By Kathleen Gallagher Milwaukee Journal Sentinel
WWR Article Summary (tl;dr) Interesting look at the growth and future of e-commerce. As e-commerce grows, more location-based offerings, for example, will alert commuters when the nearby Starbucks is offering a 50-cent discount on butterscotch lattes. And better data and analytics will help deliver to someone buying Burpee seeds news about the extraordinary new gardening tool from Holland.
Milwaukee Journal Sentinel
E-commerce, which involves transactions that take place over the internet, may seem like a well-established part of the shopping experience.
But it's actually still in its early stages, said Brian Beitner, managing director and managing partner of Boulder, Colo.-based Chautauqua Capital, which was acquired in January by Milwaukee-based Robert W. Baird & Co. Inc.
"It's a powerful trend, and it's got a long way to go," said Beitner, whose firm manages the Chautauqua International Growth Fund and the Chautauqua Global Growth Fund, launched by Baird Funds in May.
With the growth of internet transactions, certain companies are well-positioned to benefit, Beitner said.
As e-commerce grows, more location-based offerings, for example, will alert commuters when the nearby Starbucks is offering a 50-cent discount on butterscotch lattes. And better data and analytics will help deliver to someone buying Burpee seeds news about the extraordinary new gardening tool from Holland. Better data will even alert fans after a Green Bay Packers game that there's a new Clay Matthews jersey available.
"As ridiculous as it sounds, it'll work because it's only after Clay has a good game that people want to buy a jersey," Beit-ner said.
Amazon.com Inc.(AMZN, $725.54), Seattle, sells a wide array of consumer products online and has a cloud computing operation called Amazon Web Services. Its extraordinary advantages in e-commerce have paved the way for its web services business, Beitner said.
"Given their prowess in e-commerce, they've built state-of-the-art, ahead-of-the-competition data centers and have made them available to outside customers," he said. "They have an extraordinary, compelling cloud computing offering."
So compelling that Amazon is generating more profits in its web services business than in its lower-margin e-commerce business, Beitner said. The biggest risks here are the possibility of negative regulatory changes, or of Amazon becoming so large that its growth rate would slow, he said.
These shares have a 52-week trading range of $419.14 to $724.23. They offer a rare opportunity to participate in a large, liquid and visible company with a long growth path, Beitner said.
Lululemon Athletica Inc. (LULU, $67.24), Vancouver, British Columbia, Canada, sells yoga-inspired athletic apparel and accessories for women, men and female youth through company-operated stores and directly to consumers.
Lululemon management is doing a good job of adding to its store count and expanding its e-commerce platform, Beitner said. The stores are critical to its e-commerce success, he said. The company encourages customers to look around in its stores but then make purchases from the tablets salespeople carry.
"It can be the in-store experience that prevents them from being disintermediated by pure e-commerce offerings," he said.
The biggest risks here are competitive threats, management's ability to execute and the possibility the market could become saturated, but Lululemon has a product advantage, Beitner said. "It's quality merchandise, technologically advanced, and some would say, flattering," he said.
These shares have a 52-week trading range of $43.14 to $69.73. Beitner said he believes the company can grow earnings in the high teens, driving profitability improvement over the next three years.
Wirecard AG (WDI.DE, 38.82 euros), Aschheim, Germany, provides electronic payment transactions worldwide.
Wirecard is well-positioned to continue to grow as e-commerce drives even more credit card use and continues to grow, Beitner said.
The company executes e-commerce merchant transactions, sending the information to the credit card network. It also provides security and data analysis, a particularly attractive offering for small and midsize businesses aiming to do more e-commerce transactions, Beitner said.
The biggest risk here is the potential that adjacent players, like MasterCard and Visa, could become competitors, he said. Wirecard also needs to maintain its technology edge to stay ahead of the competition, he added.
Given Wirecard's attractive valuation, it has potential to continue to improve profitability, providing returns that are higher than its expected revenue growth of more than 20% over the next few years, Beitner said.