When we talked on Tuesday, I showed why you should wait until after a new IPO sells before investing.
In fact, after its initial drop, Veeva Systems Inc. (VEEV) went on to earn 863% in just a tad over five years.
Here’s the thing. During that same period the benchmark S&P 500 earned a respectable 70%. In other words, our play on cloud services for the life sciences sector beat the market’s benchmark by 1,132.9%.
That kind of return happens all the time in high tech, which I have proven time and again is the road to wealth.
With a high-octane stock like Veeva, $25,000 can turn into $240,750 in half a decade, with plenty of upside still ahead. You just need a handful of these tech-centric market crushers to become a millionaire.
Today, I’m following up to show you why Veeva is such a great long term play on the $1.2 trillion drug and biotech sector.
Establishing a New Niche
You have to hand it to Peter Gassner. When he founded Veeva back in 2007, he was way ahead of the curve. But Veeva’s CEO knew the life sciences sector needed all the help it could get.
And Gassner had the perfect background for making that intuitive leap.
Armed with a degree in computer science, he began his career back in 1984 with International Business Machines Corp. (IBM).
He then served as a vice president and general manager at the financial software firm PeopleSoft, now a unit of Oracle Corp. (ORCL). After that, he became a senior vice president at cloud leader Salesforce.com Inc. (CRM).
This is where big money comes into play. Gassner was in charge of building the Salesforce.com platform, a role that helped the firm go public in 2004.
That successful IPO is considered a seminal moment in the short history of cloud computing. Indeed, it was the first time most investors had heard of the practice of delivering software tools and applications from remote data centers via the Web.
Today, Veeva serves a vital role in the entire life sciences sector. Despite its huge potential, the drug industry is filled with time-consuming and expensive headaches.
Consider that the Biotechnology Innovation Organization (BIO), a trade group, looked at 7,400 drug programs by 1,103 companies.
The news was not good -just 9.6% of drugs scientists discover ever get approved for sale.
On top of that, a few years back the Tufts Center for the Study of Drug Development found that it cost $1 billion to get a new drug to market.
Tufts has since updated that study to reveal the field is only getting tougher. It now forecasts that the average drug these days takes 12 years to go from discovery to commercial launch.
When you factor in the impact of failed trials, the average cost of getting a new drug to the public is a staggering $2.5 billion.
A Lifeline to the Life Sciences
With such daunting data, no wonder industry leaders are on the lookout for the kinds of solutions that Veeva provides. They can really drive down the cost of discovery and shorten time to market.
Veeva offers tools to help clients manage the entire clinical suite. It covers everything from collecting and verifying data to making sure clients are ready for any government inspections.
That fact alone helps explain why so many top-tier firms are now Veeva clients. We’re talking a total of 600 firms.
That kind of success has helped Veeva grow like crazy. By 2016, the firm’s sales base had reached $400 million. By next year, I’m expecting sales to approach $1.3 billion.
And from where I sit, I can see yearly sales hitting $3 billion by mid-decade.
That’s because Veeva is just now pushing into the even bigger industrial market, which is twice the size of its core life sciences sector.
Now you know why I think there’s still plenty of upside ahead.
Over the past three years, Veeva has grown its per-share profits by 47%. Just to be conservative, let’s cut that rate in half.
And remember, stock prices tend to track earnings growth. That gives us a double from here in just a tad over three years, which is a very conservative forecast.
At that rate, the original $25,000 will have turned into $431,500. And that means seven years out, that original investment would be worth $863,000.
Like I keep saying. You only need a handful of stocks like Veeva to turn you into a high-tech millionaire in just a few short years.
And the millionaire-making power that you can get out of groundbreaking technology can even extend way beyond stocks.
Buying in right after an IPO is pretty reliable way to lose money, even with a winner like VEEV, but if you can buy in before the IPO, and become one of the insiders, then the potential gains can be astounding.
I’m talking about profits of up to 1,000%, over time periods that put the S&P 500 completely to shame.
Of course, when it comes to finding these kinds of market crushing private deals, it really pays off to have an expert in your corner.
That’s why my friend and colleague Neil Patel has been putting together the kind of research you need to find the best deals on cutting edge startups.
All you need to do is click here to get started.
Cheers and good investing,
Michael A. Robinson