Pool Corp, Heico, Veeva: How Our Theme Of Expensive Performers Is Faring
Our indicative theme on Expensive Performers – which includes companies that are seeing their valuation multiples expand but are executing well, with consistently improving Operating Margins and Revenues – is up by roughly 64% year-to-date on an equally weighted basis. This compares to the S&P 500 which is up by about 13% year-to-date. While expanding valuation multiples might be viewed as unfavorable from a value standpoint, they likely indicate that the companies are building a competitive advantage in the space that they operate in. This is likely to enable these companies to earn outsize returns in the long-run. Stocks in the theme include Veeva Systems, IDEXX Laboratories, Heico and Pool Corporation. See our theme on Expensive Performers for the detailed criteria we’ve used to pick these stocks.
[Updated 10/5/2020] Veeva Systems, Pool Corp, IDEXX IDXX : Stocks That Look Expensive, But Could Outperform
Our indicative theme on Expensive Performers – which includes companies trading at increasingly higher valuation multiples but are executing well, with consistently expanding Operating Margins and Revenues – is up by about 39% year-to-date on an equally weighted basis. This compares to the S&P 500 which is up by just about 5% over the same period. We believe that companies in this theme are likely building a competitive advantage in the businesses they are operating in, implying that earnings growth could be stronger going forward. Veeva Systems, up 96% year-to-date, is the biggest driver of the theme’s return this year. On the other side, Heico stock is down by about -7% year to date. Below is a quick rundown of some of the stocks and their performance over the past year.
See our theme on Expensive Performers for detailed criteria for picking the stocks in the theme.
Veeva Systems is a cloud-computing company focused on applications for the pharmaceutical and life sciences industry. The stock is up by 96% year-to-date. (related: Veeva Systems & Ansys – Two Software Stocks You May Have Overlooked)
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ServiceNow develops a cloud computing platform to help companies manage digital workflows for enterprise operations, The stock is up by 75% year-to-date.
Pool Corporation is a wholesale distributor of swimming pool supplies and equipment. The stock is up by 53% year-to-date.
IDEXX Laboratories sells products and services catering to the companion animal veterinary, livestock and poultry, water testing, and dairy markets. The stock is up by 47% year-to-date.
MSCI is a financial data provider that is best known for its financial indices, which money managers use to benchmark investment performance. The stock has gained 35% year-to-date.
Heico Corporation is an aerospace and electronics company that focuses on relatively niche markets. The stock is down by about -7% year-to-date.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 120% return since 2016, versus around 60% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
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