ICLR/WIX Revisited

I gotta say, I remain amazed that so many still flock to companies that sport high revenue growth without concomitant earnings growth. I’ve said it before, I’ll say it again: I’m all about earnings. I truly do not care about company sales (i.e., generated revenues) if that company does not make money on those sales (i.e., generated earnings).

That’s not to say I only buy shares of companies that have positive earnings. I don’t. My recent posts regarding Enphase are a prime example. I was buying ENPH shares hand over fist at a time when the company was hurting bad financially (and I mean BAD as in bankruptcy bad). It was a gut-churning experience that was survivable ONLY because the company had laid out a detailed road map describing HOW it would achieve profitability. From that point on, I simply followed the road map. As long as the company remained on track and on schedule, I felt confident that my investment in the firm would eventually pay off. It did, and it continues to pay off handsomely.

Now, I’m gonna do something that I’m sure is gonna rub some people the wrong way. Sorry about that, but I’m the sort who will always try to protect investors (particularly the novitiates) from perilous investments. Folks, we’re in a late-stage bull market and, for those who’ve never experienced the insanity, let me just say it’s a perilous time. No one can predict when the good times will end, but it’s assured they will. And when those good times end (generally with the onset of a recession), the profitless companies, the ones that depend on rapidly growing money-losing sales, the over-leveraged, suffer the most. That’s not just my opinion. It’s been proven time and time again. Believe me, I know, I’ve lost hundreds of 1000’s of dollars by being woefully naive in the past.

So let’s take a walk down memory lane. About a year ago, we had a spirited discussion on this board about the merits of a company such as ICLR (a traditional, conservative, profitable company) versus WIX, a high flying, revenue generating non-profit. Here’s the entire thread:

http://discussion.fool.com/my-take-on-wix-32689078.aspx?sort=who…

The only way anyone can evaluate the merits of the arguments presented then is to take a look back on the actual financial results. As I said earlier, some may find this chart aggravating. Again, sorry. I do, however, believe it’s worthwhile to remind folks that PROFITS matter and that PROFITABLE companies fare well over time:

http://stockcharts.com/freecharts/perf.php?WIX,ICLR&n=20…

[Just right click on the slider box at the bottom of the chart and select “Past Year”]

OK, I’m climbing off the soap box now. May we all live long and prosper.

10 Likes

Why stop with just those two?

http://stockcharts.com/freecharts/perf.php?WIX,ICLR,Shop,NKT…

Andy

3 Likes

I gotta say, I remain amazed that so many still flock to companies that sport high revenue growth without concomitant earnings growth. I’ve said it before, I’ll say it again: I’m all about earnings. I truly do not care about company sales (i.e., generated revenues) if that company does not make money on those sales (i.e., generated earnings).

The only way anyone can evaluate the merits of the arguments presented then is to take a look back on the actual financial results. As I said earlier, some may find this chart aggravating. Again, sorry. I do, however, believe it’s worthwhile to remind folks that PROFITS matter and that PROFITABLE companies fare well over time:

http://stockcharts.com/freecharts/perf.php?WIX,ICLR&n=20…

I understand your bias towards only investing in a company with positive earnings. I have had a similar bias after past experiences in bubbles which inflated the stocks of profitless companies. But I think it’s important to be flexible and adjust to changing situations. We are currently in an environment where many companies are rapidly growing, not yet profitable but moving quickly in that direction. So I have recently started investing in a few companies in this latter category after following the experienced investors on this board (like Saul and a few others) who have had success in this regard.

I still remain balanced with a good portion of my portfolio in both types of companies - very diversified with no more than about 3% in a higher risk unprofitable growth stock. Both ICLR and WIX look like promising investments to me. I own only shares in WIX - up about 54% in 5 months. While the chart you presented is over one year, it’s more illuminating to look at a longer term picture:

https://finance.yahoo.com/quote/ICLR/chart?p=ICLR#eyJpbnRlcn…

Here’s my reply with appropriate italics:

I gotta say, I remain amazed that so many still flock to companies that sport high revenue growth without concomitant earnings growth. I’ve said it before, I’ll say it again: I’m all about earnings. I truly do not care about company sales (i.e., generated revenues) if that company does not make money on those sales (i.e., generated earnings).

The only way anyone can evaluate the merits of the arguments presented then is to take a look back on the actual financial results. As I said earlier, some may find this chart aggravating. Again, sorry. I do, however, believe it’s worthwhile to remind folks that PROFITS matter and that PROFITABLE companies fare well over time:

http://stockcharts.com/freecharts/perf.php?WIX,ICLR&n=20…

I understand your bias towards only investing in a company with positive earnings. I have had a similar bias after past experiences in bubbles which inflated the stocks of profitless companies. But I think it’s important to be flexible and adjust to changing situations. We are currently in an environment where many companies are rapidly growing, not yet profitable but moving quickly in that direction. So I have recently started investing in a few companies in this latter category after following the experienced investors on this board (like Saul and a few others) who have had success in this regard.

I still remain balanced with a good portion of my portfolio in both types of companies - very diversified with no more than about 3% in a higher risk unprofitable growth stock. Both ICLR and WIX look like promising investments to me. I own only shares in WIX - up about 54% in 5 months. While the chart you presented is over one year, it’s more illuminating to look at a longer term picture:

https://finance.yahoo.com/quote/ICLR/chart?p=ICLR#eyJpbnRlcn…

1 Like