The shares of this insurance business were recently upgraded to ‘Buy’ at Goldman Sachs.
SelectQuote, Inc. (SLQT)
From Cabot Growth Investor
We always like to play the odds, and when it comes to individual stocks, that means having as many pieces in place that correlate with great performance as possible. That’s why we’re taking a swing at SelectQuote, which has all the makings of a winner. The story is outstanding, as it operates the biggest insurance marketplace out there, and the firm has legitimate barriers to entry, thanks to the network effect and its own technology and history (one billion data points it integrates into its lead generation and routing efforts).
Numbers-wise, sales and earnings grew at triple-digit rates in Q4, and analysts see the bottom line up 83% this fiscal year (ending in June) and another 48% next year, both of which are likely conservative. The only hitch here is that about three-quarters of revenue comes from senior-related health plans (especially Medicare Advantage), but SelectQuote is taking share rapidly in that field and, of course, it’s a solid long-term growth area as long as the government doesn’t get overly involved.
As for the stock, it’s wild and wooly, but it held its 50-day line twice during the Nasdaq’s downturn and recently popped back toward its old highs. Granted, it’s backed off since then, but that’s par for the course these days. We’ll start a half-sized position (5% of the portfolio) on this dip with a stop in the mid-20s. BUY A HALF.
Michael Cintolo, Cabot Growth Investor, cabotwealth.com, 978-745-5532, April 8, 2021