While they should always be taken within the context of ‘ideas’, rather than recommendations, newspaper share tipping columns can be a great resource for the DIY investor. The companies highlighted may or may not have a natural place within your particular portfolio and you also may or may not agree with the analysis and forward-looking optimism behind the suggestions.
However, from looking into a range of shares put forward in columns or specialist media, the chances are you’ll uncover some gems you’ll also get enthusiastic about. At the end of the day, you can’t follow every company or stock market in the world so why not take advantage of the research of others when investing online in an ISA, SIPP or standard stockbroking account?
In our humble opinion, one of the best such columns is The Telegraph’s Questor. The column invites different investment experts, often fund managers, to highlight a company they are particularly keen on at the moment and explain why. On a day when Spotify’s promising debut as a public company is drawing headlines, today’s column picks out a much less well known technology stock as one that might hold even more promise.
Allianz Technology Trust’s Walter Price believes NetApp, a US-listed corporate data storage solutions and software provider is being overlooked by a market that hasn’t yet understood the promise of its new business model. The trend towards enterprises and other organisations migrating their storage needs away from localised and owned hardware to cloud storage services will be well known to most. On-site data storage tends to only be used by companies that have particularly sensitive information they want to retain full control over.
However, there is now a third-way which is becoming increasingly popular. This is a hybrid approach that means some more sensitive data, for example valuable intellectual property, is hosted on physical servers on the company’s own premises. The rest of their data, such as a website that should run with optimal speed from anywhere in the world, is cloud hosted to optimise costs and convenience.
Until a couple of years ago, NetApp supplied and maintained physical data storage systems. However, since current chief executive George Kurian took over in 2015, the company have pivoted towards providing software to help manage the hybrid approach which is becoming more and more popular. As far as Price is aware, NetApp’s software is also unique and has little to no competition.
Price also believes the market still views NetApp as a hardware provider, which has led to serious undervaluation of the stock. It is currently valued at less than ten times cash flow and about 15 times earnings estimates for the coming year. Companies that are comparable in terms of offering a high margin, high value product often trade at a multiple of 50 times earnings. Price further points out that since the US tax reforms came into force, NetApp have started repatriating billions they had been holding offshore. This could be, Price believes, either channelled towards a future share buyback or significant hike to dividends.