I had intended the next blog post to be about the typical services that Industry Clouds offer to their communities–after all–I’m still just introducing the idea of an Industry Cloud.  But the recent (and continuing?) drop in stock market prices compels me to write about the public Industry Cloud providers and at least suggest you take a look at some of them given their recent price declines.

Several caveats are in order:

1.  I’m not normally going to write about the stocks of Industry Clouds because I am not a professional investor or even an active stock-picker.  I’m on the board of Ariel Investments and I let John Rogers and his associates (along with the folks from Vanguard) invest all my savings.  I’ve profited greatly from letting John/Ariel handle my money and resist the temptation to do it myself.

2.  I may, and often do, own stock in some the Industry clouds I will write about.  After all, I think that companies that become successful platforms within an industry can create enormous value for industry participants and shareholders, so I want to put my money where my mouth is!  However, I do not want readers to think I am “pumping” a stock because I own it.  (Which is really funny when you think about it, because I own so little stock and because there are so few readers of this blog!)

3.  Industry Clouds are, by definition, SaaS providers and the valuations in SaaS have been, by most traditional measures, somewhere between “really pricy” and “ridiculous”.  Many of the valuations are now just less ridiculous.

Having said all that, readers who are interested in the Industry Cloud concept and want to learn more, may want to look at the public Industry Cloud providers, as they create really interesting businesses with very attractive economics.  My goal is not to provide you with investment advice, it is to show you a) that there are lots of public ICs in  b) a wide variety of industries and c) that many have compelling economics.  I think seeing these public companies makes the whole concept more real–and in case you were doubting–more legitimate.

Enough CYA, here we go:

Two public Industry Clouds–Blackboard (BBBB) in higher education and Emdeon (EM) in insurance– have recently announced buyouts by private equity firms.  As a result, their stocks have helped up well– though both are significantly below the announced buyout price– perhaps signifying that in a world as crazy as this, nothing is a sure thing.   These deals show that larger, established Industry Clouds are businesses can throw off nice cash and attract the big PE players.

Other public Industry Cloud providers that I follow are:

  • Concur (CNQR), an IC in the travel and entertainment space is near it’s 52 week low and way off its highs (as is everything else).  CNQR has typically had a valuation that was awe-inspiring and by most measures it still is!
  • Descartes (DSGX), an IC in logistics has a lot more reasonable valuation, though it’s position is not quite as strong within the highly fragmented logistics space as Concur’s is in travel.
  • Medidata Solutions (MDSO) is a neat little Industry Cloud trying to build a platform in the clinical trials space, it too sports a more pedestrian valuation versus some of the SaaS highflyers.
  • Speaking of high-flying Industry Cloud providers, Real Page (RP) an IC in property management has seen its stock price hold up relatively well so far and still maintains a really impressive set of multiples on every measure.
  • A former high-flyer, EBIX (EBIX) which is an IC in property-casualty insurance has seen its stock drop almost in half over the past few months.  This precipitous decline results both the market swoon and some concern that the company’s numbers–which are phenomenal–might be too good.  (Meaning the accounting approach could be either lax or too aggressive in interpretation of GAAP.)
  • Bottomline Technologies (EPAY) which is trying to build a couple of ICs–one in B2B payments and another in legal billing had been on a tear recently and has pulled back, but only into the stratosphere.
  • I’m not sure if SPS Commerce (SPSC) is really an Industry Cloud, but its stock has held up really nicely during this last few weeks.  (SPS is an EDI provider and enabler and I need to study it more closely.)  I’m also going to do a post just on the EDI kingpins, Sterling and GXS, to talk about their IC status.

Successful Industry Clouds build the classic “moats” that great value investors, like John Rogers and Warren Buffett look for–though they incorporate too much technology for those two to be buyers.  Still, I think the nature of the internet, SaaS technology and multi-sided markets means it is fruitful to watch for emerging Industry Cloud winners in almost every industry–and try to invest before the valuations get outrageous or when they return to the realm of reason.  When that is, I’ll let you decide.

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