Investors in online retailer Amazon.com
Finding the tail on this coat
Few would dispute Amazon's success in transforming a book-selling, cash-burning enterprise into a profitable, high-growth online retailer. The company has expanded its storefronts to drive 28% revenue growth over the past five fiscal years, dispelling the notion that it and other online portals such as eBay and Yahoo! could never derive massive profits without bricks-and-mortar establishments. eBay and Yahoo!, by the way, have grown revenues even faster -- 51% and 55%, respectively -- over the past five fiscal years.
So how would an investor spot compelling investment opportunities that could share in Amazon's success? If we can nail down some companies profiting from the burgeoning ecosystem that Amazon is driving, maybe we'll find a hidden treasure worthy of investment.
I think conventional wisdom about coattail companies is sometimes too limited. Typically, investors look only for direct suppliers or partners with a giant like Amazon. It's easy to look to other online retailers such as Overstock.com
Smaller companies have abundant ways of their own to drive great returns from a booming sector -- and not by just undercutting prices for the same products Amazon carries. For instance, a company may address an overlooked niche in a related market, or even offer a value-added service related to online sales.
Motley Fool CAPS can really help us here. The massive Foolish stock database has lots of tools for finding and researching stocks and the people who pick them.
Tagging along with CAPS
With CAPS, investors can look through Amazon's tag list for other companies sporting similar attributes such as "E-commerce," "Top Brands 2006," and "Disrupts Bricks-and-Mortar." In addition, the comments investors leave in CAPS regarding each company occasionally turn up firms whose similar qualities to Amazon could lead to inspiring returns.
These clues could lead investors to Motley Fool Rule Breakers pick Bankrate
Online gaming firm and Motley Fool Global Gains recommendation GigaMedia
Of course, plenty of coattail investments have ultimately flopped for investors. For this reason, CAPS is best used as a research tool, not a device to pick stocks for you. Investors should always perform their own due diligence on companies. Still, for the price -- absolutely free -- you can't beat CAPS' information and resources.
Do you know of another stock riding Amazon's current? Give your own opinion in Motley Fool CAPS.
GigaMedia is one of more than a dozen international picks from the Motley Fool Global Gains newsletter service. To see what other global gems lead analyst Bill Mann and his team have dug up, check out a 30-day free trial today.
Fool contributor Dave Mock has never worn a coat with tails, and he prefers the waiter style. He owns no shares of companies mentioned here. Amazon, eBay, and Yahoo! are Stock Advisor recommendations. MasterCard is an Inside Value recommendation. Blue Nile and Bankrate are Rule Breakers picks. Blue Nile is also a Hidden Gems pick. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy is imitated, but never duplicated.