPD) with a $57 billion market cap is the largest midstream MLP. The company provides the full range of energy infrastructure services.

EPD is one of the biggest pipeline service providers to transport crude oil from the Permian to the Texas Gulf Coast. It recently announced that its 416-mile Midland-to-Sealy pipeline is now in full service with an expanded capacity of 540,000 barrels per day (“BPD”) and capable of transporting batched grades of crude oil.

This company also stands out from the MLP pack by using internally generated cash flow to pay for growth projects. In an era where the cost of raising equity capital is high, this is a significant advantage.

EPD yields 6.6% and is growing distributions by 2.5% per year.

Magellan Midstream Partners LP (NYSE: MMP) primarily owns and operates refined products (gasoline, diesel fuel, jet fuel, etc.) pipelines and storage terminals. The company also owns 2,200 miles of interstate crude oil pipelines.

The company provides service to almost 50% of the U.S. refining capacity. With its $14 billion market cap, Magellan is one of the more stable large MLPs. This is another of a very small number of midstream energy companies that funds growth capital from internal cash flow.

Since its 2001 IPO, this MLP has consistently grown the distributions paid to investors. Over that period, the payouts have grown at a 12% compounding rate.

Currently the company forecasts 5% to 8% distribution growth through 2020.

MMP yields 6.5%.

If you don’t want to own individual MLPs and have to deal with the Schedule K-1 tax reporting, look at the Global X MLP ETF (NYSE: MLPA). This MLP ETF has a management fee that is half the rate charged by the larger and better known ALPS Alerian MLP ETF (NYSE: AMLP). MLPA uses the Solactive MLP Infrastructure Index as its benchmark.

The fund currently yields 8.7%.

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