3 Disruptors to Buy Now

Shares of Zipcar (UNKNOWN: ZIP.DL2  ) soared 48% last week, racing to life after Avis Budget Group (NASDAQ: CAR  ) agreed to pay a healthy premium to buy the leading car-sharing service.

It was easy to see this coming.

Zipcar is the undisputed top dog in this growing field. Zipcar's membership has grown 18% over the past year to 767,000 Zipsters looking to rent conveniently located cars with gas and insurance included for as little as an hour.

Avis Budget is as much a dinosaur as the fossil-fuel source that powers its old-school rentals. Analysts see flat revenue in its latest quarter and a meager 4% uptick in 2013.

Zipcar was acquired at a premium because it was a disruptor. Avis Budget paid a premium because it was being disrupted.

The deal makes sense, and savvy investors should've seen it coming.

Invest like John Derek
Six years ago, I urged investors to approach stocks the way that John Derek approached women.

Derek himself wasn't a superstar in Hollywood. He had small roles in big movies and big roles in small movies. His directorial career later in life wasn't very successful. However, he did marry Ursula Andress, Linda Evans, and Bo Derek just as each actress was an emerging box-office bombshell.

I certainly don't want to condone Derek's lifestyle. I've been happily married to the same woman for 22 years.

However, when it comes to growth-stock investing, it certainly pays to hit on pretty young things.

My inspiration for the Derek article at the time was that many of the young budding starlets that David Gardner was singling out for Rule Breakers newsletter subscribers were getting gobbled up.

  • Archipelago was making waves as an electronic trading exchange. Click! New York Stock Exchange arranged for a merger combination.
  • Pro Flowers parent Provide Commerce was making waves with its unique method of delivering fresh flowers in bloom. Pop. It became another clipped prize on John Malone's lapel.
  • Click Commerce was raising the bar in the way that RFID technology improves inventory control. Check. It got snapped up at a premium.

If we dig into the stocks from Rule Breakers and David's Stock Advisor picks -- the recommendations that we now collectively call the Supernova Universe -- you'll find deals for PayPal, Marvel, Pixar, LoopNet, Ancestry.com, and many more.

These companies didn't get taken out as charity cases. They were acquired because they were doing things in game-changing ways. They were threats, and larger companies or private equity firms wanted to turn them into opportunities.

Things haven't changed in the Supernova Universe, judging by last week's Zipcar buyout.

3 potential buyouts for 2013
You didn't come here to hear me simply sing David's praises, though I am certainly qualified to do exactly that. I've been here since 1995. I wrote portfolio recaps for the original Rule Breakers real-money portfolio in the 1990s. I have been a member of the Rule Breakers analyst team since the growth-stock newsletter service's inception in 2004. I am the portfolio lead for one of the two original missions of the new Supernova service.

However, like most Supernova-minded investors, I'm more excited about the future than I am interested in celebrating the past. There are plenty of stocks that are part of David's Supernova Universe that have the disruptive traits that will make them compelling to desperate acquirers at higher prices.

Let's dive right into three of them.

  • SodaStream (NASDAQ: SODA  ) -- The company behind the popular beverage-making system that's taking the world by storm is doing better than you think. Sales of its water-fizzing starter systems rose 37% in its latest quarter, and these aren't novelty items collecting dust. Sales of the carbonators and soda flavors rose a sharp 55% in its latest quarter. Even in the wobbly Western European economy -- where SodaStream has a longer tenure and a larger presence -- revenue rose 33% in its most recent quarter. Clearly SodaStream's message is getting through, but don't look at Coke (NYSE: KO  ) or Pepsi (NYSE: PEP  ) as potential sugar daddies here. The real potential buyers here are either the kitchen appliance makers that see this as an untapped growth opportunity or the food giants that want to get in ahead of SodaStream's push into grocery store distribution in the next year or so. SodaStream already has deals in place with two food giants. Don't be surprised if a growth-starved behemoth stops to take a sip.
  • Tesla Motors (NASDAQ: TSLA  ) -- Electric cars are as disruptive as you can get in the automotive industry, but investors are worried. Even those $7,500 federal tax credits to subsidize the fuel-efficient vehicles aren't helping populate the road with Leaf and Volt cars. Tesla, on the other hand, can't keep up with demand. It's the aspirational electric car. It's the iPhone of electric cars, only there's no Foxconn cranking out Tesla Model S sedans with lightning precision. Production constraints have been the stumbling blocks as Tesla tackles its long waiting list, even after a recent price increase. Any car company would love to own the cool brand behind the car of the future, stepping up to bankroll the assembly line.
  • Netflix (NASDAQ: NFLX  ) -- Don't let anyone tell you that Netflix stopped being a disruptor when its stock crashed in the latter half of 2012. No one is even close to Netflix with its streaming subscriber base of 29.4 million video buffs worldwide. Netflix is serving 20 times more content than its closest rival in premium streaming. The game is over. Netflix won. It can pay more for content than anybody else, and distributors know that they need Netflix to get noticed. Is Netflix the new gatekeeper or tastemaker for filmed entertainment? It doesn't matter. For the first time in nearly nine months, Netflix broke into the triple digits this week. Expect an online juggernaut, a cash cow service provider, or a media giant to make a move at Netflix before it's too late.

Master of the Universe
The Supernova Universe is a pretty fertile ground in which to find 2013 buyout candidates, and Supernova is a premium service with real-money portfolios based on David's market-thumping growth stocks. He's always hunting for revolutionary disruptors, even though he would prefer if they grew on their own instead of getting hitched. If you want to take advantage of the premium research service click here to get instant access to a personal tour behind David's Supernova experience.

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Read/Post Comments (20) | Recommend This Article (45)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 08, 2013, at 12:22 PM, pauldeba wrote:

    Why would someone pay $6+ billion for NFLX when it only generates $10 million of profit with aggressive accounting?

    They lose money internationally and make most of thier money domestically on DVDs which are slowly dying. That doesn't sound attractive.

    The idea that leverage will ever hit is ridiculous. They need constant marketing spend to keep churn at bay. It is a neverending cycle of investing for little to no profit.

    Netflix customers are notoriously cheap with high expectations. No one wants to inherit that baggage.

  • Report this Comment On January 08, 2013, at 3:57 PM, DebtFreeDave0 wrote:

    Your example of Zipcar as an opportunity to make lots of money from potential buyouts ignores a key fact: ZIP dropped steadily from $29.15 on April 21, 2011 (shortly after its IPO) to $6 by Nov. 7, 2012. That is a loss of 79%. The only people that made any money from its $12.20 per share acquisition are those that bought it from May 2012 forward. Anyone that bought earlier than that lost money. The big winners are the ones that bought it at under $9 per share, after Aug. 2nd, 2012. For long-term shareholders, the buyout premium is a consolation prize at best. Investing in Zipcar was not a good investment; anyone who made money trading this stock just got lucky.

  • Report this Comment On January 08, 2013, at 5:26 PM, JZuc wrote:

    @DebtFreeDave0 100% agree... Zipcar example just kills all credibility. If a long-term investor truly believed in the company's disruptive technology, they most likely lost money.

  • Report this Comment On January 08, 2013, at 5:44 PM, sunesta50 wrote:

    This is really so offensive. For the fool to publish that "anyone should have seen the Avis acquisition of zip car coming because it is a disruptor" is really interesting. I am a member of MDP and bought when I was told to buy by the Fool, and MDP along with all of us that follow it have lost perhaps 20+% on our investment. To then read that we should have seen it coming??? Wow, that is really poor of you. Avis only bought it at a premium from where it was on the day they purchased it, but certainly not a premium from where we were instructed to buy.

  • Report this Comment On January 08, 2013, at 5:57 PM, krwp wrote:

    net flix value is in content. the day all tv is from the internet is fast approaching and content providers will win big. perhaps if Debtfreedave0 would have bought puts on Zipcar he would be happier. If you keep listening and doing what the sheeple do from CNBC you will continue to lose money. sunesta50 tighten up your stops, perhaps then you will not have the need to blame others for your loses. how many winners did you get from the Fool?

  • Report this Comment On January 08, 2013, at 6:20 PM, blkbrd101 wrote:

    If 'savvy investors should have seen it coming' where does that leave the FOOL's Hidden Gems?

  • Report this Comment On January 08, 2013, at 6:23 PM, aufergy wrote:

    I made money in Zipcar. Part of it was clearly luck, as I bought shares about a week before they were bought out. But, I was sitting on a 40% loss before I purchased more shares. So, I feel for the people that lost money. But, investing is what you make of it. If you really believed in the company, you had the chance to buy it at $6 and greatly reduce your cost basis. I bought more shares and was rewarded for it.

  • Report this Comment On January 08, 2013, at 7:24 PM, gene132 wrote:

    Also, in its 12 years existence, Zipcar has NEVER made a profit! Yes, maybe they have a good idea, but the fact is, they never earned a dime. As for Tesla, electric cars are about to see a big drop in demand-the reason? High efficiency diesel engines combined with new body materials will make 80 MPG cars feasible. When you are waiting 8 hours to recharge your batteries, a 2 minute fillup sounds attractive.

  • Report this Comment On January 08, 2013, at 8:02 PM, tomd728 wrote:

    ZIP was a horror show to anyone who owned it and AVIS got it at a price they thought beat their own cost of start-up.I happy for those who suffered with ZIP.

    TSLA anyone seen an electric car on fire or pulled over with the traffic going by @ 70 mph +. Think about WSPT,CMI,perhaps.

    Has anyone tasted the soda from SODA ? The product is simply dreadful.

    NFLX ? Go for content and delivery.Try DISCK, or

    DIS or Muntz for that matter.

    Respectfully,

    Tom Durkin

  • Report this Comment On January 08, 2013, at 8:35 PM, Shirtlessdude wrote:

    "It was easy to see this coming."

    Brings to mind the cliche hindsight is 20/20.

    What BS!

    I'd give more credence to any of the commenters over Mr. Munarriz.

  • Report this Comment On January 08, 2013, at 10:41 PM, incurablyFoolish wrote:

    When did "Get Rich Quick" become an acceptable headline at MF? This directly contradicts everything your founders have ever written about investing!

  • Report this Comment On January 08, 2013, at 10:43 PM, Carpian wrote:

    What Shirtlessdude (and the others) said

  • Report this Comment On January 09, 2013, at 9:53 AM, 4167chariot wrote:

    I, too, was quite put off by the "Get Rich Quick" headline. That's exactly what TMF is NOT all about.

    ZIP never made a profit and those MDP members who followed the recommendations lost big time. "It was easy to see this coming"--I don't recall these discussions by MDP analysts at all.

  • Report this Comment On January 09, 2013, at 10:40 AM, BIGSHCLUNK wrote:

    I was another dumbazz member who followed the ZIP recomendation. PPPPHHHHTTTT

  • Report this Comment On January 09, 2013, at 11:07 AM, flightning wrote:

    Zip Car=tiny Enterprise Rent a Car (Which Avis needs to beat)

    Soda Stream=Bread Maker(If you didn't buy one last year, you're not going to want one next year)

    Netflix=Block Buster (They don't own the content or the streaming technology and there is no cost of user switching)

    Tesla, has very interesting technology, but no profit=someone will buy them for peanuts if/when their market doesn't materialize.

  • Report this Comment On January 09, 2013, at 11:23 AM, enltgen wrote:

    Re: ZIP I too am appalled at TMF for suggesting that 'we as savvy investors' should have seen it coming?? If your highness' did, is it not your duty to shout out and let your subscribers know?!? Is that not why I pay you hundreds of dollars a year to alert me of possible issues market conditions? I saw a ton of SEC filings from ZIP knowing that activity was brewing but again thought TMF would have my back.... yeah right. Now add a get rich quick headline to their email and I am wondering who is the fool and who is laughing? Seriously considering taking my stock advice budget elsewhere. Fool that.

  • Report this Comment On January 09, 2013, at 4:19 PM, mikecart1 wrote:

    "It was easy to see this coming."??????

    If it was easy, did you predict this and if so where? I might be wrong and if you did, then you get the win. However, Zipcar before it was traded publicly was a disaster (I did a research project on the company when I was getting my MBA). Zipcar as a public company was worse. It was anything but easy. It was more easy to see it go bankrupt than anything else which is what my team predicted back in 2008-09.

  • Report this Comment On January 10, 2013, at 3:32 AM, adamclary01 wrote:

    I am with Debt Free - I bought zipcar after rule breakers came out with it as a must have around 28 per share...well aren't I lucky to have followed that advice...oh yeah Tesla as well only to watch it fall. As "savvy investors" I followed the recommendation and this new one sickens me. Be honest about what you called and when...not a good record on these two.

  • Report this Comment On January 10, 2013, at 10:50 AM, TMFBreakerRick wrote:

    To incurablyFoolish and others that complained about the "Get Rich Quick" in the headline, it has been nixed.

    I agree that "Get Rich Quick" is far from the Foolish mantra. I was trying to play up the expression in light of the overnight pop in buyouts -- pointing out how you sometimes have to wait a long time for these buyouts to happen -- but did not get around to that, clarifying the tongue-in-cheek nature of the headline.

    I am sorry about that, and it has been remedied.

  • Report this Comment On October 22, 2013, at 5:55 PM, The1MAGE wrote:

    I decided to look up the 3 stocks mentioned in this article from 9 months ago.

    Soda Stream is up 28%

    Tesla is up 137.2%

    And Netflix is up 225.12%

    Comparatively the S&P is up 20.42%

    Those were some good picks, contrary to the arguments against here.

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