SMLR

$SMLR Semler Scientific has just reported earnings and the stock took a 25% hit. This is not a “write-up”, I’m just sharing how I’m thinking about the situation and investing in general.

I’ve been following the company since Yen Liow pitched it on Equity Mates here (the pitch starts around 25m38s):

“Following” is probably an understatement here. I was watching it like a hawk, is more like it. From their Q3 earnings call, I got the sense that they might be facing short-term headwinds, which transpired in the stock price. But it was still too expensive for me. So I decided to wait, hoping Q4 would be bad as well.

Now I don’t remember where I got this from, it might have been from researching $ISR Isoray, a cancer treatment medtech, but I remember that even cancer treatments were being postponed in the Q3 2021 due to Covid.

I thought: hey, if life-threatening illnesses are taking the back-seat, surely there’s a chance that Q4 will be less than stellar for Semler, especially given the outbreak of Omicron.

So I waited, and indeed, it was a rough quarter. Variable fees were down QoQ and YoY, and cost of revenues were up, significantly.

The stock now trades for ~13x EV/EBIT(ltm), and that’s a good enough entry point for me, so I took a bite.

General Investing Thoughts

This purchase was surprinsgly easy for me. Probably because I had decided on the course of action before hand, should the stock price drop. The other reason might be the last book that I read (summarized here), which describes how the market ALWAYS overreacts to bad news.

Of course, I don’t know what the future holds and this could turn out to be a bad investment. There are some significant risks, such as customer concentration. So this is not investment advice. But people tend to overcomplicate things and read too much into quarterly numbers. I don’t think the company is suddently facing some new competition or dealing with fundamental issues.

Rather, I think it was simply hard to do business as usual when Omicron was the number one concern on everybody’s mind. Simple as that.

Of course, I’ll monitor and adapt in the coming quarters, but right now it seems like a no-brainer bet to me.

Update (2022-03-03)

>}}


Until next time, stay cool & stay invested!