I'm not a big fan of the "Gazillion Stocks to Buy NOW" articles that you see in so many personal finance magazines these days. It's not that I don't appreciate stock ideas -- over at the Motley Fool Rule Breakers newsletter service we love them dearly -- it's just that those print stories are usually full of yesterday's news. The analysis is limited to companies you probably already know regurgitating what those companies already did.
Rearview mirrors are important -- especially if you love going in reverse or find yourself being chased by a Tyrannosaurus Rex -- but there is little value in investing exclusively on the painted road behind you. I mean, we all know that, right? What has happened is mostly baked into the market price. Even the company's guidance for the year ahead, or at least Wall Street's best guess as to what that may be, is built into the shares that you are looking at.
That's why you have to look beyond tomorrow. If you can find the catalysts that no one presently sees you'll be in great shape if your vision comes within striking distance of the eventual reality.
In the first version of this article, I promised to do something a little different. That tack seemed to resonate, so today I'm going to continue the trend and examine three more public companies that I think have more to offer come next year than the market is currently giving them credit for. Looking ahead is something that we do in much greater detail in the Rule Breakers newsletter, with growth stock recommendations and columns devoted to early adopters, biotechnology, and the promise of nanotechnology. Consider this a superficial sampler.
You're probably familiar with the pioneer in online DVD rentals. With Netflix, it's just a matter of filling out your virtual queue from the 25,000 available discs and making that short walk to your mailbox a few days later. For $17.99 a month you can rent as many DVDs as you want. Netflix covers the shipping costs. You can have three movies out under that plan. Want the next DVD on your list? Just send one back.
Netflix is an amazing growth stock, but it certainly didn't seem that way late last year when Amazon.com
So why buy Netflix next year? Because things will only get better come 2006. By then, Blockbuster is likely to have concluded that it cannot continue to cannibalize its physical stores by undercutting itself online. I don't think that Blockbuster will give up its online business entirely. It will, however, have sobered up when it comes to plundering its already devastated balance sheet. In other words, it will return to emphasizing its company-owned and franchised stores and allocate its financial resources accordingly. It may even team up with Amazon.com, eliminating a predator that is too smart to dive into a niche during a price war.
The only brand that matters among digital video recorders (DVR) is starting to matter again. Sure, it's been 15 months -- and counting -- since the stock last traded in double digits. It also suffered through executive defections and the bad news that its best source for new accounts was going to start marketing a different DVR to its subscribers.
Sound bad? Not if you are a patent-rich company with the proprietary software that viewers crave -- despite the fact that the company is only making a third of the DVR boxes that are being sold these days. Why? That's because television content providers, including the same satellite company that dissed TiVo, are turning to TiVo to offer their audiences access to the intuitive functionality of TiVo.
With these licensing deals still months away from implementation, investors have plenty of time to bone up on their due diligence to determine if TiVo is right for them. They're likely to give a green thumbs-up to what they see. TiVo is evolving from a money-losing hardware company into a more exciting (and higher margin) software and services provider. The company has also been testing the placement of ads on its playbacks. If TV fans don't scream blue murder at the notion, TiVo will be able to pump out perfectly targeted ads. That will open the door for the same sponsors that once feared TiVo for producing an addictive appliance that threatened to rub them out. Intimidation breeds respect? It does here. Follow the money.
3. Apple Computer
Apple had an amazing run last year. In recent months, it's had a bit of a breather. Let's face it, rolling out cheaper, stripped-down Mac Minis and iPod Shuffles accompanied with price cuts for its originals isn't the kind of stuff that sends tongues wagging down Wall Street. The company has been able to grow its market share in the personal computer market -- finally -- but it's doing so with that cocky swagger that got it into trouble in the past.
So, wait. You've got the time, don't you? So does Apple. It's got time -- and boatloads of cash. If the company's greed in digital music backfires or if any of its new products fail, it can ride through the speed bump and sit pretty next year.
What's so special about next year? Well, Apple's decision to go with Intel
Apple still has a long way to go before it can get to the top of the stepladder to sock Michael Dell in the kisser. Then again, Apple has always prided itself on oozing quality and getting consumers to pay a premium for the ooze. Cocky swagger or not, Apple is going to mean business come 2006.
The advantage of buying early
While all three of these companies are established, they are all laying down the roots in 2005 for what should be a stellar 2006.
That's the kind of misunderstood investing opportunity that also drives many of the smaller companies we single out every month for our Motley Fool Rule Breakers newsletter subscribers. From stock recommendations to profiling emerging industries to lively discussion boards, it's all about seeing the catalysts that the shortsighted market fails to make out on the horizon. You don't need to scour eBay -- a classic Rule Breaker in the late 1990s, by the way -- for a time machine. You just need to connect the dots until you get to tomorrow's tomorrow.
If you're intrigued, why not kick the tires as part of a 30-day free trial? You'll receive two stock recommendations per month, access to all 20 of our picks to date, and a community of like-minded investors all searching for tomorrow's landscape-changing growth companies. Click here to learn more.
Before you set your wake-up call to 2006, why not:
- Check out which stocks are making the cut these days in our Rule Breakers newsletter.
- Learn more about why Apple is gunning for Dell this time.
- Find out the compelling story stocks worth telling.
Longtime Fool contributor Rick Munarriz never did find that time machine that Napoleon Dynamite was so fond of -- but that doesn't stop him from taking field trips to see what 2006 may ultimately shape up to be. He does own shares in Netflix. Netflix, Amazon.com, TiVo, and Dell are Motley Fool Stock Advisor recommendations. The Fool has a disclosure policy. He is also part of the Rule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.