Data Migration Could Be a Year-End Winner
A week ago, the indexes were under pressure as traders worried about the fiscal cliff, slower growth in China and supply chain disruptions.
Traders learned on Wednesday afternoon that the debt ceiling crisis had been averted, President Biden and China’s President Xi arranged to meet and executives at General Motors (NYSE: GM) are looking far beyond current supply constraints.
Everything changed in an instant.
My research suggests a big rally could be possible going into the end of the year as professional investors reenter equities. The benchmark S&P 500 is up 17.1% through the first nine months of 2021. Many institutional money managers are far behind and need to catch up quickly.
The best way to do this is to consider buying shares in companies that are growing fast. There’s definitely a place for cyclical stories.
• But the best investments over the next three months will be in businesses helping banks, industrials and other companies that move data and build new revenue streams.
And one possible winner looks like Confluent (Nasdaq: CFLT).
Executives at the company bill the business as a data in motion facilitator. Traditionally, data is stored in databases where it can be accessed by several systems and processes.
Slow, periodic batch processing creates bottlenecks and prohibits rich, real-time software development.
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Confluent’s systems help customers access data across the entire system simultaneously regardless of where that information lives, from Salesforce.com (NYSE: CRM), Oracle (NYSE: ORCL) and mainframes to Amazon.com (Nasdaq: AMZN) subsidiary Amazon Web Services (AWS), Microsoft Azure and Google Cloud.
Citibank (NYSE: C) uses Confluent tools for fraud detection and better customer experiences. Humana (NYSE: HUM), a healthcare company, builds systems for interoperability between consumers, providers and payers.
And retailers like Lowe’s (NYSE: LOW) and Dick’s Sporting Goods (NYSE: DKS) use the platform to build on-the-fly applications like curbside pickup.
The company issued shares to the public in June for $35, and the stock immediately rallied to $58 on the strength of its impressive revenue growth.
That process accelerated so far this fall.
The Mountain View, Calif.-based company reported second quarter sales of $88 million, up 64% year over year.
After seeing a high of $74.25 in late September, shares pulled back to test solid support around $58 before soundly rebounding.
At the time of writing, CFLT is trading for $67.18.
This appears to be a good short-term opportunity that investors should consider. But as always, do your own research before buying anything.
Jon D. Markman