Ellie Mae (ELLI)
- We first picked this in 2012 on Seeking Alpha, when the share price was just $15, basically on the basis of the business model
- That business model sure has delivered. In essence, it makes the whole mortgage origination process simpler, faster, easier cheaper and by cutting duplication it's less prone to error. It's basically a problem solver by re-engineering the industry supply chain.
- The most impressive thing is that revenues and profits have kept on rising, no matter what the state of the mortgage market (as shown in this article)
- The main risk, a slowdown of the mortgage market because of rising interest rates (and a drying up of refinancing existing mortgages), seems therefore somewhat overblown to us, without entirely discard it as the stock, although off the highs, is still priced as having little margin of error.
The graph is nice:
And you see that we're at crucial support levels, so picking up a few stocks on Monday (even if it's not yet 2016) might seem a good idea. We're not going all in, and should it decisively break these levels one might have to sell the initial position, even if market expectations are for a considerable rise in EPS. Look also at the number of times Ellie has been able to beat expectations: