Chris Hill: You look at any industry, there are going to be leaders just as in a horse race there are going to be leaders, but there's always a dark horse. In the consumer goods space, what's a dark horse that you're watching in 2013?
Austin Smith: I'm actually watching two dark horses pretty closely. One is SodaStream. You and I recently talked about this. This is a company with really disruptive technology I think a lot of people in the market are underestimating, and they had very, very impressive growth.
One of the reasons I think they're a dark horse is they're sort of encumbered by this reputation that they're similar to a Green Mountain Coffee Roasters.
Austin: Investors, once burned, twice shy, rightfully so. Their devices even look similar. They have a similar business model with the "razor and blade." But there's many key differences people overlook.
SodaStream has been around significantly longer. They've weathered patent expirations. This isn't actually a new product; it's just new to the United States, but it's been in Europe for years and they're seeing crazy growth. The last three years they've grown revenue at an average growth rate of 40%. Most recently, over the last 12 months, it's 50%, so it's accelerating because they're getting all these great retail relationships.
Chris: Another key difference, David Einhorn hasn't come out with a big presentation on why you should short SodaStream.
Austin: Yeah, and I sure hope he doesn't, because with his track record, that's not the guy I want on the other side of my bets.
But I really like what SodaStream's doing. They have accelerating revenue growth, an unencumbered balance sheet, great retailer relationships with Bed Bath & Beyond, and a really disruptive technology that I'm personally very excited about, and they're trading for the same earnings multiple as a [Coca-Cola] or [PepsiCo].
When you look at their growth and the upside potential that you're getting with that, and the multiple you're paying for it, I think it's one of the few flyers worth taking a chance on.
The other dark horse I'm watching is eBay. This is a company that went on sort of a silent tear in 2012. I think if you ask people what was one of the best-performing tech stocks, almost everybody would leave eBay off the list. But here's a company that grew at leaps and bounds in 2012, one of the best-performing tech stocks, by far.
Yet after that run they still only traded 17 times earnings. When we look at the sort of growth rates they're realizing, it's amazing. On Black Friday, eBay saw a 153% increase in mobile volumes transacted, and PayPal saw a threefold increase over last year.
These are incredible growth rates, and if you consider the shift that we're seeing, not just toward online retail, but mobile retail, eBay is one of the few companies that benefits from that because their mobile users are actually three to four times more valuable to them than their desktop users. That's unusual in this space.
Most of the time it goes the other way -- both Facebook and Google, their desktop users are more valuable. eBay loves this mobile trend because their users are more valuable, and clearly all their services are growing at absolutely insane rates, yet they're still only trading at 17 times earnings. I think they have a lot of gas in the tank, and I think 2012 is going to be another big year.
Austin: That's right, sorry.
Chris: For years, it seemed like the thesis for buying eBay, or a huge part of it, was PayPal.
Chris: But just this past year, 2012, it really seemed like that marketplace business got turned around for them.
Austin: Both are showing big strength, and eBay did a very smart thing with their marketplace. They made a more fixed-price format -- similar to the [Amazon.com] model, which obviously consumers have a great appetite for -- and it's been taking off.