Stockpickr: Uncovering Hidden Internet Gems

The Internet, it seems, has been viewed by the rest of the world in three distinct phases so far:

• Fantasy ("All Internet businesses will have 95% profit margins, and every other company is dead!"),
• Disgust ("The Internet is a scam!"), and finally
• Reality ("Hmm, if we use the Internet we can improve communications with customers, improve workflow and increase productivity!").

In the first phase, everybody bid up the shares of revenueless Internet start-up companies as if each would be the world's next GE (GE Quote). In the second phase, people sold off profitable Internet companies until they were trading below cash in the bank. Now that reality has set in, even companies whose core businesses are not Internet-related are finding that they can improve margins and sales through growing Internet subsidiaries.

At Stockpickr, we're keeping track of such secret Internet companies. I believe these companies are being valued as stodgy and "Old Economy," and the market is not taking into account the margin and profit growth they will experience as their Internet subsidiaries grow.

When Tradition Meets Internet

A great example is Illinois Tool Works(ITW Quote). ITW, which was started in 1912, can hardly be considered an Internet company, and yet it is.

ITW manufactures engineered products. What is an "engineered product"? Anything from metal fasteners, laminated products, swabs, wipes and mats for clean-room usage in the electronics and pharmaceutical industries; and electronic-component packaging trays, dishwashers, refrigerators, etc. The list goes on.