3 Game-Changing Small-Cap Technology Stocks to Buy

Markets Motley Fool

Small companies must navigate more risks than large companies have to, especially when they're disrupting mature markets dominated by deeply embedded and well-heeled competitors. Nevertheless, small-cap stocks historically outperform large-cap ones, so including some of them in portfolios can make sense.

Continue Reading Below

In this episode of The Motley Fool's Industry Focus: Technology podcast, host Dylan Lewis is joined by contributor Todd Campbell to explain how Alarm.com (NASDAQ: ALRM)Impinj (NASDAQ: PI), and Paycom (NYSE: PAYC) are reimagining home security, inventory management, and human resources, respectively, and why each of them could overcome obstacles and go on to reward long-term investors. Listen in to find out if these stock are right for you.

A full transcript follows the video.

10 stocks we like better than Wal-Mart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

Continue Reading Below

*Stock Advisor returns as of September 5, 2017
The author(s) may have a position in any stocks mentioned.

 

This video was recorded on Sept. 22, 2017.

Dylan Lewis: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. It's Friday, Sept. 22, and we're talking small-cap tech stocks. I'm your host, Dylan Lewis, and I'm joined on Skype by fool.com's Todd Campbell. Todd, listeners might be a little disoriented hearing your voice on today's show.

Todd Campbell: They might be, just a little bit, if they tune in to all the different shows we do. But I'm so excited to be here.

Lewis: For listeners who don't listen to every Industry Focus show, Todd is usually on the Wednesday Healthcare show with Kristine Harjes. I'm stealing him this week. Hopefully Kristine doesn't get mad if she listens to us while she's over in Greece. We don't want to cause any issues between the folks on the Wednesday show.

Campbell: Dylan, I won't tell if you won't tell.

Lewis: We can keep it our little secret.

Campbell: [laughs] Listeners have to play along.

Lewis: And listeners, while Todd does cover healthcare primarily, he is a bit of a generalist as well and has spent a decent amount of time following some of the small-cap tech names we're going to talk about, and frankly they've done pretty darn well, so I was excited to bring him on to talk about the topic today. Todd, before we really get into the companies, why don't we broadly talk about small-cap tech stocks a little bit, and maybe just, what's a small-cap stock, for listeners who don't know?

Campbell: Small-cap stocks are exciting ways for investors to get involved in companies that could be truly disruptive. These are companies that are reshaping industries that have been around, in some cases, a generation or more. Typically speaking, we're talking about smaller companies in the younger stages of their development. With that comes risks, and as a result, most advisors and others will tell you, don't overweight your portfolio toward small caps, because they do tend to swing much more broadly than a company like Coca-Cola.

Lewis: So with that in mind, if you're thinking about how to invest in small caps, it's certainly something that you might want to have some exposure to, but it's not something you want to go whole hog into. So it's maybe a portion of your portfolio. Within that, I think it's smart to diversify and have several different small-cap plays. We talk about how a well-rounded portfolio for general purposes has between 10 and 15 stocks at least, and I think that might be good guidance for people interested in investing in small caps.

Campbell: Yeah. Dylan, I'm a diversified investor. You probably are, too. I obviously have healthcare stocks in my portfolio, including biotechnology -- technology is right in the name, so it's not that big of a leap. But I probably have 20% or so because I take on a little more risk in my portfolio in small caps. But like you said, getting much more than that in the portfolio could expose you to much wider swings during tough times.

Lewis: And I like to think about small caps as an opportunity for the individual investor to be kind of a venture capitalist. VCs tend to invest in dozens of different companies, making small bets across all these different small companies with the hopes that a couple of them really pan out. You have the opportunity to do that on public markets with small-cap stocks, because these are companies that have really big growth profiles and large runways ahead of them. But they are far more volatile. So that's why you want to spread your bets.

Campbell: Yeah, with a caveat. You get that growth, but you pay a price for it.

Lewis: I think something else worth noting with small caps, we didn't hit this definition earlier, typically we're talking about companies between the $500 million and $2 billion market cap. There are soft cutoffs with microcap, small-cap, midcap, and large-cap. That's generally where you'll hear that term applied. One of the companies we're going to talk about was a small cap, now a midcap, but for the sake of the conversation, we're going to include it.

Todd, enough background. We've got three small-cap tech stocks we're going to talk about today. Why don't we start out with Alarm.com?

Campbell: Alarm.com should interest or potentially excite investors, because they're taking an industry that's been around for a long time, home security, and they're actually bringing it forward into the 21st century, making it far more relevant to the way we live our connected lives today.

Lewis: And how exactly are they doing that?

Campbell: Think about, what did security look like in the past? It was all point-in-time security. Someone breaks a glass window or busts in through the door, or you're recording on some grainy black-and-white video your front door and having to go back and try to figure out who may have knocked on it at 2 p.m. by watching six hours of tape. It was obviously not a very efficient way to monitor the security of a home. If something happened, you would get a phone call that would go out automatically to the police or the fire department. But it really didn't provide you with a lot of useful insight that you could use to manage your household. And what Alarm.com is doing is, they're saying, "What happens if we allow for real-time monitoring of the home and the systems around it and inside it? What kind of insight would that give the homeowner, that they can then use to improve their day-to-day life?"

So they came up with an app that plays nice with all of these Internet of Things connected devices that we're increasingly installing in our homes. And that app allows you to lock or unlock your doors, arm or disarm your security system, or record in real time on high-def video what's going on in and around your house, control your lighting, control your thermostat, do all of these Jetson-like things that for the last 40 years we've been hoping our households would end up incorporating.

Lewis: This is an Internet of Things-style company. You mentioned that before. Typically, you think of devices when you hear Internet of Things. But this is really much more of a software company, right?

Campbell: They sell hardware, but it's mostly, they're working with OEMs and third parties and collecting a little bit of a higher-margin end of that from selling the software as a service. I think a lot of people look at companies like this and say, "We're going to disrupt this industry," any industry, "and we're going to do that by going directly to the consumer." Well, Alarm.com, that's how they started out. They said, "What if we take these monitoring and controlling systems and we sell them directly to the consumer?"

What they've soon found out is that a lot of consumers that are early adopters or early-inning adopters of this kind of technology, they're relatively wealthy, and they're time constrained, and they're really not going to want to go around their house and unscrew all their light bulbs and screw in new light bulbs and take out thermostats and put in thermostats and take off and put on deadbolts. So they ended up tapping into the current existing security companies that exist in all around America and offering their app to them, to private label or white label, or not, to be used alongside the stuff they were already selling, installing, and maintaining for these different homeowners. And it's worked out very well for them. They've had tremendous growth as a result, in terms of the number of subscribers, the number of sales, and the company's profitability.

Lewis: Yeah. When you think about things that you want to have work correctly, I think home security is definitely one of them. I trust a professional to install something like that far more than I trust myself.

Campbell: These systems are complex. I don't know to what degree you've installed any of these things in your own home, but I've gone through and I've done a couple of little things here and there, and you're trying to get them all to communicate to one another, and it's like, oh my God. 

Lewis: You mentioned the market opportunity, Todd. I think the home security market might not be something people are super familiar with. What does that look like? And what kind of presence does Alarm.com currently have?

Campbell: I was a little bit surprised. This number shocked me a little bit. There are 22 million homes in America that have security systems in place. Twenty-two million. That seems like a lot to me. What's really interesting about that is, of those 22 million, not very many, 30%-40% of them, I'll call smart homes. But how smart are these homes really? We're still very early in this whole smart-home movement. Right now, we're really controlling the temperature, the climate, that kind of thing. It's not as smart as it will be in 10 years. But a very small percentage of those 22 million are smart homes, but Alarm is already working with about 5 million of these homeowners, which is pretty impressive to me, given the fact that they were working with 1 million back in 2012.

Lewis: That smart-home stat, there are a lot of different things that can qualify as a smart home. Having something like Nest, it could be a smart-home product, or it could be kind of a more integrated, full security system, like some of the stuff that Alarm.com partners with.

Campbell: I was kind of hinting at this earlier. You have all these players like Nest and Z-wave and all these other things out there, and the idea is, you've got all these different devices. How do you get them all to work and play nicely together? Everybody's got an Echo inside their house now, and they're using -- I won't use the word, because our listeners tell us that it actually triggers it to turn on -- the name of the device when we ask it to do something.

Lewis: That's very courteous, Todd.

Campbell: Yes. I like to try to help out our listeners whenever possible. But you're able now to access Alarm.com through your Echo to be able to do things like say, "Dim my lights 30%." Or, "Hey, I'm a little chilly. Can I get the air conditioning to drop down another 2 degrees?" Or something like that. So it's really become far more than just, "I'm securing your home, and if someone breaks a window I'm calling the police." You're now able to use all of this real-time data that's being collected and discover all sorts of information about what's going on around your home. I don't know about you -- I may have snuck out once or twice when I was a kid.

Lewis: Of course, yeah.

Campbell: Alarm.com is going to make that a lot more difficult for the teens of today.

Lewis: Parents, take note. Todd, what are some of the numbers like for this company? We talk about how small-cap companies tend to be big growth opportunities. How do the financials look?

Campbell: We're talking about a fast-growing company. Revenue on a compounded annual basis, it's grown about 28% since 2012. In the second quarter, sales were up 33.5% to $86 million. It's not a Goliath company. It's a small-cap company. But it's growing rapidly. If you look at the way that their revenue breaks down, Dylan, most of it is coming from higher-margin software, gets about 40% of its sales from that, or a little bit more. And its guidance for 2017 is for 25% year-over-year growth -- nothing to complain about there; $326 million, at least, in sales. And about $1.00 in earnings per share, too. So it's profitable. So you have a company that's growing double digits, generating profit for investors, in a really, I think, attractive market.

Lewis: And something that I think is kind of a major trait of most small-cap stocks is, they don't necessarily trade for kind of "reasonable," quote-unquote, valuations on a P/E or price-to-sales basis. At a $2 billion market cap, this is obviously a company that's priced for growth. But when you're looking at what might be in front of it, that's what you're paying for, right? 

Campbell: You're going to end up paying, typically, on a price-to-sales multiple, you're going to pay up 7 to 12 times sales for these fast growers. The thing that you have to remember, though, is that if you get a company that's growing 20% annually, you know, the revenue is going to double in five years. So, you really do have to think about the potential, how big the market could be, and then figure out what a fair value is. If you say, "OK, you know, maybe it's worth 5 times sales in five years, and sales are going to double, maybe it's worth $3 billion, or $4 billion." Some of these are puts and takes that you're going to have to consider when you consider how big the market opportunity is versus how much you're willing to pay up to buy the stock.

Lewis: And that plays into the overall volatility that we see with a lot of these companies. It's very difficult to forecast out what a market might look like, and a lot of people have different estimates and different expectations for what a company could grow into. And because of that, as a company reports earnings, maybe the picture pans out as they expect, maybe it doesn't, there will be major corrections with the stock price accordingly.

Campbell: Yeah. You have risks. You have competitors out there who have been in the market for years and years and years, like ADT, etc. And they're not going to just give up this marketplace easily. So competition could increase. You've got technology evolving so rapidly, and who knows, how is Amazon going to try? Could they, at some point, leverage Echo to try and home in on this market? Who knows. So there are some risks. Investors need to remember that.

Lewis: Let's talk small-cap stock No. 2. This is a lesser-known name, a company by the name of Impinj. What exactly do they do?

Campbell: It's interesting, because this is a lesser-known stock. It's the smallest stock of the three that we're going to talk about. But it's been around a long time. They do something called RFID, radio-frequency identification. This is something that retail has been dabbling with since the 2000s, trying to figure out, are there better ways to track and manage inventory? And I think it's fair to say that we're at the point now in the technology, we're at a tipping point. And we're going to see retailers, healthcare companies, travel companies, basically anything that has a good, a product that they want to take from manufacturing through distribution, through their warehouse to their stores or whatever to the actual end-user -- if they want greater intelligence into that, they're going to adopt some form of radio-frequency ID. And if that's the case, then Impinj could be perfectly positioned to benefit from it.

Lewis: And this type of tracking that we're talking about is really done with small devices, these little tags, right?

Campbell: Oh my God, yes. We're talking about, already, billions of these little tags being attached to goods, to pallets, to whatever, to be able to quickly identify them. So you've got these little tags, and these little tags cost pennies. They're extremely cheap. Then you've got readers that can be handheld, and then you have gateways that are much larger, and you can use those to track, say, what's in an entire warehouse all at once. And they're figuring out ways not only to be able to have this tag and to be able to read the information on the tag so they know where their product and good is, but also be able to tie that to software that provides all sorts of inventory insights along the chain, along that distribution cycle.

And that's why we're at a tipping point. You're seeing a lot of these big retailers saying, "Maybe I should tag every single item in my store, or every single item that goes in or out of my warehouse, so that it becomes easier for me to know if I have red shirts, blue shirts, green shirts in my store, where they happened to be located." There's all sorts of really cool, futuristic ways that companies can use RFID to not only eliminate waste, cut back on shrinkage, things like stealing, but also connect more with their customers.

Lewis: Todd, you mentioned all of the different elements that go into tracking. All these different hardware pieces and the software that goes into managing it. Where does Impinj play in this market?

Campbell: They're a relatively large player. They team up with others, like Avery Dennison, which accounts for a fairly large amount of their sales. This year, they're expected to supply 7 billion, 7.2 billion worth of tags to the industry, which would be 18% year-over-year growth. And they've got about 60% of the market. They have competition out there in different spots of what they do. But they like to say that they are the soup-to-nuts provider of RFID, meaning that they have not only the tags but the readers, the gateways, and the software to analyze all of that information.

Lewis: So they're selling a ton of tags. They're also selling a lot of stuff you need to manage this, on a broad-stroke level. What does that look like for them financially?

Campbell: Their revenue has doubled over the last four years. In 2016, it was up 43% to $112 million. They think they can get 25% annual growth for 2019-2020. In the second quarter, their revenue was up 31% to $34 million, and they showed a non-GAAP profit of about $0.06 per share. Now, there are some caveats here.

Lewis: There always are.

Campbell: Right, Dylan? There always are, especially when you're talking about small-cap stocks. They're still investing a lot of money. There's still a lot of moving pieces. We're at a tipping point, like I said, and it's not a guarantee that you're going to get even, steady growth. The growth may be double digits -- 20%, 30%, or even 40% one year, or it may be 15%-20% or even less in another year. And that's because each one of these adopters, if they're going to be big, could use billions alone of these tags. And that means their rollouts would significantly affect how quickly this company is able to translate that into sales.

So you are going to have to kind of pay attention to the quarterly results with this company. See what they're saying as far as what deals are getting pushed out or brought forward, what their timeline looks like. And then take the long view and say, if you believed that someone walking into the fitting room wearing a red shirt and putting it on, that it would be useful for the retailer to be able to show them on a smart mirror what that same shirt would look like in green or yellow or some other color, and then be able to pop up some kind of advertisement for pants that might go well with that shirt -- I mean, there are just so many different ways beyond inventory management that RFID could excite shoppers and build brand loyalty.

Lewis: Some I can't help but think about, Todd, looking at a company that makes essentially hardware, but components too, is that it hasn't always been a great place to be as a business. You look at consumer tech -- there are a lot of hardware companies out there that haven't panned out. Margins can be tough to maintain at a hardware business. How do they look in this space? And is there the worry that there might be other people who can come in and undercut them?

Campbell: Yes. [laughs] 

Lewis: [laughs] Simple, right?

Campbell: Yeah, absolutely. The tags themselves, we're talking about pennies on the dollar. It's going to come down to functionality and cost. So the more technology you can pack into that, maybe you can charge a little bit more in premium pricing. That's where the software that reads these tags is going to come in handy, in trying to differentiate between just, say, getting a dumb tag and something that's a little bit more of an intelligent tag.

It's going to be interesting, too, to see how this progresses, because you could have companies that incorporate things like near-field communication to add additional value after the purchase is made and the person is actually at home and interacting with technology around them. You have the potential to print these tags with some sort of biodegradable ink, or actually embed them in fabric during the whole manufacturing process. And whoever does that first, theoretically, could be disruptive to that industry and affect pricing and market share.

So, yeah, although RFID has been around for a while, I think we're finally at a point now where we're seeing real-case usage ways that could really ignite its growth. And with that, you're going to get a lot of different competitive pushes and pulls.

Lewis: With the companies that we talk about today, it seems Impinj, both because of its size -- I think it's an $850 million company -- and because of the space that it operates in, probably one of the riskier companies that we're looking at today.

Campbell: I think that's fair to say. Reward and risk. We have the potential -- apparel alone is an 80 billion tag market opportunity. That's 10 times the forecasted number of tags that Impinj is going to sell this year. So yes, there's a huge market opportunity. With that comes a huge risk that someone else is going to go in there and innovate or undercut. But I think it's definitely a stock that should be on people's radar.

Lewis: All right. We have one more stock that people maybe should have on their radar. And this one kind of involves us taking some liberties with the term "small-cap." This is a company that, when you started following them, Todd, was a small-cap company. They have kind of moved into the $4 [billion]$-5 billion market cap territory, which makes them a midcap stock. Why don't we talk about Paycom? This is actually a company that some Fools might be a little familiar with.

Campbell: If you're getting a paycheck. [laughs] If you're employed by an employer that has dozens to hundreds of employees, then that employer may actually be using Paycom's services. You know what's funny, Dylan, we were talking about the previous two, these companies that were reimagining different industries. You've got Alarm reimagining home security, we've got Impinj reimagining inventory management, and now we've got the stodgy, boring human resources industry, and Paycom is blowing that up.

Lewis: Yeah. It's an industry that's been around for a long time. One of of their main competitors, ADP, was a favorite stock of Peter Lynch back in the '80s. So this is an industry that has been around forever and treated investors fairly well. What exactly are they doing to try to unseat some of the established players in the market?

Campbell: I think it's helpful for investors to understand is where human resources was in the past, and where it is now, and maybe where it's going. Dylan, a little fun fact between you and me, a lot of people don't know, in a past life I actually worked in human resources. 

Lewis: I didn't know that.

Campbell: Yeah. So back then, in the day, the way that human resources worked, it was very siloed. You had recruitment, you had training, you had payroll, tax reporting, you had evaluation. You had all of these different pieces of the human resource puzzle, and oftentimes different vendors and different databases for each one of those things. Obviously, that's not an efficient way to manage and get the most out of your workforce.

Lewis: Absolutely. 

Campbell: We can both agree on that. Obviously, one of the things that leads us to naturally assume is, wouldn't it be more useful if you could break down all those barriers between each one of those different parts of HR to be able to gain greater insight and enable a better relationship between the workers and the employer? And yes, that's exactly what's happening now, and what's happening at a company like Paycom. What they realized early on was, if we build a cloud-based system that centers around one singular database, and then build out functionality across benefits and recruitment and time and attendance, all of those different parts of the HR function, then wow, we could be on to something big here, and we could disrupt the market and maybe win away business from ADP and Paychex and some of these older legacy players, and that's exactly what's happened.

Lewis: And I can't help but notice that what they're doing here isn't all that different from what Impinj is doing and what Alarm.com is doing, where they're basically providing this central hub where you can manage a whole bunch of different things in one place. It's being able to oversee a whole bunch of different functions from one dash.

Campbell: Right, it's all about being able to get more information together in one place so that you can gain greater insight from that information. And in human resources, that's incredibly important, especially since more and more employees are working from home or in remote offices. They're not as centralized anymore. So if you can allow employees to have greater self-service control over their human resources experience, be it training or benefit choice or whatever, that's a good thing. And if you can have all of this information in one spot, then as an employer, you're much more likely to find trouble spots early on that you can address or whatever, whatever it happens to be, the insight that you're going to get from having all of this information compiled in one place. And that, Dylan, is resonating with employers. And as a result, this company is growing and has grown pretty quickly.

Lewis: And what exactly does that look like? It sounds like they're offering something that employers can get behind, employees can get behind. Do the growth numbers bear that out?

Campbell: Yeah. Absolutely. You've got sales that are growing very rapidly. They're up 46% last year, $329 million. In the second quarter, sales were up 33% to $98 million. So you're talking about close to a $400 million run rate. And the way that this company makes its money is, it charges either a per-period fee, or a per-period fee plus a fee for each employee. So you can imagine, Dylan, in an environment where you've got low unemployment, you've got a lot of hiring going on, that's actually providing a relatively nice growth stream for the company, to be able to not only go out and open up new offices where they're in markets and be able to win away business from some of their competitors, but to also be able to take their existing client base and say, "Hey, we now have extra functionality. You want to use us for time and attendance, you want to use us for tax form reporting, you want to use us some of this other stuff? It'll cost you a little bit extra. Do you want to do that?" So there's a lot of opportunities for organic growth for this company as well.

At a recent conference, Dylan, the CEO actually outlined what he thinks that market opportunity could be. He said this could be a billion-dollar sales company at some point down the road. Now, take that with a grain of salt. But the market is big enough, theoretically, to support that.

Lewis: Yeah, major grain of salt with that. But something to keep in mind. Something that I really like when I look at this company, Todd, you hit on the idea of there being a pay-per-head pricing model, and the idea that this business scales with the businesses that it supports. It's this kind of symbiotic relationship. You also see that working out with companies like Shopify. Software companies that especially provide services to businesses and grow as the businesses that they support grow, I think that's generally a good sign. It's something that should have investors' ears perk up a little bit.

Campbell: Yeah. And the other thing that's interesting, too, Dylan, you triggered something in my head -- historically payroll and payroll processing have been a very tooth-and-nail kind of market, very price-sensitive, a lot of battling back and forth to win business year over year. High churn. If you can create a system that's very deeply embedded within the company -- again, unified, one database, everything feeding off this one database -- maybe that gives you more stickiness and helps to reduce your churn, and in turn gives you more opportunities to enjoy that symbiotic relationship over time as the companies get bigger.

Lewis: Yeah. There are big costs to switching providers if you're a business. You get used to using something, you use it for a year, maybe two years, your employees become trained on it and very used to using it. Then you switch over to a new provider -- there are months and months of new training, understanding how the software works, getting all your employees on board. So if you can be a good service provider, really cause a frictionless experience for your end users, I think that's going to work pretty well for the business.

Campbell: Right. And Paycom, by their own admission, they're not the lowest cost provider out there in this industry. So, you summed it up beautifully, you're competing not just on price but on functionality and service, what kind of a relationship you can establish with that employer. And if it's a good relationship, you get all sorts of benefits that come from that. Not the least of that would be referral business, right?

Lewis: Yeah, absolutely. If something works for one person, chances are they're going to tell somebody else that works in HR, their buddy across the street, about it. Todd, we mentioned some of the legacy competitors. I think for this industry in particular and this small-cap that we're talking about, out of the three, this might be one that's really good to take a step back and look at the industry and how some of the competitors stack up to Paycom on sales.

Campbell: I think it's important. Dylan, you're hinting me toward that risk area, how might this all play out. I think, from an investor standpoint, you're all excited now because I've been ranting and raving about how great of a company Paycom is. But you need to remember, too, that none of these legacy players are sitting back on their heels. They're all doing these same things. They're trying to create unified solutions. The disadvantage they have is, oftentimes they're trying to make those unified solutions out of legacy products, rather than building them from the ground up to be cloud-based. However, that being said, this is a big market. ADP is the gorilla. They do $12 billion a year in sales. You've also got Paychex out there, they're doing $3 billion a year in sales. So, when you think about the fact that those two companies are doing $15 billion in sales, maybe Paycom's idea of being a $1 billion company isn't so far-fetched. But they are going to have to battle, and as we talked about, not only on price, but they're going to have to battle on service and functionality.

Lewis: Yeah, and they're going to be going up against deeper-pocketed competitors when it comes to the R&D and innovation side of what they do, which is something that you see time and time again with upstarts in the tech space.

Campbell: Yeah, absolutely.

Lewis: Todd, I think that wraps all of our companies that we wanted to talk about. Anything specific to this conversation or generally about small caps that you want to leave investors with before I let you go?

Campbell: When Kristine asked me this on the Wednesday show -- anyone who's listening to the Healthcare podcast will know my standard response is "diversify, diversify, diversify."

Lewis: Of course.

Campbell: My final takeaway is, don't go out and invest 100% of your portfolio in these three stocks just because Dylan and I happened to talk about them on today's show. They're interesting companies. They're doing some pretty exciting things. Consider them as a small part of your portfolio within that small- and mid-cap range.

Lewis: Yeah. And certainly a space where you want to slowly position build, rather than buy what you consider to be your full position all in one stake. You want to be able to dollar-cost average as there are fluctuations with the stock price, and maybe some hiccups along the way as they go down that growth broadway.

Campbell: I totally believe that. That's why I invest myself, personally. You can take a starter position and watch these companies as they play out. They're expensive stocks; they're going to be more volatile. Hopefully that gives you opportunities to add to them at some attractive prices as we go.

Lewis: I think that's a good note to end on right there. Thanks for helping on the show, Todd!

Campbell: Thanks for having me today, Dylan! I appreciate it.

Lewis: Yeah, we'll have to get you back on sometime soon, as long as Kristine's OK with it.

Campbell: Anytime.

Lewis: Listeners, that does it for this episode of Industry Focus. If you have any tech stocks on your radar, shoot us a note at industryfocus@fool.com or tweet us, @MFIndustryFocus. I'd love to hear about them. If you're looking for more of our stuff, subscribe on iTunes or check out the Fool's family of shows over at fool.com/podcasts

As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against stocks mentioned, so don't buy or sell anything based solely on what you hear. Big ups to Austin Morgan for all his work behind the glass. Today's show required a decent amount of editing because of my goofs. For Todd Campbell, I'm Dylan Lewis. Thanks for listening, and Fool on!

Dylan Lewis owns shares of Amazon. Todd Campbell owns shares of Amazon, Impinj, Paycom Software, and Shopify. The Motley Fool owns shares of and recommends Amazon, Paycom Software, and Shopify. The Motley Fool recommends Alarm.com Holdings, Automatic Data Processing, and Impinj. The Motley Fool has a disclosure policy.