Are These Events Game Changers?

Jayson is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The stock market is full of stories and events that often go unnoticed by shareholders, and sometimes, it can be overwhelming. These are three events that investors need to follow closely as they can be considered game changers, and can drastically transform the direction the company is heading in.

A $1.9 billion acquisition by this Chinese company

China-based Baidu (NASDAQ: BIDU) acquired Websoft, a Chinese mobile app distributor, for $1.9 billion. Since 2007, Websoft has seen over 10 billion apps downloaded through its app market.

The acquisition is strategically positive for Baidu and will strengthen its mobile presence in China. Websoft is the first and one of the largest app stores in China, which is important as apps are currently more popular than web on mobile phones, given the slow 3G connection in China. The mobile app store will strengthen Baidu’s co-operation with app developers and enhance its mobile search capability as Baidu is already a strong leader in Chinese mobile web search.

Baidu’s acquisition is a positive game changer as the company continues to expand its Chinese mobile empire. It can create significant shareholder value by strategically using its online payment license, app store, search marketing channels, cloud services to dominate the mobile market.

A new trademark might mean game over for this company

Shares of SodaStream (NASDAQ: SODA) have been flying high in 2013, up more than 40%, but shares have been under pressure as of late following a downgrade and a cautious note over the possibility of “choppy” Q2 earnings because of increasing competition, and news that the company is struggling to attract acquirers.

On July 15, news broke that Green Mountain Coffee Roasters (NASDAQ: GMCR) has applied for a trademark for the term ‘KARBON,’ which is described as a machine for the production of cold water, soda, still, carbonated, and sparkling beverages. With a growing indication that Green Mountain Coffee is entering the single-serve soda market, this can be a big negative for SodaStream, which is substantially smaller than Green Mountain Coffee ($1.2 billion valuation compared to $11 billion).

Investors immediately sold SodaStream on the news and the stock has been steadily declining since hitting two month lows at a time when the NASDAQ index is hitting new highs.

Investors that believe in the hype (and potential profitability) of single serving soda products should dump shares of SodaStream and invest in Green Mountain Coffee, which has already asserted its clear dominance in the single serving coffee products. I think it’s game over for SodaStream as it was just a matter of time before a much larger competitor enters the market.

Recently discovered that patents are set to expire in 2014

With all the hype surrounding 3D printing and the potential to revolutionize manufacturing, investors are scrambling to find companies that are able to maximize shareholder returns. Unfortunately, for 3D Systems (NYSE: DDD), its valuable patents are set to expire in 2014. The patents cover a technology known as "laser sintering" and is the lowest cost 3D printing technology.

Once the patent expires, the dominant position that 3D Systems currently holds will be challenged by a huge drop in price from competitors and a flood of Chinese manufacturers eager to enter the market and take away market share from 3D Systems, that currently has a 12-18 month waiting time for new printers.  

According to experts, the technology will revolutionize every industry, but it was only recently discovered that the only thing holding back the printers from booming is the key patents that are set to expire, thereby effectively ending any sort of competitive advantage 3D Systems holds.

Conclusion

The companies I have listed are the ones that need to be followed closely as they are likely to drastically outperform the overall market (or in the case of SodaStream and 3D Systems, under-perform) and deliver superior returns. 

With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in 3 Stocks to Own for the New Industrial Revolution. Just click here to learn more.

 


Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Baidu, Green Mountain Coffee Roasters, and SodaStream. The Motley Fool owns shares of 3D Systems, Baidu, and SodaStream and has the following options: short January 2014 $36 calls on 3D Systems and short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus