Stryker and eHealth are Two Top Picks from this Professional Portfolio Manager

June 26, 2020

St. Denis Villere III is Partner and Portfolio Manager at Villere & Co. Mr. Villere joined Villere & Co. in 1999 when he launched Villere’s first mutual fund.

He started his career as an institutional research analyst and equity sellside analyst with Gerard Klauer Mattison, a Wall Street institutional equity research firm. He earned a B.S. in finance from Southern Methodist University. He is a member of the CFA Institute.

Mr. Villere has been frequently quoted by The Wall Street Journal, Associated Press and Reuters.

In this 3,950 word essay, only in the Wall Street Transcript, Mr. Villere has some interesting stock picks for today’s volatile market.

“We are really bottom-up investors. We really don’t look at what’s going on in the economy and try to figure the macro and then trickle down to individual stocks. We take the opposite approach and look at very good companies that have low debt and strong cash flow characteristics.

We like companies that are low price-to-earnings relative to their growth potential.

While we are multicap, we do focus on the smaller- and mid-cap names, as we find those are where most of the value is that maybe Wall Street hasn’t seen.”

“Stryker is interesting because we tend to do a lot of research and talk to a lot of orthopedic surgeons that were installing anything from knee replacements to hip replacements to spine surgeries. Stryker is an absolutely industry-leading medical device company.

However, over the short run, interviewing many of these orthopedic surgeons, we found that their businesses literally were going to zero. They stopped performing any of these things during the shutdown, as many of these procedures were considered nonessential.

Therefore, the stocks went down, and I think that just sets up as a perfect opportunity to buy an industry-leading company at an extremely reasonable valuation knowing that these nonessential surgeries will come back…”

Mr. Villere bangs the table for another one in the healthcare tech space:

eHealth (NASDAQ:EHTH) is a great story considering the current environment, as they thrive with people doing more remotely on the internet. They own the website that was essentially founded about 20 years ago to make people buy Medicare insurance. It is a very simple story. They are essentially trying to make it as easy for seniors to buy Medicare insurance online as it is to buy a plane ticket on websites like Expedia (NASDAQ:EXPE) or Travelocity. The competition is literally and; websites that are extremely clunky and not easy to use.

So the backdrop is, there are about 10,500 people every single day who are turning 65 and eligible to buy Medicare insurance. eHealth is just hoping to go from 1% share of the market up to 4% to be very successful. When we bought the stock, there was a little bit of an opportunity because there was a short report written about how these guys calculate churn or the rate at which customers leave, as this is an important component of the lifetime value of their contracts and how they recognize revenue. It is literally done based on an accounting rule called ASC 606, which is the standard way that companies like this account for it.”

Get more information on these and many other top picks from this highly regarded portfolio manager, in his 3,950 word interview, only in the Wall Street Transcript.