Recommendation #4: PROS Holdings, Inc. (NYSE: PROS)

New to the PROS story? 

PROS Holdings, Inc. (NYSE: PRO) is a leading provider of pricing and revenue optimization software worldwide in five major markets: airline, hotel, cruise, manufacturing and services.

If you’ve ever wondered how hotels, airlines, or other businesses know how to price their offerings to always seem to squeeze the very last dime out of potential customers, PROS is one of the companies responsible by applying revenue optimization software that prices company’s offerings on the fly to maximize revenue.

PROS has proprietary pricing algorithms and systems that have been developed and refined over many years of implementation and experience, that provide the company with a distinct competitive advantage over the many rivals that troll the pricing optimization space.

Want More?

• Start: with my initial company write-up here.
• OR: read my sell recommendation of PROS here.

The main reason you should invest in PROS:

PROS Holdings is a riskier play on the turnaround in the economy and with it, the willingness of companies to spend more money in the new year on IT spending and software/hardware to improve their pricing technology and capitalize on the perception that “people don’t have as much money as before.”

Folks are still going to look to go on cruises, take vacations, fly places, etc., and PROS software will be invaluable to these companies to squeeze every last bit of margin and profit that they can in what otherwise is going to be a cutthroat time for consumer-based companies.

I feel that as things settle down and at least flat-line, not even improve as much as stop getting worse, PROS’ technology will be in higher and higher demand since it is a proven technology that is already being used by some of the world’s largest and most well known companies.

Pricing optimization software might not sound sexy, but it will never go out of style, just be put on the shelf temporarily if companies pare back IT spending, which they indeed have in the last 6 months or so.

Once things turn, the companies that are left standing and that are in the strongest positions, will use the opening presented by the changing tides to leap ahead of their competition, and one significant way of doing that is to make sure that you are selling your product in the best possible manner for not only your bottom line, but to add value to the customer experience and compete on an even playing field in real time.

Additional reasons that you should invest in PROS:

• Niche product, high barriers to entry to specific proprietary pricing algorithms, structures and methodologies
• Insiders have recently begun to purchase large amounts of shares on the open market
• Company approved up to a $15 million share buyback, which would represent about 8% of the total shares outstanding.
• High insider ownership: Insiders as a whole own over 40% of PROS’ shares outstanding. Within this group the CEO owns about 6.8%, the CFO 2.3%.
• Huge stockpile of cash ($48 million, $0 debt)
• Continued execution by management: 9 straight years of being cash flow positive
• Steady growth within the industry as well as potential takeover candidate by a larger company

Biggest risk factors you should know before you invest in PROS:

• Because PROS’ offerings require a significant commitment by their customers both in hardware, software and manpower, shrinking budgets might curtail future orders, regardless of the promise of PROS’ offerings to actually increase company’s profits via its software. In fact this already was showing up in PROS’ latest earnings releases.
• Increasing competition by new entrants, and old stalwarts like Oracle (NASDAQ: ORCL), SAP (NYSE: SAP) and others
• Continued deceleration of future bookings and overall slowdown in the marketplace for PROS’ products.
• PROS’ product offerings could become a commodity or feature-set of current offerings by other companies thus rendering PROS stand-alone versions cumbersome and unattractive

Critical Buying Information:

• Portfolio allocation: 20%
• Strong Buy: < $4
• Buy: $4-$6
• Hold: $6-$9
• Consider Selling: > $10*

* Before selling, please check PeakStocks.com for the latest updates.

Recommendation #5: Zix Corporation (NASDAQ: ZIXI)

New to the Zix story? 

ZIX Corporation (NASDAQ: ZIXI) or ZixCorp (as the company refers to itself) is a leading provider of easy-to-use-and-deploy email encryption and e-prescribing services that connect entities with their customers and partners to protect and deliver sensitive information in the healthcare, finance, insurance and government industries.

ZixCorp’s hosted Email Encryption Service provides an easy and cost-effective way to ensure customer privacy and regulatory compliance for corporate email and its PocketScript® e-prescribing service saves lives and saves money by automating the prescription process between payors, doctors, and pharmacies.

Zix Corp and its largest competitor Allscripts (NASDAQ: MDRX) provide e-prescribing technologies, which have pending legislation in the House and Senate to provide financial incentives to promote the adoption of the technology.

e-prescribing is basically when you go to a doctor and they use a little handheld PDA to enter your prescription information, and then send it off to the pharmacy of your choice without having to write anything out on paper.

This is a quicker and more streamlined way of doing business and has the added affect of catching any potential allergic or drug interactions through the cross-referencing capabilities of the software that is used.

Want More?

• Start: with my initial company write-up here.

The main reason you should invest in ZixCorp:

Because of the legislative mandates and Zix’s recent announcements with large insurance providers like Aetna (NYSE: AET) in New Jersey and Blue Cross and Blue Shield of Alabama, I believe that we are in the beginning stages of this technology taking off and being accepted at more and more doctor’s offices and that it will become mainstream in no time at all.

The email encryption part of Zix’s business is just another revenue stream that acts as a corollary to their e-prescribing business and right now, accounts for the vast majority of their revenue.

The true future revenue potential of this company, and what one should begin to look at in the years ahead, is their ability to save the American healthcare system tons of money, redundancy and complications that stem from the potential of missed drug interactions, allergies, and other patient-specific problems that would all be logged into the e-prescribing system and allow doctors to run a tighter ship.

With a new administration in tow, it is quite possible that as a matter of health care reform, and cost analysis, future legislation will further pursue the e-prescribing system, and even supplement the cost of it for a certain period of time until it becomes more widespread and is adopted by more doctors.

It is only a matter of time, similar to other technologies that take time to catch on in the stodgy medical profession, before this is commonplace, and all of our prescriptions and medical records too, are zipped away to the proper channels for processing, saving the American taxpayer billions of dollars.

Additional reasons that you should invest in Zixcorp:

• Company can add features/up-sell to their e-prescribing offerings
• Improving fundamentals, including positive cash flow has company on the verge of solid profitability
• Possible merger/takeover target for their IP and applications/customer base

Biggest risk factors you should know before you invest in PROS:

• Legislation could fall through that requires doctors to begin using e-prescribing services
• Doctors, notorious for delayed acceptance of new technology, could spurn e-prescribing, or adopt it more slowly than anticipated
• Zix might not reach critical mass or find enough subsidies for their e-prescribing services to become profitable
• Although cash flow positive, Zix might need further funding in the future if adoption takes longer than expected and growth stalls, thus diluting shareholders
• Both the e-prescribing and email encryption services could stall in their growth leaving Zix with scant growth opportunities beyond its core competencies

Critical Buying Information:

• Portfolio allocation: 15%
• Strong Buy: < $1
• Buy: $1-$1.50
• Hold: $1.50-$2.50
• Consider Selling: > $2.50*

* Before selling, please check PeakStocks.com for the latest updates.

Bottom Line:

With a portfolio of these 5 stocks allocated as I have intended, bought at the prices that I have specified, you should soundly beat the market over the coming year.

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