This company was recommended on one of TMFs paid services a number of months ago. They are in the business of supporting veterinarians primarily with diagnostic tools that can be used in office rather than sending samples to a lab and waiting days for the analytical results. They have sales operations worldwide including China. I bought some shares without a lot of analysis and so far I have been rewarded for that decision.
Here’s why I bought. I first traveled in China in 2007. In all my 6 weeks of travel, I saw exactly two dogs and zero cats. This year (I’m in China now as I write) it seems everyone has a pure bred dog. I’m in southeastern China in Guilin, a semi-tropical clime in the summer with very cool winters. For some reason Samoyeds are a favorite here. I pity the dogs in the summer months. What I’m getting at is that there has been an explosion of pet ownership here. Cats too, but not nearly so many as dogs. I know the Chinese will treat these animals like their offspring (even while they may order dog in a restaurant - just a quixotic Chinese paradox).
IDEXX is an industry leader with 87% recurring revenue and 22% compound growth rate in stock price over the last 15 years. You can read their latest 14A proxy statement, pursuant to the May 3 annual stockholder meeting here: http://seekingalpha.com/filing/3471853?uprof=46. I have added shares and ticker IDXX now comprises close to 9% of my overall investments.
Nice find and well done mate. It has a strong tail wind. As the ageing trend gathers pace, the pet space will be a booming business - elderly get pets to combat loneliness. It is also very high margin. Everything to do with pets is much higher margin than the human equivalent (food, vet treatment, insurance).
The share price chart looks alarmingly like a TMT chart of 1999.
Cramer has been on this name for quite a while. He calls it a humanization of pets secular trend.
I looked at this a few weeks ago but the price was far too high; everybody and his mother was chasing it.
“Nice find and well done mate. It has a strong tail wind.”
That made me chuckle, thank you. Am I the only guy who found that funny?!
You’re smarter than the average bear boo boo.
Yes, it is “expensive.” I’m aware of that, but you may recall someone recently asked Saul which of his investments were cheap and he pretty much answered “none of them, well maybe LGIH” (hope I’m not misquoting here).
The stock’s not cheap today, but will today’s price look cheap in 6 months? I think so. I’ve not owned it long and I’m up 6% in a few months including adding to it at a higher price than my initial purchase (I bought before the quarterly report, it had a nice bounce after reporting). When I look at my portfolio, I don’t see many bargains, but I’m over 13% for the year. My goal is 20% per annum (being kind of new at investing with a strategy instead of just following tips I think that’s reasonable).
Anyway, not trying to twist anyone’s arm, just thought I’d post it because it’s part of what I think this board is about and no one else has mentioned it yet. I seldom post company names because by the time I get into something, it’s usually old news here.
Not clear about the punctuation brittlerock. The stock is expensive, not “expensive” which implies the cost only appears expensive to the uninitiated when it is actually reasonable. I do not think it is reasonable!
Sorry about the confusing use of quotes. I only used them to indicate that I was referencing your words. You’re correct. The stock appears expensive because it is expensive in terms of P/E and other methods of valuation. That you think the price unreasonable is a fair judgment. Like I said, not trying to twist any arms. We each go through our own mental gymnastics when making investment decisions. This is not a science.
My decision regarding an investment in IDXX was driven largely by what I believe is enormous market potential more than seeking a bargain. That potential is based at least in part due to my experiences in China. I did not post my full thought process which goes beyond taking notice of what can only be viewed as an explosion in pet ownership here (I’m in China now).
To each his own. There are many ways to make (and lose) money in the market. I hope you do well. Thanks for reading my posts.
someone recently asked Saul which of his investments were cheap and he pretty much answered “none of them, well maybe LGIH” (hope I’m not misquoting here)
I thought Saul typically looks for growth at low PEs. Here are two excerpts of his Knowledge Base:
My feelings about PE ratios: Just out of curiosity some time ago I figured the average PE ratio of my eight biggest positions. These were rapidly growing companies but the average PE was 20. Note that that goes against the MF RB idea of picking overpriced stocks, or even ones with no earnings. An exciting company with a PE over 200 or something, may do just fine over the long haul, but I’ve decided “Not for me.” If I can find a rapidly growing stock with a reasonable PE, why buy expensive stocks where you have to hope they’ll grow into their price?
Given a choice between a low PE company and a high PE company, growing at comparable rates, I’d go for the low PE company every time. Which is why my big positions all have reasonable PE’s. What’s reasonable? You might say a PE of 15, I guess, if you were talking about conservative, slow growing, Dow-type stocks. Mine are much faster growing. If I can get that rapid growth at a PE of 15 to 25, I consider that cheap.
There are many good things to be said about IDXX and it may continue to perform well… but it grows at 10-15% and sports a PE in excess of 60. That is not “expensive”, that is really expensive in my book. You have to factor in a lot of goodwill for yet untapped growth opportunities, a reliable business model with reliable cash flow, a reliable dividend and so on.
I’d sure like to own IDXX but I’m not going to pay this much myself. But of course I have been wrong before so don’t listen to me. Do your own thing! Everybody has to find his own investing style. I surely wish you all the best and honestly hope you will achieve your ambitious goal of returning 20% p.a.
SHOP P/E (TTM) unmeasurable
AMZN P/E (TTM) 172
HDP P/E (TTM) unmeasurable
KITE P/E (TTM) unmeasurable
PAYC P/E (TTM) 73
LGIH P/E (TTM) 9.75
SPLK P/E (TTM) unmeasurable
Just a few “Saul Stocks” off the top of my head . . . .
I don’t want to stir up emotions here but in my perspective Saul has become significantly more aggressive in the last year or two.
My outsider’s view is that Saul invests in fast growth companies. Historically you could find them at reasonable prices, say with a PEG not too far above 1. At the current market valuations such companies are rare. Therefore Saul goes now after growth companies before they are profitable… i.e. after companies that sacrifice near-term profitability to capture market share and future profits.
Exception to the rule is LGIH which comes with incredible growth at a PE below 10. This looks like an archetype of a Saul company.
And this brings me back to Idexx. I personally like the company, the business, almost everything except the price tag. In terms of a Saul stock, however, it (i) lacks the growth and (ii) it is way too expensive. Just my take.