I don’t post all that much or that often, but I read this board every day because board regulars serve up valuable nuggets fairly regularly. Thanks to Saul and this engaging crew, I’ve profited handsomely by buying UBNT, ABMD, PAYC and ESNT. My portfolio is significantly different from Saul’s portfolio but, hey, I’m not at all averse to appropriating great ideas. Consequently, there is overlap along with significant departures.
I would be remiss if I didn’t offer up an occasional recommendation of my own. Correction: I will build on a stock evaluation prepared by okapimoon in July 2015. It was quite detailed and a great effort. Please read his write-up first, as I will incorporate it in full:
Sooo…back in the summer of 2015, ICLR was trading in the mid-$60s. I liked the financial metrics. Good growth with profitability tends to float my boat. Subsequently, the financial metrics remained strong. From this value investor’s perspective, this company chugs along quite well. I began accumulating shares around the $65 price point. Volatility proved to be my friend. The stock price would hit ~$80 on occasion, and I would harvest profits. Shares would fall back to the $60s and I’d buy more. It was a comfortable/profitable holding.
Now, here’s where I diverged significantly from okapimoon. He was impressed by the financials, but was concerned about the lack of a “moat” and no recurring revenues. Having spent a bit of my career conducting medical research trials, I had NO such concerns. First, the question of “moat”. Contract research companies evolved organically, typically starting with a researcher or two who gain a reputation for skillful conduct of medical trials. There aren’t all that many companies in this sector, and they pretty much all evolved the same. It takes time, effort, and long-standing relationships with doctors, hospitals, pharmas and laboratories to establish a bona fide contract research operation. These companies evolved over decades and now ICLR (among just a small handful) is world class. Recurring revenues? You betcha! Drug trials grow from laboratory studies to multi-phase clinical trials spanning YEARS. A promising drug is tested against ever larger and more complex cohorts over a long period of time. It’s not cost-effective to switch researchers between phases. The revenue just keeps streaming in.
Why am I talking about ICLR now? First, I’ve enjoyed decent returns on my investment since 2015. Second, all the current chatter on this board about immunotherapies is certainly exciting, but I’m not one to bet on a specific company. Too risky for me. Drugs die unexpectedly, even in Phase III/IV. Stocks get blown to pieces when promising candidate drugs fail (and they often do). It’s the research that keeps on going! The contract researchers keep investigating, keep conducting clinical trials. And there’s simply no end to promising therapies being lined up. Think back just a year or two: we learn of a promising therapy (often based on lab studies); the possibilities are SO promising such that the company goes public and raises millions/billions. Where does that money go? For clinical trials! Who is a leader in the field? ICLR.
Just to bring y’all up to date, I’ve been trading ICLR over time, buying in the $60s, selling in the $80s. I racked up a number of trades returning ~20% over the course of the past year. I sold all my shares in the beginning of the year in the $80s. Why did I sell? I was spooked by all the talk of drug price controls (even though I applaud the effort, I recognize the effect that would have on the pharma sector). Now I hear that drug price control notions are falling by the wayside. Meanwhile, ICLR has dropped below $80.
Yeppers, I’m back in.