Market Monitor: Lamar Villere

Our weekly market monitor guest is betting on small cap stocks. He says:

  • Large caps, driven by investors piling into ETFs, are way overvalued
  • Small caps tend to have less debt
  • Less exposure to eventual ETF unwind (crowded trade, possible bubble, will end badly)
  • Over the past year, Russell 2000 is up 15% while the S&P 500 is up 22%
  • The performance gap between the two indices is unsustainable

His picks are companies with strong recurring, growing revenues and are names you want to own for 5 years or longer:

Axon Enterprise (AAXN – $1.2b market cap) (Villere owns shares)

  • Key: Growth in body camera business accelerating as result of high profile police shootings and ROI from reduced complaints
  • Formerly known as Taser
  • Dominant player in non-lethal weapons, growing body camera business
  • Subscription revenue model for massive video data storage
  • Recently began deploying Axon Fleet in-car video systems here in New Orleans, LA State police, and Fort Worth PD
  • Citizens, officers behave better when camera is on; A Cambridge study found that complaints against officers are down 93% with use of cameras
  • We spoke to decision makers at police departments all over US, this is a key trend and Taser is the top player “it isn’t the cheapest, but it’s the best”
  • Reduction in complaints leads to massive cost saving for police departments
  • Full weapon/camera/service plan cost $99/user/month
  • Massive international market opportunity, CEO spending year building int’l business

 

 

 

 

 

 

Pool Corp – (POOL – $5.1 Billion Market Cap) (Vlliere owns shares)

  • Largest distributor of Pool materials, equipment, chemicals, related products
  • Larger than next 52 competitors combined
  • Stock sold off on concerns about online competition; core EPS growth still 15-20%
  • Massive growth in Texas, Florida will boost pool installations
  • Upgrade/refurbish cycle lagged from 06 housing boom
  • 4% dividend

 

 

 

 

 

 

2U (TWOU – $3.1b Market Cap) (Villere owns shares)

  • Key: GetSmarter acquisition adds partners, accelerates growth outlook
  • Core 2U business partners with top universities to create online graduate degrees
    • Partners include NYU, Yale, Northwestern, Cal-Berkeley, USC, UNC-Chapel Hill, Syracuse
    • Students get the same degree, same quality education, and pay the same tuition
    • Schools love it because they can actually make money even though 2U keeps 60%+ of tuition
    • Very long (10-15 year) contracts/deep relationships; 100% retention (zero churn)
    • Great margins once programs are up and running, esp from programs where they offer the same degree through multiple schools (MBA at UNC, Syracuse, American, Simmons; Nursing at Georgetown, USC, Simmons)
    • Adding 58 new degree partner programs by 2020
    • Target 30+% revenue growth
  • GetSmarter acquisition adds-
    • non-degree certificate programs
    • new relationships with Harvard, Oxford, Cambridge, MIT, U Chicago, others
    • international footprint
  • Recently added MBA programs at Rice and UC-Davis

This entry was posted in Market Monitor. Bookmark the permalink.

Leave a Reply