Exploration No. 2 Has Launched!
The One Un-Hyped Stock That Could Soar Higher Than Twitter
Click the video player above to launch your Exploration 2 FINAL PRESENTATION. Then watch as Motley Fool co-founder David Gardner, and Supernova Senior Advisors Matt Argersinger and Rick Munarriz break down The Container Store, LivePerson, Pandora and RetailMeNot — and direct you to the one we like best for 2014!
Download the Exploration 2 "mission prep" report by Matthew Argersinger here.
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Before we explore these four somewhat overlooked stocks and a number of unique and exciting growth characteristics that they possess, let's talk more about what makes Motley Fool Supernova such an unbelievable resource for individual investors like you...
It all begins with our Supernova network, which includes Motley Fool co-founder and Supernova leading light David Gardner... a team of passionate Motley Fool Supernova analysts... and of course our Supernova members: from a founder and CEO of a Fortune 500 company... to project leaders at companies like Google... to video game programmers... truck drivers... college professors... money managers... and everyone in between.
All committed to honest discourse and growing wealthy with one another by following one or more of the Supernova "missions"... such as our Odyssey (for wage earners) and Phoenix (for those closer to retirement) Portfolio missions...
Our members really do value this network-supported, focused stock, and missions-based approach. Just have a look at the kind of messages we routinely see on the Supernova boards:
"I think Odyssey has a great opportunity ahead of it to break through and achieve surreal portfolio results that will outshine every known fund manager on the planet. It has a great team that responds respectfully to the community by listening and engaging them rather than sitting in an ivory tower."
"I would like to say thank you for all the great investing advice you have taught me since 2010 and for inspiring my daughters to the wonderful world of investing."
"I appreciate that Odyssey has decided not only to actively manage the position, but also to explain their reasoning, including individual opinions. You don't get that in Stock Advisor or Rule Breakers."
We love hearing from Supernova members, and I realize that messages like these can convey a great deal to prospective members like you. That's why I'll continue to share these with you as we count down to the annual new-member opening of Motley Fool Supernova on Wednesday, Jan. 22, 2014...
Because more than anything, I want to prove to you the value of Motley Fool Supernova and our friendly network of committed wealth builders. I want to show you firsthand what an individualized investment "mission" that focuses your hard-earned money on only the most promising companies of our time can do for you...
And there it is again — focus. It's a critical and powerful tool for our group. That's why our NEW MISSION in Motley Fool Supernova is to go even farther and focus on the best investments in a number of important categories, the second of which we'll explore right here.
The Container Store (NYSE: TCS)
- Recent Price: $45.98
- 52 week: $32.10 – $46.28
- Market Cap: 2.11B
- P/E: –
- EPS: -1.71
The mission of The Container Store (NYSE: TCS) is simple. Through its 62 retail stores, it wants to help people organize their lives by providing over 10,000 unique items — everything from food storage to office equipment to custom shelving — through the company's Elfa brand. But the company's success has depended on a somewhat different — even radical — idea.
Rather than focus its efforts on its customers or its shareholders or battling its competitors, as most companies do, CEO Kip Tindell and team focus a lot on creating a great work environment and culture for its employees. That's paid off in numerous ways. The turnover rate for full-time staff is about 10% annually, versus the industry average of over 100%. The company has been on Fortune magazine's list of the "100 Best Companies to Work For" in each of the past 14 years. And The Container Store's happy employees have led to happy customers. Comparable-store sales have risen for 13 consecutive quarters and counting.
This might not come as a surprise when you learn that Tindell, who founded The Container Store in Dallas in 1978, was a former college roommate of Whole Foods (Nasdaq: WFM) co-founder John Mackey. Like Mackey, Tindell is a pioneer of "conscious capitalism," and he created a strong culture around it — a culture that nurtured his company as it grew. Whole Foods, another member of the Supernova Universe, has prospered mightily from its emphasis on its employees' compensation and experience, which has led to a strong customer experience and growth and profit margins that are the envy of the supermarket industry. That same dynamic is playing out at The Container Store, and with the company's recent IPO, we can now be part of this success story.
David's brother, Motley Fool CEO Tom Gardner, recently interviewed Tindell, who espoused some of these conscious capitalism values:
"So many companies are myopic in their focus on the shareholder, and if you do that, you have no magic. The employees aren't happy, the customers aren't happy, and the shareholders aren't going to be happy either. Our shareholders are ecstatic. They love that our employees are happy. We pay very well. We pay 50 to 100% above industry average. The average full-time salesperson on the sales floor makes right at $50,000 a year, which is not a tremendous amount of money in this day and age, but it's a lot for a retail salesperson."
How does this consciously capitalistic container store outperform the likes of Twitter? Tindell and team believe TCS can eventually expand its U.S. store count to at least 300 locations — five times the current footprint. Right now, The Container Store can be found in only 22 states and the District of Columbia. That leaves considerable upside for a brand that, if it sticks with its successful conscious capitalism ways, should continue to engender more happy employees and more happy customers.
LivePerson (Nasdaq: LPSN)
- Recent Price: $14.58
- 52 week: $8.03 – $15.19
- Market Cap: 798.27M
- P/E: –
- EPS: -0.03
At under $700 million, LivePerson (Nasdaq: LPSN) is the smallest of the four companies in this report, but may have one of the biggest market opportunities. You see, LivePerson powers the platforms that enable some of the world's largest companies to engage on a person-to-person level with customers. It might not seem that big of a deal, but no e-tailer wants to see a potential customer walk away from an abandoned shopping cart. No company wants a client to slam down the phone after playing touch-tone tag for 10 minutes. That's how LivePerson has attracted more than 8,000 businesses that realize the importance of immediate engagement.
LivePerson makes Internet commerce more effective, and its impressive client list includes Microsoft (NYSE: MSFT), Verizon (NYSE: VZ), Orbitz (NYSE: OWW), and Charles Schwab (NYSE: SCHW). Across the world and across industries, websites that need online chat or click-to-talk connectivity with customers are benefiting from LivePerson's customized platform.
But don't think this company begins and ends with a "chat" button waiting for you to click. LivePerson's platform can be proactive, studying users' surfing trends to know when to jump into action to avoid a lost sale or to help a frustrated support seeker. LivePerson reports that its retail platform delivers average chat-enabled conversion rates of greater than 15% and increases average order values by 35%.
It's this kind of "intelligent" interaction that gives LivePerson a considerable competitive advantage. That's what founder and CEO Robert LoCascio told us when he spoke to the Fool earlier in 2013:
"It's really our intelligence and our predictive capabilities, so chat is a channel of communication and we chat, we use SMS, we use video, voice. These are channels of communication, but when you pair it with intelligence and the ability to say, 'Hey, there's a consumer on my website, let me practically offer to this specific consumer, because they need it,' and then convert that consumer into a sale, that's what we do really well, and we pioneered the idea of using predictive technologies and behavioral targeting back in 2005, and that's where it's really helped us grow our business and make it more than just a chat company."
LivePerson has already been a stellar performer as a Supernova Universe member, but we think its opportunity is still vast and untapped. As more and more business gets done online — e-commerce sales are expected to reach nearly $1 trillion in 2013 — investors stand to profit from this top dog in online support.
Pandora (NYSE: P)
- Recent Price: $26.59
- 52 week: $8.78 – $31.94
- Market Cap: 5.17B
- P/E: –
- EPS: -0.30
If you're reading this on a computer or mobile device, you can probably use the same gadget to play your favorite song. If you're really connected, you may have an app on it that controls your home sound system. Maybe you'll be playing a tune you discovered on a social music website. We have ever more ways to listen to the music that moves us, with more of it always waiting to be discovered. And in the sweet spot where those trends are in harmony, is Pandora Media (NYSE: P).
Pandora is the leader in Internet radio and the pioneering company behind the Music Genome Project. The project's idea was to break songs down into their building blocks and find commonalities that could be turned into musical recommendations. Using a band or a song as a starting point, Pandora finds listeners music with similar attributes, serving them something new with a familiar taste. Founder and Chief Strategy Officer Tim Westergren remains rooted to that purpose and has turned Pandora into the Internet's leading musical matchmaker.
People are listening to Pandora more than ever: Pandora boasts more than 200 million registered users and more than 70 million active listeners — growth of more than 30% year over year. The company streamed almost 1.5 billion hours of music to listeners in November alone, up almost 10% from September, and Pandora now accounts for 8.4% of all U.S. radio listening.
More users listening to more music means more value to advertisers. That's important, because ad sales make up 88% of Pandora's total revenue (subscriptions account for the rest at 12%). And Pandora knows more about its listeners than terrestrial radio stations do about theirs, allowing advertisers to target specific audiences. Consider that terrestrial radio advertising is a $15 billion industry and ripe for disruption, especially now that Pandora has the infrastructure in place to bring its data to local advertisers. Yet Pandora's total annual revenue currently chimes in at less than $600 million, leaving a monster number of advertising dollars yet to capture.
Yes, Spotify and Apple's iTunes are competitors, but we think Pandora's large user base — and its huge library of proprietary data on listeners' preferences — will keep it the top dog. And think about this: Pandora is the third- leading mobile ad player by revenue, behind only Google (Nasdaq: GOOG) and Facebook (Nasdaq: FB) (and way ahead of Twitter). And that market is expected to grow from about $17 billion today to nearly $62 billion in 2017. If that doesn't give Pandora a shot at drowning out Twitter's hype, we don't know what can.
RetailMeNot (Nasdaq: SALE)
- Recent Price: $28.23
- 52 week: $25.51 – $39.50
- Market Cap: 1.66B
- P/E: 221.15
- EPS: 0.13
Can you think of a market position you'd rather have than RetailMeNot's (Nasdaq: SALE)? It's the country's largest digital coupon marketplace. You don't wind up there through your desktop or mobile app unless you want to buy something and you're ready to act now. Merchants know it, and 60,000 of them have decided to offer coupons or digital coupon codes on RetailMeNot's platform, probably for this reason: RetailMeNot's digital money-saving marketplace attracted 450 million visitors last year, generating $2.4 billion in sales from its deal-seeking visitors.
Merchants have embraced digital coupon codes. They're cost-effective, and unlike traditional marketing practices, they can be tracked. Furthermore, these businesses want visibility before the folks who are ready to buy, and they want control over the codes these shoppers use. Becoming a RetailMeNot partner makes that possible, and RetailMeNot top-dog status has helped it drum up affiliate relationships with 10,000 of the 60,000 merchants on its site. It's a safe bet that more will follow as more Web-savvy shoppers stop by.
Affiliate marketing may not seem like a big deal, but it is when you average 24 million unique visitors a month the way RetailMeNot does. Small checks add up, and the average commission from the site's 500 largest merchants was nearly a quarter-million apiece last year. That's a major reason RetailMeNot's revenue surged 39% in the most recent quarter. And RetailMeNot's business is growing even faster in mobile and internationally.
Still, does RetailMeNot's business have enough of a competitive advantage to match up with the likes of Twitter, let alone the other three companies mentioned in this report. We think so. Being the leader in any market endows a network effect that has helped other companies, like eBay (Nasdaq: EBAY) and Pandora (NYSE: P), attract the lion's share of new business and users. Retailers and advertisers want to be where the most potential customers are, and customers want to be where the deals are. It all adds up to a recent IPO that we think has a fighting chance to unseat Twitter's return over the next 12 months.
REMINDER: This report is your primer for the "exploration" we'll conduct on Saturday, Jan. 4, during which I, along with my fellow Supernova senior analyst, Rick Munarriz and Motley Fool co-founder David Gardner, will dive deep into these stocks, debate the potential for each going forward, then present you with the one we like best for new money now!
Until then, thanks and congratulations on your superb decision to learn more about Motley Fool Supernova!
All numbers as of Dec. 30, 2013. All numbers in Exploration No. 2 video as of Jan. 2, 2014. John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Matthew Argersinger owns shares of Apple. Matthew Argersinger has the following options: long January 2015 $400 calls on Apple, short January 2015 $400 puts on Apple, long January 2016 $50 calls on eBay, and short January 2016 $55 calls on eBay. The Motley Fool owns shares of Apple, eBay, Facebook, Google, Microsoft, and Whole Foods Market.