An All-Weather Portfolio?
“Go for a business that any idiot can run –
because sooner or later any idiot probably is going to be running it.”
― Peter Lynch
The Portfolio
Our blog portfolio is turning out to be an all-weather performer. Year-To-Date the portfolio is up +13.39% and we still have $46,000 in cash to invest. With the S&P 500 up 13.43%. I suspect when the rest of the cash is put to work we'll see better performance. Keep in mind that the long term average for the S&P 500 is about 10%, so we've done well and so has the index.
Looking at some of our stocks
Within the portfolio we have four stocks that are negative and 23 that are positive. Our biggest loser is Nabriva Therapeutics (NBRV), a high risk/reward biotech company. Nabriva has been knocked down by a general sell off in the sector as well as a lack of good news. With some solid catalysts in the future I'm holding onto Nabriva but not adding to it to lower our cost.
VEEV +91%: The biggest winner in the portfolio is Veeva Systems (VEEV). VEEV has been a big winner for us in the past and this exceptionally well run company continues to deliver year-after-year; up just over 91% year-to-date. Veeva is a software company that specializes in managing all the data that pharmaceutical companies have to keep and manage for running drug trials, reporting to the FDA and much more. The Veeva system is built on Oracle database technology; smart they didn't re-invent the wheel in order to create a specialized database system. Enterprise software is expensive to buy, and more expensive if you have to maintain it in-house; think servers, IT staff, down time and all the hassles of maintaining something that is outside your companies expertise. Instead, VEEV offers a subscription based software as a service SaaS model that is very sticky. Once a customer is on board, leaving the system is highly unlikely. Recently VEEV added additional capabilities to its core technology that enables companies in other industries to manage their complex data and reporting. Now the total addressable market has increased and the primary challenge will be developing the sales organization to go after all the new opportunities. I don't think we're being greedy holding onto this terrific name. I put a $184 12-month price target on VEEV, another 13% upside, but I may have to increase that to at least $200.
HEI +75.35%: Heico isn't exactly a household name for a company that's been in business since 1949. HEICO Corporation designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally. The company's Flight Support Group segment provides jet engine and aircraft component replacement parts; thermal insulation blankets and parts; renewable/reusable insulation systems; and specialty components. This segment also distributes hydraulic, pneumatic, structural, interconnect, mechanical, and electro-mechanical components for the commercial, regional, and general aviation markets; and offers repair and overhaul services for jet engine and aircraft component parts, avionics, instruments, composites, and flight surfaces of commercial aircraft, as well as for avionics and navigation systems, subcomponents, and other instruments utilized on military aircraft. Its Electronic Technologies Group segment provides electro-optical infrared simulation and test equipment; electro-optical laser products; electro-optical, microwave, and other power equipment; electromagnetic and radio interference shielding; high-speed interface products; high voltage interconnection devices; high voltage advanced power electronics; power conversion products; and underwater locator beacons and emergency locator transmission beacons. This segment also offers traveling wave tube amplifiers and microwave power modules; three-dimensional microelectronic and stacked memory products; harsh environment connectivity products and custom molded cable assemblies; radio frequency and microwave amplifiers, transmitters, and receivers; communications and electronic intercept receivers and tuners; self-sealing auxiliary fuel systems; active antenna systems; and nuclear radiation detectors. The company serves the U.S. and foreign military agencies; prime defense contractors; and commercial and defense satellite and spacecraft manufacturers.
While all the news in aviation seems to be about the Boeing 737 MAX and SpaceX launching satellites, Heico Corp plows forward relentlessly supplying critical components and services. Since the same quarter last year HEI revenue growth has been 19.8%, that's 10% higher than the industry average. The current debt-to-equity ratio is significantly below the industry average and HEI improved earnings per share by more than 36%. But we don't care about one quarter here; Heico has been increasing earnings growth consistently for the past two years. With a Forward P/E that's almost 5 points below the Trailing P/E the bet is that Heico is going to keep following this trend of earnings growth.
My price target on Heico is another 6% above current prices, I am increasing my 12-month target to $157.
PGR +48.4%: Do you love those ads on TV as much as I do? Apparently a lot of people like the ads, the insurance and the stock. Most of us know Progressive for those funny ads, but their business segments reach into all the most important and growing areas of the insurance business. Think insurance for ride hailing, construction equipment, flood insurance and much more.
The Progressive Corporation provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. Its Personal Lines segment writes insurance for personal autos, and recreational and other vehicles. This segment's products include personal auto insurance; and special lines products, including insurance for motorcycles, ATVs, RVs, watercrafts, and snowmobiles. The company's Commercial Lines segment provides primary liability, physical damage, and other auto-related insurance for autos, vans, pick-up trucks, and dump trucks used by small businesses; tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses, and non-fleet long-haul operators; dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses; tow trucks and wreckers used in towing services and gas/service station businesses; and non-fleet taxis, black-car services, and airport taxis. Its Property segment provides residential property insurance for homes, condos, manufactured homes, and renters, as well as offers personal umbrella insurance, and primary and excess flood insurance. The company also offers policy issuance and claims adjusting services; home, condominium, renters, and other insurance; and general liability and business owner's policies, and workers' compensation insurance. In addition, it offers reinsurance services. The Progressive Corporation sells its products and services through independent insurance agencies, as well as directly on Internet, and mobile devices, and over the phone. The company was founded in 1937.
I'm reiterating my $104 12-month price target.
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and use sun screen"
- Clay Baker
Stay Invested,
Clay
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Keep Me Honest
S&P 500 declines to 2,350 or more (1-3-2019)
Healthcare and Biotech sectors outperform (1-3-2019)
S&P reaches 3,000 by year end (1-11-2019)
CSCO reaches $60/share (1-18-2019)
VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)
CVS reaches $91.50 (2-27-2019)
Bull market takes another leg up (4-7-2019)
The Fed will lower rates 1-2 times (5-13-2019)
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't
Rule #4: When a good stock you own drops 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
