Heading to the beaches, your favorite vacation spot, or your backyard this month? Don’t forget to take along some reading material. Summertime is a great time to research stocks, including these top picks from five of our favorite Motley Fool contributors. Here’s why August could be the perfect time to add…
A data disruptor
Keith Speights (MongoDB): You’re surrounded by data. Every online purchase you make. Every item you buy in a brick-and-mortar store. Every streaming TV show you watch. Every social media post you make or read. Pretty much everything you do today involves data. And it all has to be stored in a database somewhere.
There’s a problem, though. Most of the databases in use today were designed decades ago. They weren’t built for the kinds of unstructured data that is most prominent now. They were intended to run only on a server in a company’s data center rather than the cloud (for a good reason, since the cloud hadn’t been invented yet).
Enter MongoDB. The company’s name means humongous database, with “mongo” embedded in the word “humongous.” Unlike most of the big databases used today such as Oracle and Microsoft SQL Server, MongoDB was built from the ground up to support massive amounts of both structured and unstructured data. It was also designed to run anywhere, including servers in on-premise data centers and in the cloud.
MongoDB’s founders were the team behind internet advertising company DoubleClick, which was acquired in 2007 by Google (now a subsidiary of Alphabet). After selling DoubleClick, they set out to create a database that addressed all the shortcomings of other databases they used while they were in the internet advertising business. They also took a much different path to commercialization — a path that has helped turbocharge MongoDB’s growth.
In 2009, MongoDB was released as open source. That means the database’s source code was made available at no cost to developers. Giving their database away for free might sound like a really dumb way to run a business. But there’s more to the story.
Only a limited version of the database is free. For organizations that need more features and need ongoing support, there’s a charge. This “freemium” model has worked very well for MongoDB. By 2016, its database had been downloaded over 20 million times. The following year, the number of downloads jumped to over 30 million. Now, MongoDB’s database has been downloaded over 60 million times.
And the company’s revenue has skyrocketed. When MongoDB reported first-quarter results in June, its revenue totaled $89.4 million, up 78% year over year. What’s especially impressive is that growth continues to accelerate. In the previous sequential quarter, revenue increased by 71% year over year. The great thing is that MongoDB makes most of its money from subscriptions — recurring revenue that it can count on coming in each month.
MongoDB now has 14,200 customers and counting. That’s more than double its number of customers from just a year ago. It makes at least $100,000 annually from nearly 600 of those customers, up from less than 400 in the prior-year period.
MongoDB hasn’t even scratched the surface of its potential. Even with its tremendous growth, the company has less than 1% penetration of the database market. This data disruptor looks like a great stock to buy in August and hold for the long run.
Dan Caplinger (Vail Resorts): Summer might sound like exactly the wrong time to buy shares of a ski resort operator. But Vail Resorts has just come off a great winter, and it hasn’t taken a summer vacation from looking for further opportunities for growth.
Vail Resorts operates some of the best known ski resorts in the world. Among its portfolio of top U.S. properties are the Vail, Beaver Creek, Breckenridge, and Keystone resorts in Colorado; Heavenly, Northstar, and Kirkwood in Lake Tahoe; and Park City in Utah. Vail also has the prominent Whistler Blackcomb resort just north of Vancouver in British Columbia, as well as the Perisher resort in Australia and some properties in the U.S. Midwest.
Coming off two subpar winter seasons, the winter of 2018-2019 was a huge growth story for Vail Resorts. In its fiscal third quarter, which covers late winter and early spring, Vail saw revenue and income growth of double-digit percentages, with lift revenue seeing even stronger gains. Vail also gets a substantial portion of its revenue from providing lodging to visitors, and 17% growth for the lodging segment showed just how popular Vail properties were during the long winter. Extraordinarily good snow conditions lasted well into the spring, giving the resort operator a much-needed break from disappointing performances in prior years.
Also helping its growth has been Vail’s acquisition strategy. Its purchase of the Stowe Mountain ski resort in Vermont in 2017 helped give it more East Coast exposure, and it’s consistently been on the hunt for ways to extend its reach.
Vail’s most recent strategic move is why it’s my pick this month. Vail just announced that it would buy out competing ski resort operator Peak Resorts in a deal worth $264 million. Peak operates a network of ski properties across the country. In the Northeast, Vail will acquire 10 properties, including Mount Snow in Vermont, Hunter Mountain in New York, and three resorts in New Hampshire, and five locations in Pennsylvania. Peak also has another seven resorts spread across the Midwest in Ohio, Indiana, and Missouri.
Vail has high hopes that the move will give it more access to major metropolitan areas. In particular, New York and Boston will benefit greatly from its New England, New York, and Pennsylvania locations, while its Midwest locations should enhance the efforts that Vail has already made in trying to attract visitors from Chicago and Detroit.
Even better, adding new properties will make Vail Resorts’ Epic season passes more valuable. Epic gives skiers the ability to get unlimited, unrestricted access to resorts across the company’s network, and so the bigger that network is, the more valuable the season pass becomes to many customers. In addition, Vail will not only honor Peak Resorts season passes but will also extend the right to upgrade those passes to Epic status.
Skiing is a lucrative business, and Vail Resorts has capitalized on the big opportunities in the industry. By continuing to build out its network of high-quality resorts, Vail is giving its customers value they can’t get anywhere else — and shareholders are in a great position to benefit from it…
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