The Stay Invested portfolio was DOWN today: $7.78 (-0.01%)
Overall GAIN/LOSS YTD: +$5,591.56 (+5.44%)
Our benchmark index, the S&P 500 is UP Year-To-Date +9.50%
(daily performance is updated after the close, early blog posts typically show the previous days performance)
"In God we trust. All others must bring data."
― W. Edwards Deming
Statistician, professor, author, lecturer, and consultant.
Many in Japan credit Deming as one of the inspirations for what has become known
as the Japanese post-war economic miracle of 1950 to 1960
Note in the header above I've added the total portfolio value at the beginning of the year and the current portfolio value. Just wanted to add some clarity.
My second stock review for 2019 is Pleasanton, CA based Veeva Systems. When I consider a stock for investment, one of my primary objectives is to find a company that is doing something that's hard. Warren Buffet called this a large moat to keep competitors at bay. The harder it is to break into an industry and duplicate a product or service the more likely you are to succeed. Don't confuse this metric with 'lack of competition'. Veeva and many other companies with large moats have competition, but a large moat keeps the competition from taking market share. Veeva Systems is one of these companies. Veeva is up 40.15% in our portfolio in just 1.5 months of ownership.
Specialty cloud-based software
Veeva Vault enterprise content management
Professional and support services
Raising my Price Target to $145
Veeva Systems Inc. provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, and internationally. The company offers Veeva Commercial Cloud, a suite of multichannel customer relationship management applications, data solutions, and master data management solutions; and Veeva Vault, a cloud-based enterprise content management applications for managing commercial functions, including medical, sales, and marketing, as well as research and development functions, such as clinical, regulatory, quality, and safety. It also provides professional and support services in the areas of implementation and deployment planning and project management; requirements analysis, solution design, and configuration; systems environment management and deployment services; services focused on advancing or transforming business and operating processes related to Veeva solutions; technical consulting services related to data migration and systems integrations; training on its solutions; and ongoing managed services that include outsourced systems administration. The company was formerly known as Verticals onDemand, Inc. and changed its name to Veeva Systems Inc. in April 2009. Veeva Systems Inc. was founded in 2007 and is headquartered in Pleasanton, California.
On December 4, 2018 VEEV closed at $93 when famed short seller Andrew Left of Citron Research Tweeted that he was shorting VEEV stock and set a price of $65. VEEV never dropped below $83. The stock took a big dip on the news and by January 7th the stock was back above $94.
$VEEV price target $65. Competition has arrived as multiple
is at peak and short interest at low. Same setup as $NVDA at $280.
A market correction will hit $VEEV harder
than any other SaaS name. Buyout off the table until $40
I owned VEEV personally when the Tweet came out and was followed by another short seller calling for a big decline. The problem with their calls for the company to decline is that the only reason the stock declined was due to their public statements and the fear they created in investors with weak hands. VEEV receives most of their revenue by a subscription model, revenues are easy to track and project. Every year their customer base increases and the value they create for their customers is hard to find an equal. The closest business model is Salesforce.com; which the VEEV platform is built on.
On February 8th Veeva Systems cleared my year end price target of $112; I took a look at the growth drivers and decided to keep the stock. Today VEEV closed at $118.97. I'm re-evaluating my price target as either I've missed something, I've waited too long to sell, there is new information, or investors are caught up in euphoria. Let's look deeper.
VEEV gained 17.03% over the past month and year to date VEEV is up over 35%. In the last 3 years VEEV has gained over 444%. This has outpaced the Computer and Technology sector's gain of 7.64% and the S&P 500's gain of 5.93% in that time.
VEEV is expected to report earnings on February 26, 2019. Analysts expect earnings of $0.40 per share. That would be year-over-year growth of 73.91%. Consensus estimates are for quarterly revenue of $227.54 million, up 23% from a year-ago for the same period.
Four of the world's largest Contract Research Organizations (CRO's) have standardized on Veeva Vault. “CROs are taking steps to modernize their clinical operations to drive more efficient trials,” said Jim Reilly, vice president of Veeva Vault Clinical. “Our goal is to make it easier for CROs to work with sponsors and sites and accelerate drug development. We’re honored to support CROs’ mission to speed study execution and get treatments to patients faster.” What does this mean for an investor, simple; if you're a drug company or any life sciences company, you have a tremendous amount of research, data and trial information to manage. That information needs to be readily accessible to the researchers, the FDA and other government regulators on a moments notice. The faster information can be shared, the faster treatments get to patients. All of that new efficiency translates into better performing investments.
Compared to its peer group and the S&P 500 Veeva trades at a premium.
Trades at a premium, might signify higher growth ahead. Veeva systems PE ratio indicates a significant premium compared to an average of 58.97 for the Health Care Technology and a premium compared to the S&P 500 average of 20.75
Trades at a premium, might signify higher growth ahead
Price/Book Value 15.37
Premium to the S&P 500 median of 2.76 and a significant premium versus the industry average of about 4.41.
Shows the value investors place on each dollar of sales. VEEV is more than double its peers suggesting that investors are confident in top line growth and VEEV's ability to increase prices, grow its customer base and lower costs. VEEV trades at a premium to its peers.
Here’s the hidden gem, Veeva's Sales Growth is out pacing it's competitors which indicates they are taking market share. I think this is important because once a customer is on board and using a system like Veeva's it becomes very expensive and hard to switch to a new system. A new customer is likely a customer for life.
Revenue & Earnings Growth
Veeva's Income statement indicates 25.20% revenue growth which translates to 5.22 per share. Earnings growth is over 44%.
I like VEEV and I like the current price. With 78.5% of the shares held by institutions and 0.89% held by insiders, only 20% of the stock is in float to individual investors. With only 20% in play the stock is unlikely to take a big dip. The other statistic I like is the short interest. Short sellers have been accumulating shares, which in most cases should be telling us to back away, something is wrong. However, with Veeva Systems the short sellers have been consistently wrong, they simply don't know the business and have lost a lot of money on their short positions. Every once in a while the shorts get a brief drop from their own news and cash in, but long term investors have done better. The reason I like the increasing short percentage is that eventually the shorts will have to cover, creating a 'short squeeze' that will cause the stock to rise significantly. China also has a growing biotech and life sciences industry that has an ever increasing obligation to report and manage data just like US and European companies. In fact China may have to do much more to prove their biotech industry is on par with the US and Europe; Veeva may have an opportunity in China that analysts haven't calculated yet. Due to a number of fundamental and technical indicators I'm raising my year end price target to $145, over 20% above the current price. I do expect volatility getting to that price target. Veeva systems is priced to perfection, any inline or bad news will take a big toll on the stock price; but as long as the news isn't a systemic problem with the company I would be inclined to take advantage of any significant decline (10% or more).
My Buy below price: $84.89 (January 1, 2019)
My price target is $112 (January 1, 2019)
My New PT: $145 (February 14, 2019)
Analysts average PT is $112
Low PT: $95
High PT: $125
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S&P 500 declines to 2,350 or more (1-3-2019)
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