“Data is the new oil.”
Or so said Clive Humby, a British statistician, in 2006. He should know; he created the first supermarket loyalty card on behalf of Tesco (TSCDY). And with the data gleaned from that “Clubcard” program, the U.K. grocery chain doubled its market share from 1994 to 1995 alone. Talk about a valuable commodity!
If data is the new oil, then who is Big Data’s version of an oilfield services company? (It’s worth knowing – because in one boomtime, stocks like Core Laboratories (CLB) stock went from $5 to $60 per share in just five years!)
Well, that would be the cloud services companies.
If you’ve ever had friends or family urge you to “move to the cloud” – or had an I.T. guy make you do it – you’re not alone. Nowadays, many companies don’t keep their own servers, or even rent space in a data center…they just use cloud (online) storage.
“At this point, cloud adoption is mainstream,” as one of my favorite research firms, Gartner, put it in November. That report also noted that “next-generation” software has become pretty synonymous with “cloud-enhanced” software.
Like the other big trends I’m eyeing for 2020, there’s big money in this. Already in 2019, the cloud was a $227.8 billion market worldwide. Gartner expects that to climb another 17% in 2020 – to a whopping $266.4 billion.
So, as always, the question for investors is: What’s the best way to cash in?
The answer may surprise you. Here are the top five public cloud companies, ranked by their Total Grade in my Portfolio Grader:
Source: ZDNet.com, Navellier Portfolio Grader
Believe it or not, Amazon (AMZN) ranks at the bottom for my stock screener – despite the fact that Amazon Web Services is probably the best-known cloud provider around.
Amazon Web Services is also the biggest profit driver for the company these days. However, lately Amazon has not been delivering the goods (so to speak) with regard to its overall profitability. That’s largely thanks to Amazon Prime’s new one-day shipping policy. While one-day shipping is certainly a lifesaver for shoppers – especially this time of year – it’s been an extremely expensive endeavor for Amazon, costing over $1 billion! The result was a significant earnings miss in the latest quarter.
Below you see AMZN’s full Report Card from Portfolio Grader, which tells the tale pretty plainly. While Amazon is certainly raking in the revenues, it scores very poorly when it comes to profitability:
Compare that to Microsoft (MSFT), and the contrast is pretty stark. Yes, Microsoft is the company that kicked off the “PC revolution,” but it’s also brought us Microsoft Azure, the top-selling cloud provider. And it’s an A-rated “Strong Buy” in my Portfolio Grader. Here’s the Report Card:
While even Microsoft’s fundamentals aren’t 100% perfect, they are very solid, and MSFT gets top marks for my most important factor: the stock’s Quantitative Grade. Its “A” rating suggests that big money on Wall Street is flowing into MSFT right now. (In this low-interest-rate environment, MSFT’s dividend surely helps, too, and the company just hiked its payout for December.)
For those looking to profit from the cloud computing trend, Google (GOOGL) ranks highly, too, as does the “Amazon of China,” Alibaba (BABA). Both companies are making several billion dollars a year from cloud services and are B-rated “Buys” in Portfolio Grader.
That being said…
Don’t neglect the lesser known companies when planning your investments. Some of them have just as strong ratings – and their obscurity creates a great buying opportunity for investors in the know.
Under-the-Radar Cloud Stocks in Our Power Portfolio 2020
Only nine stocks qualified for this Power Portfolio – but cloud services are well represented within this exclusive group:
One cloud software company, an A-rated small-cap stock, is certainly not a household name…but its clients include elite corporations like Pfizer (PFE), Sanofi (SNY), Allergan (AGN) and Advanced Micro Devices (AMD). And their business is fueling a dramatic jump in the company’s earnings each year.
Our other cloud-services play is part of a booming trend: “virtual meetings,” where people can use video chat and online calls to communicate with colleagues all over the world. This, too, is an A-rated Strong Buy in my Portfolio Grader.
I can’t give their names here. But I can share the replay of Tuesday’s Early Warning Summit, where Matt and I talk about why stocks are a screaming buy now – and where we’re looking for the best gains.
Note: Several headwinds are converging in the markets at once and they will drastically impact the share price of virtually every stock.
Prepare now and you could have the chance to make a fortune…
But you’ll need to own the right stocks to participate. Otherwise, it could cost you dearly. Go here for more details in our Early Warning Summit.