Short term focus versus long term results

Short term focus versus long term results

Diabetic Investor has received several questions as to why shares of Dexcom (NASDAQ: DXCM) after rising almost 10% prior to the earnings announcement have given back nearly all of the gains since the earnings announcement. Many wonder why analysts do not see the long-term prospects for the company. Why they fail to grasp that even the best run companies can and do experience bumps along the road.

Frankly Diabetic Investor has never understood analysts nor do we care very much what they think. The fact is, yes, those pesky facts, Dexcom is not just one the best run diabetes device companies. They also have the best product on the market and better products in the pipeline. Never did we expect that it would be nothing but sunshine for the company as move towards the future. We knew there would be blips along the way. Still when it comes to the investment community old habits die hard and while everyone talks about long term the focus is still short term.

What’s astonishing here is most these analysts with their short-term focus are missing a much bigger picture. The hidden value of Dexcom is the slap it on turn it on Band-Aid like sensor they are working on with Google. This is the goose that will lay the golden eggs. This is the right product that will come at the right time and it’s not an overstatement to say it could forever revolutionize diabetes management for ALL patients with diabetes NOT just insulin using patients.

This is the point we’ve been trying to make all along. This is the point most analysts just don’t get. They like many others are too focused on insulin using patients and not ALL patients with diabetes.

Think of it this way. By our estimates there are approximately 5 million insulin using patients in the US. Of these 5 million approximately 500,000 use an insulin pump, the rest following multiple daily injection (MDI) therapy or long-acting insulin plus pills. By contrast there are nearly 25 million patients who do not take insulin to manage their diabetes. Just doing some very simple math it’s clear that the non-insulin market by its sheer size is the road to riches.

Even better and what’s lost by most analysts is Dexcom does not have to capture a huge share of this market to make tons of money. So, go ahead and focus on the short term but this focus will blind the real story here, the true potential of Dexcom. Smart investors will take advantage of these dips in the company’s share price to add to their positions. Investors who will be handsomely rewarded over the long term, something the company has proven consistently.

As Momma Kliff used to say; “This isn’t a sprint but a marathon and you don’t train for a marathon like you would a sprint. The results of the marathon will take longer than a sprint but the reward is well worth all the hard work put into the race.”