Why I Stick with These Stocks
“Always carry a flagon of whiskey in case of snakebite
and furthermore always carry a small snake."
- W.C. Fields
The Portfolio
The portfolio is UP +12.60% YTD.
Our benchmark index, the S&P 500 is down -8.57% YTD.
Owning Hard Names
Some of the most controversial stocks to own during this period have turned out to be great performers for the portfolio; I'm glad I've remained patient and non-partisan. From an aircraft maker to an off-road vehicle suspension company and little known biotechs, I've stuck with them, here's why.
Boeing rallied +12.87% today in lock step with good news around reopening the economy has been devastated by the 737-Max ordeal, the shut down of the airlines and a lack of space to store aircraft coming out of the factory. A company with one of the best balance sheets in the world really showed how fragile it is when internal mis-steps and external conditions hit all at once. While we have a 53% loss on the stock, I suspect I'll need to add to our position and lower the cost basis. Boeing is down, but not out.
BioDelivery Sciences a little company with hardly any news was up nearly +10% today on little news; possibly a late uptick on news of a new interim CEO that was appointed last week. This company isn't a momentum stock, it's not a household word and yet it holds up and gives us nice rallies when we do hear from it. One day I expect a big surprise from this little pain management company.
Enphase Energy, one of my favorite companies in the portfolio, was up +10.36% today, and is up a whopping +65.30% in the last month. Who's buying solar panels during a global pandemic? Enphase makes micro inverters for solar systems (insert big yawn here), but those boring little devices are critical to improving performance and reducing cost, making solar energy the most affordable choice per kilowatt hour. What I love about the Enphase business is they have a great track record at upgrading existing customers to their latest innovation. Existing customers are always less expensive to sell to than trying to acquire a new customer so the margin per sale is better. The big news is that Enphase has just added Flywheel Development, a commercial customer. Flywheel Development is a leading sustainable development company active in real estate, sustainable design, solar development, and stormwater management infrastructure, with a focus on high-performance, net-zero buildings. Flywheel has standardized its portfolio of commercial and multi-unit dwelling solar projects on Enphase microinverters due to their high degree of design flexibility.
Fox Factory is up +13.48% today, and a huge +47.19% in the past month. Fox Factory would seem to be right in the blast zone of COVID-19, but the company soon learned that there products were in demand via their OEM customers. COVID-19 drove customers to buy and use ATV's in order to get out of the house and stay socially distant from others. Fox is the affinity brand suspension for these vehicles and I'm hoping that this trend continues. As professional racing comes back online expect to see Fox Factory result improve as those customers use a lot of Fox Factory products that have high margins. Recently Fox acquired two companies and in the latest earnings call I learned that both have been accretive in the most recent quarter. Fox is displaying an ongoing track record for smart acquisitions, purchased cheap and melding them into the parent company with exceptional speed.
Nabriva was up +10.50% today, and while it's gained over +16% in the last month, the stock is down nearly -54% YTD; I'm still very unhappy with this company. The earnings calls are like taking valium and the results are as dreary. A good article came out a few hours ago on the urgent need for a drug like Nabriva's XENLETA, but I fear that the company just doesn't have what it takes to be a successful commercial operation. I still have a hold position on the stock, I'm neither a buyer or a seller.
VBI Vaccines, the hot rod of our portfolio is up +14.81% today, and is up over +69% in the past month. Super hot biotech stocks can be hard to own as the ups and down can turn an investor into a trader. The consensus analysts price target is $8.50. The big new of late is that VBI Vaccines will be presenting a poster presentation for VBI-1901. In his presentation of the e-poster via an accompanying audio narrative, David E. Anderson, Ph.D., VBI’s Chief Scientific Officer, will describe how the highest dose of VBI-1901 in combination with granulocyte-macrophage colony-stimulating factor (GM-CSF) boosted cytomegalovirus (CMV) immunity, even in highly immunosuppressed patients. Moreover, a baseline biomarker was identified in patients in the Part A dose-ranging phase of the study that may help predict patients most likely to respond to, and derive clinical benefit from, treatment with VBI-1901. The correlation observed between baseline biomarker data and tumor response data in Part A of the trial was strengthened by the inclusion of additional patients in the Part B extension phase of the study. VBI Vaccines also has a candidate for the treatment of COVID-19, but I think that's just providing support, not fuel to the stock price. VBI-1901 is the block buster for this little company and I'll be paying close attention to any developments.
Twillio and Veeva Systems: These are the two biggest winners in the portfolio from a percentage gain stand point, and two of the easiest stocks to own and hold. I wish I had been able to buy more shares at lower prices, but they both took off and just haven't given many opportunities to buy. I probably should have bought more in late March, but I was still sorting out the market at that time. A pull back is certainly still in the cards for the overall market, especially around second quarter results. I've been holding our cash and may try to raise a little more in anticipation of putting it to work in these and other names on a significant pull back. Both companies have a business model that I really like, they are supper stick with their customers and provide significant value for what they charge. These are both long term holdings for the portfolio but I don't want to chase them at stretched valuations. Twillio doesn't even have a P/E ratio yet and Veeva Systems trades at over 74 times forward earnings. While earnings are improving, 74 times is a big increase over an average market multiple of 15-16 times.
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Keep Me Honest 2020
Today is a good time to carefully leg into stocks again (3-20-2020).
Worst Case: S&P 500 decline further to around 2,100 - 2,150 (3-28-2020).
Middle Case: S&P 500 level out around 2,650 - 2,700 (3-28-2020).
Best Case: YE S&P 500 eventually rise to around 3,000 - 3,200 (3-28-2020).
Market bottomed March 23, 2020 at S&P 500 2,237.40 (4-17-2020).
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
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
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
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:
HD, AMRN, BSTC, CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL, NBRV, ENPH
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.
