CGNX

Just took a look at CGNX and … i like it … they make machine vision devices (barcode readers and visual analytics cameras to detect faults in manufacturing). To me it looks like on of those companies whose sales are going to keep going as we automate more and more of our day to day lives.

Plugged the new data into 1YPEG sheet and looks like a candidate, looked at the last 10 years of growth and appears CGNX beats INX 100% of the time for past 10 years.

I have no idea about the size of MOAT this company has but it has been around since 81.

https://docs.google.com/spreadsheets/d/1H_v6WOjFi81rM3TH9ZHS…

Thoughts?

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Thoughts?

It also went nowhere during 15 years from 1995 to 2010.

http://invest.kleinnet.com/bmw1/stats25/CGNX.html

I think the business model needs exploring to find out what happened. The last bottom matches the 2009 market crash bottom. What changed to convert a flatliner into a fast grower? Is it sustainable?

Denny Schlesinger

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It has been suggested on this board before and is a recommendation in one of the TMF services.

If I were going to take a historical view of share price movement I would focus more on the last 15 years development than the 15 years prior to that which is less relevant to recent technology advancements and requirements

I had sold Cognex in 2015 after their CEO had made some controversial statement in a public forum, subsequently CGNX rose some 40% and I bought back in a few months ago … typical. Happy to hold and I have added recently as I believe that this technology will make manufacturing processes cheaper and less labour intensive

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Quick google showed that ceo changed in 2013 after which the stock started to go way up.

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If I were going to take a historical view of share price movement I would focus more on the last 15 years development than the 15 years prior to that which is less relevant to recent technology advancements and requirements

I would still want to know what changed and why it changed. Is the new regime sustainable or will it slide back to the old?

Denny Schlesinger

This has been the darling of the markets since early 2016, constantly making new highs. The valuation now seems very full but CGNX has certain characteristics which make it desirable, not least its field of action, tying into robotics.

I have a holding but I am buying no more as even the holding I have got was only marginally justifiable on valuation.

I bought it in 2011 and it is the best performing purchase I have ever made, percentage wise.

Besides technology always needing to keep improving and the valuation being high, the two main concerns I see the most are the fact they do not have recurring revenue and it is in a cyclical industry.

As soon as cap-ex $ dries up, orders go down.

The main items going for it seem to be

  • Zero debt, year after year.
  • Record profits frequently these last few years (I don’t know about continuously record, but consistently at least).
  • Apple isn’t their only large customer
  • High profit margins
  • Winning culture of “Cognoids”
  • Expansion beyond bar code readers into
  • Automotive
  • Electronics
  • Other fields

TMFCADeb consistently has great write ups on the CGNX board (SA subscription req’d)

http://discussion.fool.com/1081/cognex-posts-record-q1-32695199…
http://discussion.fool.com/1081/q1-2017-ticker-take-32697377.asp…

It’s also worth checking out their website,
http://www.cognex.com/?langtype=1033

If you go to their web pages on products as well as industries that they sell to, it is pretty impressive. (I know, I know, a person could sell one item and say they service the industry). They are expanding their portfolio and customers, helping reduce risk of other’s spending cuts by various industries through diversification.

Foolintheopen

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Hi MarkoKurs.

You’ve already gotten some excellent replies, but I wanted to add one point about why Cognex might not be a “Saul stock”, as much as I like it.

Of late, Saul has been stressing “recurring revenues” a lot. Cognex doesn’t have a lot in that regard.

I think the have a compelling set of products, some of which are increasingly useful in the kinds of warehouses and distribution centers that Amazon has popularized. Because of that, I’m not sure future sales are at risk merely because recurring revenues are lacking. But that fact certainly adds a cyclical component to their results.

As others have stated, I agree that the valuation is a bit stretched at present. That said, the company is most definitely watch-list-worthy, in my opinion. I wish I owned more, and I’m not selling any, despite my opinions about stretched valuations. So, perhaps my opinion on valuation is more accurately stated, “stretched, but for some good reasons”.

The CEO change that you mentioned was not a case of “crappy CEO out; great CEO in”. It was more a case of “founder gives up the CEO role because he found someone who could fill it better”, if I’m recalling the story correctly. Yeah, I thought the public comments were ill-advised, but I basically ignored them.

Thanks and best wishes,
TMFDatabaseBob (long: AMZN; bought CGNX in late 2014 – still holding all shares and happy with the result)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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I own some based mostly on the idea that it will be a beneficiary of vastly improved AI, allowing it to move into fields that were too hard before. IOW something a few years out, not next quarter.

IOW?

In other words

This is a retraction with apologies. I said the valuation of CGNX now seems very full. It was full when I bought it, I had not run the figures on CGNX for some time and just assumed after the very strong run-up the situation must be the same or worse. However, to my surprise CGNX still came through as a buy (although others may demur at the usual multiples which are indeed daunting). Trying to act rationally, I therefore bought some more.

What a strange market. I am coming to the view (I know, much slower than most!) that we are indeed watching a new Industrial Revolution. How the equally strange jigsaw of vast adverse global pressures will interact with it - and how much longer recession can be postponed - is beyond knowing.

I feel I have been doing enough investing for now - at least until the next opportunity comes along (tomorrow?). Here are all my US holdings, some long held, out of my notebook and not quite in alphabetical order:

AOS ALGN AMWD ANSS AMAT ADBE BLK CHKP CGNX CBOE DPZ EDU EW EA GOOG HD HON IPGP IDEXY ISRG LCII MKTX MMS MA MSFT NVDA PAYC SYK SWKS SHOP TTC TXN THO V XLB

and ETFs:

BBH BOTZ FDN IHI KXI RHS ROBO SMH SPY VHT.

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I am coming to the view (I know, much slower than most!) that we are indeed watching a new Industrial Revolution.

Uh oh! Maybe I spoke to soon. Strelna is positive???

Ant - Maybe your market top theory is right after all!

Strelna - That was fully tongue-in-cheek I want you to know.

I’m sorry this post had absolutely zero worth.

Take care,
A.J.

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Wow, Strelna, two fantastic observations in one post.

This is a retraction with apologies. I said the valuation of CGNX now seems very full. It was full when I bought it, I had not run the figures on CGNX for some time and just assumed after the very strong run-up the situation must be the same or worse. However, to my surprise CGNX still came through as a buy (although others may demur at the usual multiples which are indeed daunting). Trying to act rationally, I therefore bought some more.

I have been noticing a lot of these incidents lately as well. Something looked ridiculously expensive 2 years ago, has doubled or tripled or more, and yet now doesn’t look so expensive. FB comes to mind. Sometimes fundamentals catch up faster than I could have imagined!

What a strange market. I am coming to the view (I know, much slower than most!) that we are indeed watching a new Industrial Revolution.

Exactly. Companies with deferred revenue are inherently impossible to value with traditional metrics. GDP may be a “coiled spring” – to steal a term from Saul. Similarly many “Saul (type) stocks” have no earnings…are they therefore worth nothing? Don’t bet on it. Might turn out like betting against Amazon. Many have run up 50%, 75%, even 100% in the last several months and yet do not look overvalued. Obviously they can still pull back. Heck, even things that look undervalued can pull back and often do. But the fundamentals may catch up faster than anyone thinks.

All interesting to think about. Especially the “new Industrial Revolution” you posit. But in the end, I have no idea if “the market” is expensive or cheap. I have some idea that these individual stocks are cheap. So I’ll stick with them.

Bear

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A.J., it might indeed be an awful market top danger signal if ‘Strelna is positive’!

It is true I have become much more aware of the astonishing speed of what, technologically, is going on around us, not least because I have recently been the lucky recipient of a new heart valve and a micra-pacemaker, both installed non-invasively via blood-vessels. These procedures will no doubt soon become standard. I recovered in a few days. Amazing technology and skill. (Both MDT since you ask.)

It is also true I have brought my cash position right down to 12%. But I cannot say I am positive. Like everyone else, I just don’t know. I think all you can do is plug away buying stock in really sound companies where value can be calculated from the soundness and the growth and hope that when the crunch comes, you take the right actions.

The difficulty I always find in serious market falls (which are inevitable, overdue etc.) is that losses (where I live) can be carried forward against present and future capital gains tax and therefore have a considerable value of their own, making the correct judgements even more difficult. It is always easier to hold when there is a nice cushion of profit!

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Pulled the trigger on cgnx, and ofcourse market goes way in the red immediately :slight_smile:

Nothing has changed and CGNX trading at 85.44 i bought at 97.

My opinion is that it is dirt cheap at the moment and i will add as soon as i am able :slight_smile:

Just a heads up!

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