One of the best ways to make money in the stock market is to identify high caliber companies early on in their history, and hold on to them through the long term (I mean years, not quarters). I particularly like companies that have large market forces driving them. In some cases, these may not be so early in the history of the company, but the market trends have recently come in their favor in a big way. If you pay attention, in the current market environment, many of these are available as great buying opportunities. Here are a few to track:
SunPower (SPWR) – I am a strong believer in the potential of Solar Energy. The market is still early. Over the next 10 years, the governments will get their acts together and create better energy policies, and technology will also drive costs down to the point where subsidies are no longer necessary. Suggested readings: my interview with Tom Werner, CEO; stock analysis from Q207, Q407, Q108,
Q208; and my Forbes column, How To Heat Up Solar.
Energy Recovery Inc. (ERII) – We’re heading towards a water crisis. Desalination is one of the ways to tap into the unlimited reserve of sea water, and create new sources of drinkable water. Suggested readings: my interview with HP Michelet, Executive Chairman; stock analysis immediately after the IPO in Q308, my Forbes columns, Hydro-Alchemy and Water Firm Enlivens IPO Market.
MercadoLibre (MELI) – Latin America has huge potential as a consumer market. MercadoLibre is the region’s eCommerce leader. Suggested readings: my interview with Marcos Galperin, CEO; stock analysis pieces from Q407, Q108, Q308; and my Forbes column, Latin America’s eCommerce Leader.
SuccessFactors (SFSF) – Software-as-a-Service is a strong trend. The Talent Management sector is doing well. SuccessFactors has an excellent management team, and Lars is a great CEO. Suggested readings: my interview with the Lars Dalgaard, CEO, stock analysis from Q108, Q208;
Talent Management sector analysis from Q208, and my Forbes column, A Recession-Proof Corner of the Tech Sector .
Research In Motion (RIMM) – I am a strong believer in convergence devices. RIMM is executing well in the segment. Laptop replacement is a major trend. Suggested readings: Trend Radar 2008: The Convergence Device Movement; stock analysis from Q407, Q108, Q208, Q308.
Polycom (PLCM) – My bet is that business travel is increasingly becoming a pain in the ass, fuel costs are rising, “green” consciousness is gaining momentum, and video conferencing will become ubiquitous to support the continued globalization of business. Suggested readings: My interview with Bob Hagerty, CEO; stock analysis from Q307, Q407, Q108, Q208; and my Forbes column, Kill The Business Trip.
Akamai (AKAM) – My bet is on online video becoming an enormous bandwidth hog for the internet, a phenomenon that will require algorithmic optimization. Suggested readings: My interview with Founder Tom Leighton; stock analysis from Q407, Q108, and Q208.
Of these, I have ERII, RIMM, AKAM, SPWR and PLCM in my current portfolio. MELI had run up too much, but has fallen since. And I haven’t yet gotten around to acquiring my SFSF position.