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14 Cloud Stocks: Who Will Rule, Who Will Fade Away?

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Cloud computing remains the big story in tech, and there are still a lot companies entering the sector... just be particular when you're buying.

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Editor's Note: This interview by Gregg Early was originally produced for MoneyShow.

Gregg Early: I'm here with Rob DeFrancesco, editor and publisher of Tech-Stock Prospector. Rob, I thought that it would be a good time to catch up on the cloud, since that still seems to be the headliner in the tech space. And also, what are you looking at for 2013? Are there any stocks out there that look particularly interesting?

Rob DeFrancesco: Yes, I think the cloud stocks had a great year last year, and I think that we'll probably see another good performance this year.

Just running through some of the big ones, Salesforce.com (NYSE:CRM) was up 65% last year and NetSuite (NYSE:N) was up about the same. Cornerstone OnDemand (NASDAQ:CSOD), a small cloud company, was up about 62%, and so I think we'll probably see some good gains this year.

I also think we'll probably see some more acquisitions in the cloud space. We just had Oracle announcing they're buying Eloqua (NASDAQ:ELOQ). They do cloud-based interactive marketing.

And there's a company called ExactTarget (NYSE:ET). It may be another stock that might be taking over in that space. It's trading cheaper than Eloqua, and they do more business to consumer marketing, but they recently purchased a company that will make them more competitive against Eloqua. So that's a cloud name.

I also like Cornerstone OnDemand, which is in cloud-based human capital management, basically talent management, recruiting, learning.

Another small-cap cloud name is SPS Commerce (NASDAQ:SPSC). They do supply chain management solutions, and they're a very small company, but putting up some pretty good revenue growth last year. They're supposedly coming with growth about 32% and about 27% for 2013.

Suppliers, retailers, distributors use SPS Commerce's software to build trading partner relationships and manage order flows in the retail supply chain. So that's a small-cap name to watch in the cloud space.

Then just some other names that I like...there's a company called Imperva (NYSE:IMPV), and they do data center security solutions. We hear a lot about networking securities, but Imperva is in the data center space. They mainly compete against IBM (NYSE:IBM) and F5 Networks (NASDAQ:FFIV). The top line is growing about 30%. The stock was down actually 7% last year. So they might be doing some catching up this year.

This was a 2011 IPO. It's done that pretty well, came out at $18 a share and opened for trading at $23. It's now in the low $30s. Revenue for this year is expected to be up about 25%, and Oppenheimer recently said it was one of their favorite software infrastructure names for 2013, because I think it's well positioned.

Then, another small company is Infoblox (NYSE:BLOX). They provide automated network control appliances that basically are for next generation data centers. So it allows, the dynamic of networks allow on-demand connections and configurations of devices, so it accelerates the delivery of virtualization and cloud computing.

Infoblox was a 2012 IPO and went public at $16, traded up to $24, and then it dropped sharply. They had a strong third quarter, so the stock bounced back; but it's still trading just under $20 a share, and revenue I think is supposed to hit around 25% growth, or maybe 23%, 24% growth.

So for me, technology companies, that they're growing...if the top line is growing faster than 15%, I think that's pretty standard. If they're doing anything much higher than that, I think it's a promising name to watch.

Also, we've had a big drop just today in VMware (NYSE:VMW), which does virtualization software, and the management team is pretty conservative looking into 2013. I think it's a good way to play them, as the majority owned by EMC (NYSELEMC).

So EMC gives you less volatility but you get VMware, and also you get access to the basic storage market. EMC is offering a lot more solutions that are flash-based, which is a growth driver for them. EMC gives you exposure to VMware and also the general storage market.

I like EMC in the low $20s. I think it's not a super-fast grower, but it's a more conservative tech stock and it gives you some exposure to growth.

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No positions in stocks mentioned.
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