When it comes to Bitcoin and cryptocurrencies, Charlie Munger, Warren Buffett’s right-hand man put it best by saying the asset is “worthless artificial gold.”
Now that the Bitcoin buzz has faded into the background, many capital-gain-hungry investors have moved on in search of the next big thing. While you could score significant capital gains by herding into the next sexy asset class (marijuana), a smarter move would be to look to the treasure trove of under-the-radar growth stocks that many of today’s investors are overlooking due to their small size or lack of coverage from the analyst community.
Once you’ve identified such gems in the depths of the TSX index, the perfect plan of attack would be to pick up a few shares with the intention of ignoring them for many years. If your growth thesis was correct, then sooner or later Main Street will begin to catch on and everybody else will start herding into the stock you’ve found well before anyone had heard of the name. That’s how multi-baggers are made, and by the time you hear about them on TV, the easy gains are already likely in the rearview mirror.
One under-the-radar stock that could become the next big thing over the next five years is Solium Capital (TSX:SUM), a software-as-a-service (SaaS) company engaged in equity plan management solutions.
In simple terms, the company makes it easy for companies to manage stock-based compensation plans for employees. With a wealth of clientele already using Shareworks, Solium’s flagship product, for the various complexities involved with equity plan management, the company is quickly starting to gain a name for itself within the corporate world.
There are many benefits of including equity-based compensation plans (like attracting top talent), but the excessive paperwork involved with such plans has been a huge turn-off for smaller, private firms with limited resources to support the proper administering of such programs for employees.
Fortunately, through Solium’s offerings, equity-based compensation for various levels of employees has become a breeze, opening a huge window of opportunity to nab clients who may be more enticed by the automation and simplification of expensive grunt work involved with equity-based compensation plan management.
Shareworks, Solium’s flagship offering, has received overwhelmingly favourable reviews from its users, and as the company continues to deliver on what its clients want, the company could emerge as a frontrunner in a niche market segment that has a sky-high growth ceiling. Moreover, Solium isn’t limited to large publicly-traded corporations, as small, private entities have also applauded the product.
Over the last five years, Solium’s revenue has grown at 11.32%, which is quite decent when you consider the company’s pristine balance sheet. Although ROEs have been muted over the last few years, I do believe there’s an opportunity to accelerate growth on the top line over the next few years should the company be willing to lever up a bit more to pursue M&A opportunities within the sector.
Foolish takeaway on Solium
Solium isn’t trying to take over the world. It’s found its niche, and it’s going after it with its solid line-up of offerings. Of all the Canadian SaaS players out there, Solium strikes me as one that could make the most noise over the next five years. The company is on the right side of a secular trend, and with a strong focus on the development of top-of-the-line time-saving corporate products, I suspect Solium could be a massive multi-bagger that we’ll look back at one day.
Stay hungry. Stay Foolish.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. Solium is a recommendation of Stock Advisor Canada.