Quick Note: This payroll processing and human resources Software-as-a-Service holding is up 14% on strong quarterly results. The company exceeded street expectations on both earnings and revenues.
Top Growth Stocks - Still Hated
In this quick note, we share updated data on top growth stocks (those with at least 20% revenue growth expectations for this year and next). You’ll notice the names with positive net margins have performed relatively better over the last year (quite the opposite of when the pandemic bubble had full momentum behind it and revenue growth was all that seemed to matter). The table also shows recent performance, short interest, margins, various valuation metrics and more. It’s hard to take a contrarian view, but that’s often a profitable approach for selective long-term investors at lower points in the market cycle (i.e. right now).
Attractive High-Growth SaaS Stock: Payroll and Human Resources
We purchased shares of this high-growth small-cap stock in our Disciplined Growth Portfolio in 2015 (when the share price was under $30 and the market cap was around $1.4 billion). It just announced another quarter of strong earnings on Friday, and the shares now trade at around $260 (and the market cap is over $14 billion). What’s more, we continue to like its exceptionally strong growth trajectory going forward (the shares have a lot more upside ahead). This report reviews the business and 10 things we like about it going forward.
The Sky is NOT Falling: Attractive Cloud-Based SaaS HR Company
The market has been especially ugly for high-growth stocks recently as the pandemic-trade pendulum now swings too far in the opposite direction. But that doesn’t mean all growth stocks are ugly. Quite the contrary. The attractive growth stock we review in this report offers a compelling high growth rate, a large total addressable market opportunity and an attractive valuation. Plus, it is supported by high recurring revenues, high customer retention and important research-and-development spending plus a strong sales team.
Paylocity: Attractive Business, Attractive Price, Powerful Upside
At Blue Harbinger, we make it a point to diversify our holdings across attractive opportunities among different styles and sectors. This diversification not only reduces risks, but it opens up more attractive opportunities. This article focuses on a cloud-based payroll processing company that can provide investors powerful long-term income through price appreciation. We’ve owned this stock since 2015, and believe the current market selloff makes the upside potential (i.e. income via growth) extraordinarily attractive in the quarters and years ahead.
In The Face of Fake News--More Gains, More Income (Holdings & Performance Update)
In the face of non-stop fake and misleading news headlines, we stuck to our long-term strategies and delivered another month of healthy gains and income across our investment portfolios, as usual. This report reviews the individual holdings and performance across each of our strategies. We also review the absurdity of a few recent news headlines that are designed specifically to eat away at your hard-earned nest egg. Finally, we highlight a few of our current holdings that are particularly attractive for new investment dollars right now.
3 Attractive Investment Ideas: One +7% MLP, Two Growth Stocks
This week’s Weekly reviews an attractive +7% yield MLP that is on sale. We also review two growth stocks that we own in our Disciplined Growth portfolio. The MLP is very hated (and misunderstood) right now (which is why we like it), and the growth stocks have both rallied hard this year (they’re up 30% and 47%) and we share our views on how to play them going forward.
Performance Update and Four Stock Ideas
Paylocity: Hyper-Growth in 5 Charts
Paylocity (PCTY) has negative net income, and a forward price-to-earnings ratio (91.4x) that would make most value investors shriek! However, it has also been experiencing “hyper” revenue growth that is hard to ignore. This article reviews Paylocity’s hyper-growth in five charts, and then provides our views on whether this Arlington-Heights-Illinois-based, zero-dividend-paying company, is worth considering...
Our 28 Favorite Stocks: July Performance Review & Outlook
In this week’s Blue Harbinger Weekly, we provide a brief performance review and outlook for each of the 28 holdings across our Blue Harbinger strategies. We also provide access to a members-only report on our “Top 3 Covered Call Stocks.” Lastly, you’ll notice we’ve updated performance though the end of July, and all three Blue Harbinger strategies continue to significantly outperform.
A Tale of Four Stocks: There Will Be Winners and Losers
This week we review four stocks. First we review one of our stalwart blue chip holdings that is currently trading at a discounted price thereby providing an attractive entry point for long-term investors. Next, we provide a checkup on an attractive small cap growth company we own that provides cloud-based payroll processing services, and has the potential to easily double in price and/or get bought out at an attractive premium. And finally, we provide some additional insights on Yahoo and how the stock price of its eventual acquirer could first fall and then rise significantly.
Continued Outperformance for Blue Harbinger Stocks
All three Blue Harbinger strategies continue to outperform. This week’s Weekly reviews the performance of the individual holdings within each strategy, and we focus on several stocks in particular that we believe provide terrific buying opportunities right now. And just for grins, here is a fun quote from Charlie Munger.
Where Will Yahoo! Go To Die?
Yahoo is looking to sell its core business, and the board is excluding CEO Marissa Mayer from the process. In this week’s Weekly, we consider who might actually buy Yahoo and what they’ll pay (spoiler alert: they’re not going to pay much, and they are going to cut costs to the bone). On a separate note, our new big-dividend Blue Harbinger Income Equity strategy is off to a terrific start this year, outperforming the S&P 500 by 2.2% already.
Will Oil Drag the Market Lower Again?
The market followed oil lower last week as crude inventories exceeded expectations. Important economic releases this upcoming week include crude inventories on Wednesday (2/10) and retail sales on Friday (2/12). In this week’s Weekly we review the Blue Harbinger stocks that announced earnings last week (they were better than expected) and the ones that announce this upcoming week. We also share a top contrarian idea we’ve been working on to profit from “low for longer” oil prices.
Are You Diversified? Appropriately?
Long-term investors should not forget the risk-reward tradeoff. For example, if you were diversified into investment-grade bonds over the last year then your account balance probably hasn’t suffered as much as if you’d invested entirely in stocks. However, over the long-term, we expect stocks to significantly outperform less-risky bonds. This week’s Weekly highlights some extremely attractive stock-specific opportunities that have been created by 2016’s recent market volatility.
Year-End Rebalancing and Great Opportunities
Time to sell your winners and buy the losers? Some contrarians might think so. With 2016 right around the corner, it can be helpful to see what has and has not been working, and why. For example, Caterpillar has been a persistent loser (as we wrote about here), and Nike and McDonald’s have been big winners this year. This week we review the Dow Jones stocks we do own (and why), and our view on when it’s prudent to rebalance.
Terrific Stock-Specific Opportunities, Despite Broader Market Red Lights
With all of last week's macro-volatility, and the Fed set to begin raising rates this upcoming week, it's a great time to point out two important things: (1) Diversified long-term investors don’t need to make a single change to their investment strategy, and (2) Many terrific stock-specific investment opportunities remain for those willing to do their homework. For example, this week’s Weekly highlights several specific stocks related to cloud-based human capital management that are set to climb from an accelerating secular trend.
Know Your Goals, Hold Your Ground.
Our favorite cloud-based small cap holding is up 31% in the last month, and it beat the market again this week despite the broad sell off we are experiencing. If you are a diversified long-term investor, there is no reason to change your strategy just because volatility has picked up. Buying and holding quality stocks is a proven winning strategy.
Paylocity Update – Increasing Price Target
Paylocity (PCTY)
Rating: BUY
Current Price: $43.48
Price Target: $55
Paylocity (PCTY) announced expectation-beating earnings last week, and raised its fiscal 2016 revenue guidance significantly (from $199-203 million to $210-214 million). As a result of the company’s faster than expected revenue and earnings growth, we are increasing our price target from $45 per share to $55 per share. The $55 per share price reflects our same conservative 27.2% annual growth rate which is well below the company’s current growth rate of around 40%.
Paylocity continues to be a company that offers a highly compelling solution without the legacy baggage of its larger industry-leading competitor ADP. Unlike ADP, Paylocity’s solutions are primarily cloud-based meeting a growing customer demand. Additionally, Paylocity is a less costly solution as it does not require all the bells and whistles of ADP which many newer smaller companies don’t want anyway.
According to Steve Beauchamp (President and Chief Executive Officer of Paylocity):
"Fiscal 2016 is off to a very strong start, with first quarter total revenue growth of 45%. We continue to see strong demand for our unified payroll and HCM platform and are encouraged by the response to our ACA Enhanced product offering." (source: WSJ).
Overall, Paylocity continues to offer amazing growth opportunities, and if the company continues to grow ahead of expectations we will likely be increasing our price target again in the not-so-distant future. This company has a lot of room to run, and it has the potential to eventually turn into an exceptional "cash cow" when it grows to a point where it can stop spending on growth and instead just rake in the profits. Keep in mind this is a high-customer-retention business because customers are extremely hesitant to change service providers once they’ve gotten their payroll processing set up. (You can read our original full Paylocity thesis and research report here).