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Top 2013 Stock Picks from GARP Research (GNTX) (MCRS) (RENT) (TYPE)

January 7, 2013 11:42 AM EST Send to a Friend
Get Alerts GNTX Hot Sheet
Price: $29.04 +1.04%

Rating Summary:
    3 Buy, 8 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 23 | Down: 25 | New: 18
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We're already a week into the new year and if you haven't yet nailed down your top picks for 2013, you may want to consider adding procrastination to next year's New Year's resolution list. If that really is the case, let me be the first to encourage you to get off the can and get to work! There are already plenty of interesting stories developing, and investor paralysis is simply not an option.

For those who requiring a bit of extra encouragement, we are including a few high conviction ideas courtesy of GARP Research. GARP says 2012 marked the 12th year in the past 15 where GARP’s ideas have equaled or beat the benchmark, so they may be worth look. In any case, get that nose to the grindstone already.

Gentex (NASDAQ: GNTX) - Gentex is the world's dominant maker of electro-optical mirrors for the automotive industr. Gentex has also designed an innovative headlight system, Smartbeam, which hit the market in 2004.

"The top line has expanded aggressively over the past two years driven by a cyclical rebound and the continued penetration of automatic dimming mirrors. The cyclical tailwind is beginning to wane, and with penetration rates above 50% domestically, we think the growth rate of the core base mirrors will slow, but should still be enough to push double-digit unit expansion over the next few years," said analyst GARP Rob Furlong.

Micros Sytemts (Nasdaq: MCRS) - Micros Systems provides information solutions for the hospitality and specialty retail industries. In addition to its software solutions, the company offers support services for all of its products. Roughly 60% of sales come from restaurants, while 30% are sold to hotels, and 10% to retail customers.

"The acquisition of Torex will juice the top-line for 2013, as organic growth stalls. But, we think organic revenue growth will return to low double-digit rates beginning next year as a ‘backlog’ of upgrades begin, and the addressable market is expanded with the debut of a multi-tenet version of Simphony. Around $7.50 of net cash per share could be used to pursue bolt-on acquisitions or repurchase shares, both of which could prove our out-year estimate conservative," said Furlong.

Rentrak (Nasdaq: RENT) - Rentrak operates two divisions: Home Entertainment and Advanced Media & Information (AMI). Historically, the Home Entertainment business has been the company’s largest. It acts as a wholesaler of DVDs and Blu-ray discs to second and third tier video rental stores. The more exciting AMI segment provides audience measurement services for movies, television, and on demand viewing.

Furlong said he thinks the company is in the early innings of taking significant share in the $1.5 billion market for measuring television viewership. "The early traction is being obscured by Rentrak’s legacy video distribution business, but we think an inflection point will occur in the next quarter or two when double-digit corporate-wide top-line growth and profitability returns."

Monotype Imaging (Nasdaq: TYPE): Monotype owns the rights to popular typefaces and it has the largest owned library of fonts. Copyrighted Monotype software resides on business-class laser printers; the company collects per-unit royalties from most manufacturers. It also collects tolls for mobile phones, GPS devices, and e-readers for fonts & related technology.

"Today just ~40% of sales from the 'slow-growing', cyclical printer business," noted analysts. "TYPE is increasingly penetrating faster growing electronic devices with its fonts and font-scaling technology. This should help provide mid- to high-single digit organic growth. Web Fonts is gaining traction and could change the growth profile of this company."

Monotype cloud-base font subscription service generated just $1 million of revenue in 2011, noted GARP, and analysts think it could grow to $50 million in just five years.




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