IBM Planning Acquisitions: Are These High-Growth Tech Stocks on the List?

IBM Planning Acquisitions: Are These High-Growth Tech Stocks on the List?

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According to a senior executive at IBM, buyouts of midsized software companies for $100 million to $300 million would enable IBM to add $20 billion in earnings within three years – and that's just what they plan to do.

So far the company has made nearly 50 acquisitions since 2006, more than half of which have been in business-data analysis.

Now IBM is on the hunt to fuel growth in its $22.5 billion software business with smaller technology companies. Specifically, the company is looking for businesses worth under $10 billion that show the potential to increase their earnings rate two to three times within as many years. (via Bloomberg)

This initiative comes after IBM's achievement last week in surpassing Microsoft "to become the world’s second-most valuable technology company after Apple Inc." The company sees the acquisitions as an essential measure to continue increasing their market power.

So, IBM seems to think there's value in the small-cap, high-growth tech sector. But how are you going to find the hottest companies that fit this description?

For ideas, we collected data on institutional money flows, and identified a list of small cap tech stocks that have seen significant institutional buying during the current quarter. All of the stocks mentioned below have market caps between $100M – $300M, and have projected earnings per share growth above 25%.

Big money managers seem to think these small-cap tech stocks have a lot of potential, and IBM has expressed an interest in making some acquisitions in this space.

Should any of these names be on your watch list? Use this list as a starting point for your own analysis.

List sorted by market cap.

 

1. Ness Technologies Inc. (NSTC, Earnings, Analysts, Financials): Provides information technology and business planning services in North America, Latin America, Europe, the Middle East, and Asia. Earnings per share is expected to grow by 25.0% over the next five years. Net institutional purchases in the current quarter at 4.9M shares, which represents about 14.56% of the company's float of 33.65M shares.

 

2. Alaska Communications Systems Group Inc. (ALSK, Earnings, Analysts, Financials): Provides integrated communications services in the State of Alaska. Earnings per share is expected to grow by 31.90% over the next five years. Net institutional purchases in the current quarter at 2.0M shares, which represents about 4.5% of the company's float of 44.43M shares.

 

3. Healthstream Inc. (HSTM, Earnings, Analysts, Financials): Provides Internet-based learning and research solutions in the United States. Earnings per share is expected to grow by 23.0% over the next five years. Net institutional purchases in the current quarter at 2.3M shares, which represents about 14.95% of the company's float of 15.38M shares.

 

4. hiSoft Technology International Ltd. (HSFT, Earnings, Analysts, Financials): Provides outsourced information technology (IT) and research and development services in North America, Europe, and Asia. Earnings per share is expected to grow by 22.76% over the next five years. Net institutional purchases in the current quarter at 5.1M shares, which represents about 24.16% of the company's float of 21.11M shares.

 

5. 8×8 Inc. (EGHT, Earnings, Analysts, Financials): Develops and markets telecommunications services for Internet protocol (IP), telephony, and video applications, as well as provides Web-based conferencing and unified communications services. Earnings per share is expected to grow by 27.50% over the next five years. Net institutional purchases in the current quarter at 5.0M shares, which represents about 9.9% of the company's float of 50.52M shares.

 

6. ShoreTel, Inc. (SHOR, Earnings, Analysts, Financials): Provides Internet protocol (IP) telecommunications systems for enterprises in the United States. Earnings per share is expected to grow by 22.50% over the next five years. Net institutional purchases in the current quarter at 9.5M shares, which represents about 24.36% of the company's float of 39.00M shares.

 

7. Inphi Corporation (IPHI, Earnings, Analysts, Financials): Operates as a fabless provider of high-speed analog semiconductor solutions for the communications and computing markets, providing high signal integrity at leading-edge data speeds that are designed to address bandwidth bottlenecks in networks, minimize latency in computing environments, and enable the rollout of next generation communications infrastructure. Earnings per share is expected to grow by 27.50% over the next five years. Net institutional purchases in the current quarter at 4.0M shares, which represents about 22.64% of the company's float of 17.67M shares.

 

8. Mitek Systems Inc. (MITK, Earnings, Analysts, Financials): Develops, sells, and services software solutions related to mobile imaging applications and intelligent recognition software in the United Stats and Internationally. Earnings per share is expected to grow by 25.0% over the next five years. Net institutional purchases in the current quarter at 738.2K shares, which represents about 4.83% of the company's float of 15.29M shares.

 

9. The KEYW Holding Corporation (KEYW, Earnings, Analysts, Financials): Provides mission-critical cybersecurity and cyber superiority solutions to defense, intelligence, and national security agencies in the United States. Earnings per share is expected to grow by 25.0% over the next five years. Net institutional purchases in the current quarter at 1.2M shares, which represents about 5.83% of the company's float of 20.60M shares.

 

10. Advanced Analogic Technologies, Inc. (AATI, Earnings, Analysts, Financials): Engages in the development of advanced power management semiconductors. Earnings per share is expected to grow by 25.0% over the next five years. Net institutional purchases in the current quarter at 2.9M shares, which represents about 7.84% of the company's float of 36.99M shares.

 

 

(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Fidelity.)

 

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