"The best opportunities often come from targeted niche players like Navteq, a Chicago software maker that is one of the brains behind Google Maps. Navteq shares have doubled since the company went public in 2004 (the same month as Google), but not because of its Internet business.
It gets three-quarters of its revenues (which totaled $500 million last year) selling mapping databases to companies that make global-positioning system, or GPS, devices for automobiles. It's a rewarding business, enabling Navteq to maintain 27% operating margins and 20%-plus earnings growth. But Navteq also supplies data to the most popular online mapping sites, including AOL's Mapquest, MSN, Yahoo, and Google.
"We're only in the second or third inning of this as a growth company," says Henry Ellenbogen, a fund manager at T. Rowe Price, which is Navteq's second-largest shareholder, with a 9.6% stake. Ellenbogen reckons that onboard navigation is just starting to take off in cars, and that online sites, currently a small portion of Navteq's business, are an untapped opportunity. "It's almost as if you're not paying for this Internet growth option," he says."
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