Best Revolutionary Stocks
My wife and I spent the past weekend at the Echo Lake Inn in Ludlow, Vermont, at the wedding of a friend’s daughter. It was a great weekend, not least because I got to swim in the lake four times between Friday afternoon and Sunday morning.
Also fun was our visit to the President Calvin Coolidge State Historic Site, in Plymouth, Vermont. Owned and managed by the state of Vermont, the site encompasses the entire village where Coolidge was born (notably, on July 4, 1872). It’s not much, just thirteen buildings and a cemetery, but it’s special in that, with the exception of the modern visitor center, opened in 2010, it looks pretty much the way it did when Coolidge lived there.
Most famous is the parlor where Vice President Coolidge was sworn in as President—by his father, a notary public—after the sudden death of President Warren Harding. The kerosene lamp, Bible and table used in the ceremony are all there, in their historic positions, plain as dirt.
To me, a native of New England, everything about the place was familiar. From the barns to the general store to the furniture to the sleighs to the little cheese factory, there was nothing I hadn’t seen before. Yet its connection to Coolidge gave it a little more significance, even to those of us not particularly political.
For those visitors who were political, it was a real treat. On our little tour, there was an older couple from Connecticut, who said they had visited most of the Presidential sites in the U.S.—but somehow missed Coolidge’s until now—and there was a couple from Wisconsin, interested in the cheese-making operation.
Most interesting was the family of adults from Los Angeles—but clearly from India originally—which included their 78-year-old mother. They had visited the Presidential sites of all but four Presidents, were wearing special T-shirts depicting all the Presidents, asked well-informed questions of the guide, and took lots of pictures. I wish them well, as they head next for the Buffalo, N.Y., area and finally for an unspecified site in North Dakota—perhaps Theodore Roosevelt National Park?
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Like the December 2011 Cabot Stock of the Month, Tesla Motors, which we bought at 29 when Editor Tim Lutts foresaw the tremendous potential in this new kind of car company. Today, the stock is sitting at 122—a 400% gain in 18 months!
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BEST REVOLUTIONARY STOCKS
Vice President Coolidge’s minimalist swearing-in ceremony came about because he was home for a visit when Harding died. Not only did Coolidge have no Secret Service protection at the time—that wasn’t extended to vice presidents until 1951—the village also lacked electricity and telephone service.
But it didn’t take long for that to change! Very quickly, tiny Plymouth, Vermont was wired for both electricity and telephone service, and Coolidge found both quite handy whenever he visited.
Coolidge, however, was not one to leap on technological advances. He never owned a car, and he was the last President never to fly on an airplane.
On the other hand, he was the first president to have his inauguration heard on the radio and the first president to make a radio broadcast.
All those technologies, of course, spawned great investing opportunities.
Blue chip stocks that came from those industries include AT&T, General Electric, Westinghouse, Radio Corporation of America, Ford Motors, General Motors, Boeing, Lockheed Martin, Pratt & Whitney and more. Most were all superb long-term investments; some still are.
But if you invest in any of them today—if they’re still around!—you’re unlikely to get great growth. You’re more likely to get a dividend!
For great growth, you’ve got to invest in today’s revolutionary stocks, stocks that have the potential to become tomorrow’s blue chips. (You can read my original column on the concept of the best revolutionary stocks here.)
Which brings us to today’s featured stock, LinkedIn (LNKD).
LinkedIn was founded in Mountain View, California, in 2003 and in the decade since has cemented its position as the world’s largest professional network, with 225 million members around the world.
Members use LinkedIn to connect with colleagues, keep track of industry competitors, find new jobs, find new employees, and more. The business is thriving, yet it’s still very much in the evolutionary stage (like all revolutionary businesses) so ANYTHING is possible. To me, that’s exciting.
For the record, revenues grew 86% in 2012 (slowing from triple-digit growth in the two previous years) while earnings grew 154%, following growth of 59% and 633%.
Here’s some of what I wrote about LinkedIn (LNKD) when I named it Stock of the Month last November.
“Long ago, if you were looking for a job, you looked in the newspaper. Then in the late 1990s, Monster.com burst upon the scene, using the Internet to connect workers with jobs far more efficiently than any paper-based medium. It was a great stock—for a while. But Monster Worldwide (MWW) is hitting all-time lows these days, because LinkedIn is eating Monster’s lunch.
“The reason: While Monster focused mainly on jobs, LinkedIn focuses mainly on the people in a professional network, and on giving them the tools and connections that enable them to do their jobs better. And it allows companies to find the talent they need! As a result, LinkedIn, which was launched in 2003, is now the largest professional network in the world, with more than 187 million members.
“Like many networks, LinkedIn is free for any professional to join; in fact every addition of a new individual makes the network more valuable, so LinkedIn encourages this. But the real money for the company comes from users who pay for extras. The number one extra is “Talent Solutions,” which accounts for roughly 55% of the company’s revenues and is used by companies large and small. Here at Cabot, we have used the service several times to hire high-quality professionals, both local and remote. Big companies, including 85 of the Fortune 100 and many professional recruiters, buy “seats” that cost $8,000 per year. The number two extra is “Marketing Solutions.” As on Facebook, these are basically ads targeted to users. And number three is Premium subscriptions, which give users more tools and connections to do their jobs better.
“The stock will be viewed as expensive by some investors, with a market capitalization that’s roughly 10 times trailing 12-month revenues. But we never let valuation stop us from investing in great growth stocks. If you do, you’ll miss some great ones!
When I recommended it last November, LNKD was trading at 107, and I described a very high-potential technical setup whose main features were an IPO in the previous year, followed by a long base and an imminent breakout to new highs.
Well, the stock DID break out to new highs in February, and investors who followed my original advice are now looking at gains of 83%. If you’d like to join them, you can find more info here.
And if you’d like to invest in LNKD here, I encourage it. The long-term future for the company is as bright as ever, and while the short-term chart isn’t quite as promising as when I originally recommended the stock, it’s still positive. The stock hit a new high of 205 last Thursday on good volume and has pulled back slightly since. The main trend is up, and I think buying around 190 could work out well.
Note: I can’t avoid mentioning that I’m using LinkedIn right now to find a new employee for Cabot. Technically, the position is Marketing Copywriter, but we’re a fairly small company, where a lot of collaboration goes on, so what I really want is a talented person who can write great copy and work well with everyone on our team. You can see the ad here.
Lastly, a word of explanation. I accept LinkedIn connections only from people I know or have worked with. I accept Facebook connections from anyone who asks. But I do almost nothing on my personal Facebook—so far. And if you’d like a taste of my personal writing, you can take a look at timothylutts.com. The main goal of this site, interestingly, is to become more visible to Google (our silent partner) so that our Cabot site ranks higher in search!
The weeks ahead will bring eight more revolutionary stocks like LinkedIn, and I look forward to presenting them to you.
Yours in pursuit of wisdom and wealth,
Analyst, Cabot Stock of the Month
Best Revolutionary Stocks – 2013:
Our previous revolutionary stock has the top online rental sites in the U.S., France, Germany, Spain, Britain and Brazil...
The third stock in our revolutionary stock series is from an Internet radio service that lets listeners create up to 100 personalized stations...