We all know that there’s been a lot of attention on cutting edge industries. Biotechnology has been one of them but as investors continue to dive blindly into noise driven stocks in the hopes of finding a short term unicorn, are they missing out on real opportunities within real emerging tech?
I’m talking about information technology. Things like cyber security, access management, cloud computing, business intelligence, etc. Basically the entire realm of IT has shifted its focus to a simple term: SaaS. Short for Software as a Service, this industry has a large scope of sub-categories, all of which are projected to grow quickly in the near term. From cyber attacks to simple sales tracking, enterprises and small businesses are completely revamping antiquated systems in favor of a much more streamlined and scalable option by utilizing “the cloud”.
In fact, according to a Wall Street Journal article, five of the top-six most widely held stocks are all tech companies among large-cap growth funds. According to the latest data from market research firm eVestment, technology comprised 25% of large-cap investments.
Here are 5 stocks that have caught investors’ attention this year and are gaining acclaim for their novel tech offerings:
According to the Wall Street Journal article, among growth funds, Microsoft Corporation (NASDAQ:MSFT) saw the largest increase in ownership during the first quarter, up about 10%. The tech giant has been an innovator for decades and that doesn’t look to be changing anytime soon. Aside from new products like the Hololens (a holographic computer), the next big industry that the company seems to be quietly targeting has been cyber security and access management.
Microsoft announced that it has opened a new Cyber Security Engagement Center in India that the company aims “to deepen its efforts” in building cyber security in India. The center is part of Microsoft Consultancy Services, a dedicated India-based response team that allows clients the ability to access cyber monitoring and using machine learning based detection technology.
Microsoft is even launching a venture arm that wants to make early stage investments in startups that are involved in cutting-edge cloud computing technologies, security, and a few other high-value areas.
A few years back, the company entered into the IAM space (Identity Access Management) through the purchase of BHOLD for an undisclosed amount. The obvious rise in web-based applications and risk management solution combined with cost containment are set to drive the global IAM market says Grand View Research.
On top of this, the tech giant has also jumped back into the M&A realm. On Monday, Microsoft announced that it would be acquiring LinkedIn for $196 per share or roughly $26.2 Billion inclusive of LinkedIn’s net cash.
“Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works,” LinkedIn CEO Jeff Weiner said. “For the last 13 years, we’ve been uniquely positioned to connect professionals to make them more productive and successful, and I’m looking forward to leading our team through the next chapter of our story.”
MGT Capital Investments Inc.
What started as a speculative trade has now become one of the biggest technology stock movers of the quarter. MGT Capital Investments Inc. (NYSEMKT:MGT) in May announced the acquisition of the technology and assets from D-Vasive Inc. This was the cybersecurity business of John McAfee, the name for what is now a universal antivirus company bought by Intel in 2001 for $7.68 billion.
Shares managed to skyrocket from a 52-week low of $0.15 to as high as $5.58 as speculated that the free-spirited 70-year-old McAfee could bring some life into the company. John McAfee has been proposed as CEO of the combined company, which is also renaming itself John McAfee Global Technologies. Why pay attention to MGT?
The company has been focused on acquiring some real grass-roots, incubator style businesses that have some promise. For example, MGT acquired ownership interest in the incubator, Round House. The venture firm has an active pipeline of valuable IP including a stake in RecMed; this was renowned for its pubescent creator who already turned down a $30m buyout.
Several companies within the Round House portfolio are cybersecurity related, offering MGT an early look into potentially disruptive technologies in file sharing, chat and other applications. With the industry positioned to grow to $170.21 Billion by 2020, the move take advantage of this trend before it hits a major mainstream could be presenting itself especially with a company that now has one of the industry’s “godfathers” at the helm.
Now this one is a micro-cap company but the management team and previous success in a very young industry puts this on the list. As mentioned above, the industry for Identity Access Management is projecting some aggressive growth in the very near term where the M&A climate has been heating up to the tune of multi-million dollar buyouts.
IBM acquired Lighthouse Security Group to expand on its IAM offerings, LogMeIn acquired San Francisco-based startup Meldium for $15 million in cash, Ping Identity announced that it has been acquired by Vista Equity Partners (Ping is the same organization that made waves with its acquisition acquisition of Marketo, a leading marketing software firm, for $1.8 billion), and even Ernst & Young has even earmarked at least $20 million for the firm’s recently launched Managed Security Operations Center (SOC), an initiative designed to provide 24/7 tools and support to secure businesses worldwide.
Iddriven Inc’s (OTCMKTS:IDDR) management has extensive experience in this arena. Remember the above statement of how Microsoft acquired BHOLD allowing it to enter the multi-billion dollar IAM arena? According to the company, in 2011, they actually engineered the sale of BHOLD and its flagship IAM software program to Microsoft for a substantial, all-cash sum. MS supports that program still today but has been unable to port it to the cloud. IDdriven states that Microsoft is a key — and enthusiastic — channel partner for IDDR.
Based on BHOLD now being cloud capable and because IDDR is a channel partner, it could be a speculative play in the short term simply based on the idea that IDDR’s new flagship product, IDdriven is a dynamic, seamless, scalable, and flexible cloud-based IAM system.
Further to this, the company has also developed additional partnerships with the likes of companies such Oxford Computer Group, which also holds a signature (IDaaS) Solution. Oxford has developed a special, proprietary software program that complements IDDR’s (IDaaS) solution. The Oxford program acts as an interface connector, which seamlessly connects the IDdriven Solution to the Microsoft Identity Manager Software program. Oxford has even received Microsoft’s Partner of the Year award seven times in 1991, 1993, 2000, 2008, 2013, 2014, and most recently in 2015 for enterprise mobility, and was named a finalist for the past ten years.
At a price of less than $1 per share, the M&A potential in the space alone could be enough to build an audience around IDDR this year.
Another small cap stock on this list and a company that deals with database management, Quantum Corp (NYSE:QTM) has recently found itself as the focal point of industry analyst firm Enterprise Strategy Group’s evaluation of Quantum’s Artico™ active archive appliance. ESG Lab performed evaluation and testing of Artico in the areas of data access, protection and archive as part of the orchestrated and repeatable pattern of business activity that constitutes a critical user workflow.
Obviously as cloud systems and scalability become a major focus for enterprise organizations, QTM has made it a point to address the growing need for easily accessible workflow management systems in an on-demand environment.
As the stock has been trending near 52-week lows, the market itself has begun to see a rise in activity mainly during the more recent months of late spring. With IEX Capital Advisors, LLC (the company’s biggest shareholder) putting together a list of nominees for a new board director shows that it isn’t the company but now even the shareholders that want to see a turnaround in growth of shareholder value. With the majority of candidates holding decades of experience, the timing of this, at least to add to a watch-list could be well framed heading into the summer months.
As we see even today, terrorism is very much a prominent subject right now and what has yet to be addressed in strong detail has been cyber security. Access management, database management, and anti-virus software have all become part of this and the industry is set to continue to see a rise in growth as the world becomes more digitally connected.
Lifelock Inc (NYSE:LOCK) itself help its customers protect themselves again identity theft and through its subsidiary, ID Analytics, LLC, LifeLock provides a patented technology that monitors not just someone stealing a client’s identity but even just the threat of that happening. The big thing for LifeLock as the takeaway for shareholders is that the company actively works with law enforcement agencies and non-profits to help consumers establish positive habits to combat this threat.
Most recently the stock has “hit the airwaves” after announcing a multi million dollar share buy back program with Bank of America, N.A. for approximately $48 million. The final settlement of the transactions under the new ASR agreement is expected to take place on or before the end of Q3 2016. This additional ASR transaction is being executed as part of an authorization by LifeLock’s Board of Directors to repurchase up to $100 million of the Company’s common stock and is not inclusive of the previously announced $50 million ASR transaction entered into with Bank of America, N.A. by LifeLock in February 2016.
There is a lot on the market side of this company that is set to happen within the next 6 months alone. It should also be mentioned that as of the last filing, LifeLock reported that revenue rose by 18% year-over-year to $159.3 million, while membership increased by 11% to 4.3 million both of which should be key factors to appeal to investors.
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