Align Technology Is My Biggest Stock Winner, and I'm Not Selling

By Motley Fool Staff Markets Fool.com

Align Technology (NASDAQ: ALGN) is disrupting the market for braces, and that's sent shares 170% higher since Fool contributor Todd Campbell bought them in 2014. But he thinks even better times might be ahead for the company, so he's planning on holding this company for the long haul.

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In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes asks why.

A full transcript follows the video.

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This video was recorded on May 3, 2017.

Todd Campbell:On the winning side of the column,I want to talk aboutAlign Technology. Align Technology is a stock that I got invested in in 2014. Like many parents out there,I was drawn to this company becausemy teenage boy needed to get braces. As I was sitting in there andwatching people pile in and pile out ofthe orthodontist's office,I started thinking to myself, what has really changedin the way of bracesover the last 20 or 30 years, other than adding charms to your metal brackets that reflect your sports interests? What has really changed in this way?

Kristine Harjes:Wait,do they really have that now?I'm sorry to cut you off. Do they actually have that now?

Campbell:Yeah. My son,unfortunately, was not a candidate for Invisalign,which is Align Technology's product, because he had a more severe need of straightening thanInvisalign can address. So he actually picked the Patriots' colors,because I know, God forbid, we'reup here in New England, and that happens to be his team. Please forgive us,rest of the United States.

Harjes:You knowhalf our listeners just stopped listening.

Campbell:Yeah, I know,shutting off left and right. But yeah, they actually do have that. If you think about thepotential to disrupt that market, and tothink about the millions and millions of adults and teenage kids who need braces or want braces, and fortunately can afford those braces. Ifyou can come in with a product that savessome money, cuts the cost, andyou can create a better, more desirable experience for the patient, that's a win-win in my book. That's the big reason thatI went out and boughtInvisalign, which is now up 170% for me. You talk about the minority of stocks outperforming the majority of underperformers, this was obviously a big winner, up 170% sinceMay of 2014. I'd like to say thatI knew I was going to get that kind of areturn in a few short years,but that's not the case. My decision to buy them was simply,how much of the market have they penetrated now with Invisalign, anddo I think consumers are going to want a clearaligner systemrather than metal brackets? And what is the opportunity to expand that beyond the United States as a global platform?

Harjes:When you'relooking at this company going forward --you're still a shareholder, right?

Campbell:I am, and afterdoing my homework this past weekend, there'snothing that has changed as far as the reasons behindwhy I bought it and would want to own it. If youlook at the most recent quarter, sales were up30% year over year. If youlook back at the Q1 2014, thequarter before I bought my shares,revenue growth was only up, "only," 18%. So, you have, as they're making moreheadway into treating more complicated cases, andas they're making more headway in rolling out this product,Invisalign, globally, inimportant markets like Asia, for example, wherebillions of people live and are getting wealthier and can afford products like this,I think there's a tremendous amount of opportunity.I think investors always benefit fromgoing through and reading the earnings transcripts of companies.I recommend they do that for Align Technology,because they will learn someinteresting things about the growth opportunities inplaces like South America, i.e. Brazil, and Asia, andwhat they're doing to try tobetter penetrate the teenage market.I thinkthere's a lot of opportunity, still, from here. If youlook at their annualized shipments for cases, it's running at about 800,000 cases. Theyestimate the total market opportunity would be 10 million cases. So you're really only talking about8% penetratedacross the entire market.

Harjes:That'sincredible, yeah. Before we turn over to a potential loser you might want to talk about,what would you say is the biggestlesson you've learned from Align?

Campbell:Don't getworried about the quarter-to-quartermachinations. There have been competitors like3Mthat are rolling out their own products. There have been patent disputes. There are a lot of reasons that, day to day,I could have looked at this and said, "Oh, boy,maybe the run is over andI should book this gain." Instead,I looked at it and said, "No,they're still the leader in this space, and they're 100% tied to this disruptive product." So as long as that remains to be the case, and revenuecontinues to grow the way it is, I think this is a stock that I can seeholding on to for years and years.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell owns shares of Align Technology. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.