I think the answer to that question is always yes…but the real question is: which ones? I’m not a big fan of chasing new highs so sometimes you have to dig deep to find good value.
I bought stock in a new company last week – Equinix (EQIX). They’re an owner/operator of large data centers throughout the world. This is a play on the global move to everything online/mobile. It’s unlimited and exponentially growing demand for companies to be connected and data to be stored!
While technology is changing the world every year, I’ve found it very hard to find investment opportunities in this space in which I can have full confidence. The issue for me is always finding companies that have a competitive advantage and a sustainable business model. As soon as some hot, new product or app comes out, there are an endless number of copycats right behind them. Just think about how many different options you have to listen to music, share pictures or communicate with friends – all for free! Companies also need to innovate and reinvent their product/service basically every year, which isn’t an easy thing to do. This all makes it very easy for a company to become a fad…
What I like about Equinix is that they were an early entrant into the data center space but they simply own/maintain the properties while customers provide their own equipment. Companies will decide to store their servers at an Equinix site so they can directly connect with other companies at that location. This gives them a huge leg up because there are high barriers to entry with how long it takes to acquire and build the sites and attract customers. Once you have the customers though, they’re very “sticky” leading to recurring revenue. Their unique “neural networks” allow customers to exchange data with each other effortlessly with low latency requirements. This creates a snowball effect as new businesses want to easily connect with Equinix’s current customer base, creating an even larger network of customers that should attract additional new customers.
The stock was one of the worst performers in 2013 after incurring large expenses related to expansion of new sites in Asia and costs associated with an open application to convert to a REIT (which would grant them tax savings and will hopefully go through in 2015). But this is what I like about Equinix right now – a high growth company in the industry with perhaps the greatest potential, with competitive advantages and is trading well of its all-time highs! There aren’t too many stocks out there right now well off their highs with this favorable of an outlook.
Equinix (EQIX) – 3 Years, Weekly Chart
Thanks for following!
-Nick
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