“Data is the new oil.”
Or so said Clive Humby, a British statistician, in 2006. He should know; he created the first supermarket loyalty card on behalf of Tesco (OTCMKTS:TSCDY).
And with the data gleaned from that “Clubcard” program, the U.K. grocery chain doubled its market share from 1994 to 1995 alone.
If data is the new oil, then who is Big Data’s version of an oilfield services company?
(It’s worth knowing — because in one boomtime, stocks like Core Laboratories (NYSE:CLB) stock went from $5 to $60 per share in just five years!)
Well, that would be the cloud services companies.
If you’ve ever had friends or family urge you to “move to the cloud” — or had an I.T. guy make you do it — you’re not alone.
Nowadays, many companies don’t keep their own servers, or even rent space in a data center … they just use cloud (online) storage.
“At this point, cloud adoption is mainstream,” as one of my favorite research firms, Gartner, put it in November. That report also noted that “next-generation” software has become pretty synonymous with “cloud-enhanced” software.
Like the other big trends I’m eyeing for 2020, there’s big money in this. Already in 2019, the cloud was a $227.8 billion market worldwide. Gartner expects that to climb another 17% in 2020 — to a whopping $266.4 billion.
So, as always, the question for investors is: What’s the best way to cash in?
The answer may surprise you. Here are the top five public cloud companies, ranked by their Total Grade in my Portfolio Grader:
Source: ZDNet.com, Navellier Portfolio Grader
Believe it or not, Amazon (NASDAQ:AMZN) ranks at the bottom for my stock screener — despite the fact that Amazon Web Services is probably the best-known cloud provider around.
Amazon Web Services is also the biggest profit driver for the company these days. However, lately Amazon has not been delivering the goods (so to speak) with regard to its overall profitability. That’s largely thanks to Amazon Prime’s new one-day shipping policy. While one-day shipping is certainly a lifesaver for shoppers — especially this time of year — it’s been an extremely expensive endeavor for Amazon, costing over $1 billion! The result was a significant earnings miss in the latest quarter.
Below you see AMZN’s full Report Card from Portfolio Grader, which tells the tale pretty plainly. While Amazon is certainly raking in the revenues, it scores very poorly when it comes to profitability:
Compare that to Microsoft (NASDAQ:MSFT), and the contrast is pretty stark. Yes, Microsoft is the company that kicked off the “PC revolution,” but it’s also brought us Microsoft Azure, the top-selling cloud provider. And it’s an A-rated “Strong Buy” in my Portfolio Grader. Here’s the Report Card:
While even Microsoft’s fundamentals aren’t 100% perfect, they are very solid, and MSFT gets top marks for my most important factor: the stock’s Quantitative Grade. Its “A” rating suggests that big money on Wall Street is flowing into MSFT right now. (In this low-interest-rate environment, MSFT’s dividend surely helps, too, and the company just hiked its payout for December.)
For those looking to profit from the cloud computing trend, Google (NASDAQ:GOOGL) ranks highly, too, as does the “Amazon of China,” Alibaba (NYSE:BABA). Both companies are making several billion dollars a year from cloud services and are B-rated “Buys” in Portfolio Grader.
That being said …
Don’t neglect the lesser known companies when planning your investments. Some of them have just as strong ratings — and their obscurity creates a great buying opportunity for investors in the know.
— Louis Navellier
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Source: Investor Place