Back in March, as I set about building my very modest portfolio, I identified a handful of stocks that I liked for various reasons, and eventually settled on purchasing SodaStream International, the purveyor of homemade soda and other tasty drinks. While it hasn't exactly been a multibagger for me as of yet, it has been a rare bright spot in a portfolio currently showing a lot of red.
With that in mind, I have decided to try to locate the next addition to my portfolio, and I will be again looking at five companies. Two are holdovers from my initial March list, and the others compete for consumers in similar ways. With that in mind, here is a quick look at the five companies I am considering at this time:
|Amazon.com (Nasdaq: AMZN )||194.5||88.2||$236.09|
|Facebook (Nasdaq: FB )||76.5||36.5||$23.15|
|LinkedIn (Nasdaq: LNKD )||646.4||85.5||$104.18|
|Netflix (Nasdaq: NFLX )||32.4||52.1||$57.75|
|Under Armour (NYSE: UA )||58.7||36.0||$55.41|
Source: Finviz.com; TTM = trailing 12 months.
At first glance, all of these companies look exceedingly expensive when evaluating based purely on P/E ratio, with only Netflix checking in below 50. However, I think each company has enough going for it to make it a compelling add to any portfolio, especially for someone who has time to (hopefully) watch these companies continue to develop and soar.
The one-stop online shop
I have been a faithful Amazon customer for a long time. My Amazon Prime membership continues to get better; the continuing addition of new content -- the recent addition of The West Wing has me particularly excited -- gives more options for streaming video. After personally clamoring for Amazon to add Instant Video to Microsoft's Xbox 360, it did so last month, providing Prime customers another option for a streaming platform.
But that's not all that makes Amazon an interesting option. A recently launched incentive for certain employees provides up to $2,000 a year toward vocational training, regardless of whether that training keeps the employee at Amazon. Furthermore, 18 new fulfillment centers will allow for even quicker delivery of most items, ensuring customer satisfaction in the years to come. Even at its inflated price, it still might be early enough to reap the rewards of future growth in this company.
Speaking of streaming videos ...
With my previously mentioned Amazon Prime membership, I feel I have no reason to double up on content and keep a Netflix subscription as well. Even the cheapest Netflix plan is more expensive than the $79 annual membership charge for Amazon Prime and doesn't include free shipping or Kindle rentals. However, Netflix is still king of streaming content, and the looming addition of Arrested Development as an exclusive to the service next year may persuade me to head back to Netflix in the near term.
Netflix the investment is also becoming more attractive, reporting 30.1 million subscribers at the conclusion of its most recent quarter. That number was tempered, however, by news that the outlook for the remainder of the year is flat and that the number of DVD subscribers is dwindling. These developments pushed Netflix to a 52-week low last week, making it even more attractive if you think it can continue to lead the streaming revolution. A dwindling market cap may also entice someone seeking content to come in and swoop it up for cheap.
Both of the social-media companies on my list have sky-high valuations, with LinkedIn's P/E currently eight times higher than Facebook's. These high valuations have led many to speculate that this is the beginning of a "social-media bubble," and companies such as Groupon, Angie's List, Zynga, and Yelp have been tossed in with them all as a cautionary tale, harkening back to the tech bubble of the early 2000s. Though it is easy to lump all these companies together, Facebook and LinkedIn have more potential to be on top whenever the dust finally clears and the bubble pops.
Facebook has fallen considerably from its much-hyped IPO in May, despite an increase to nearly 1 billion monthly active users. The primary reason for the fall was a slowdown in profit growth in its one quarter as a public company. Advertising revenue was 84% of total revenue, and the company is still struggling to find a way to monetize the aforementioned active users. LinkedIn, by comparison, has a couple of different ways to make money, with premium subscriptions for both corporations and job seekers; Advertising revenue accounted for a little over 25% of revenue during the last quarter.
And ... athletic apparel?
My final option is a holdover from my previous list, and I am still a fan of the direction that Under Armour is taking. We're seven months into the year, and the company has yet to do anything that makes me question my call that 2012 will be great. Footwear revenue increased 44% from the previous quarter, and for the first time in a while, revenue growth outpaced inventory growth, which had been a problem for the company. A recently completed 2-for-1 stock split also pushed the share price down from lofty heights -- temporarily, anyway, as the stock is up 18% since the split.
Who will win?
The winner of this latest battle for a spot in my portfolio won't be decided for a few weeks while I do some further due diligence on these companies. However, one will make the cut and be added to my portfolio by the end of August. To find out which one wins, be sure to add the companies to My Watchlist so you're up to date on their latest news.