Cerner Corp. (CERN-Q)

(A Top Pick April 12/17 - Up 2%.) There was Management turnover and they became concern. The founding CEO was gone. Sold it a couple of months ago. Not cheap enough.

(A Top Pick April 5/16. Up 19%.) Two of his favourite sectors are Information Technology and Healthcare, and this company borders both of those. It is a company in the healthcare space that basically takes records from paper to digital, which is a mandatory event in the US.

This basically supplies information technology to hospitals, healthcare systems and ambulatory companies. It has gone through a couple of years where it has shifted from selling software as a package to software as a service. It always takes time to roll over the way your profits are measured, and Wall Street is not patient about those kinds of things. Their revenues and profits have continued to grow. It used to trade at 35X earnings and is now down to around 20X, and represents an exceptionally good value in the healthcare space. (Analysts’ price target is $60.)

(A Top Pick Jan 13/16. Down 4%.) This converts medical records from paper to an electronic form. There is a law in the US that at a certain point, X number of paper documents have to be converted to digital. Regardless with what happens with the healthcare act going forward, this is in place and digitalization will continue. This company went from fully recognizing sales all at once, to more of a subscription type revenue recognition model, which has caused some lumpiness. He has a half position, and is looking to buy more, but wants to see some of that lumpiness disappear.

About 18 months ago, they changed from an upfront sales model to more of a subscription model, much like Adobe did a number of years ago. That’s been causing major headaches for ANLESS (?) in trying to gauge how much their sales and backlog is actually growing. The contract can be somewhat lumpy. A situation where the company continues to work through a change in its billing management. Came very close to buying more at $48. Thinks ANLESS has been burnt and are very cautious about making investment decisions right now, because they can’t figure out how long this takes to roll over. The profitability is still there and this is as cheap as it has ever been. Trading at about 20X forward earnings.

He really likes technology, both in financial services and healthcare. Companies are needing to spend to find ways to save costs and become more productive. This company has very strong technology around medical records and clinic workflow, and the stock is performing well.

Their premise is basically digitizing health records. Demographically that is a good place to be. There are lots of doctors’ records that are either handwritten or digital in a format that is not compatible with others. There is a US law that says that by this year you have to have this and next year you have to have that, etc. It is a forced conversion to electronic data management and records. They’ve generated about 15% revenue growth and 20% earnings growth consistently. Over the past year they’ve moved from a one-time revenue recognition model to a subscription type model, and the stock really came off. It is now started to come back.

This is a technology company in the healthcare space. They are in the digitization of electronic health records. The US has mandated that they have to move from paper to electronic and the whole procedure can be complicated, but this company does it all.

This is on the technology side, so he looks at it as the best of both worlds in technology and healthcare. There are government mandates in the US requiring companies and hospitals to adopt technology like this, in order to digitize records with more automation on payments and reimbursements, going from a fee from service to a fee for value. 14% revenue growth and 22% earnings growth annually over the past 10 years.