Most investors tend to turn their back on stocks after they have rallied strongly. It's a short-term mentality that kicks in whereby the investor assumes they have missed the boat and that the stock in question no longer presents as a decent buy.
Unfortunately, it's also a trap that has stopped too many investors from making some fantastic long-term profits.
Are you too late to the Veda Group party?
One company that has experienced a remarkable rally in recent times is data analytics business Veda Group Ltd (ASX: VED). Since sinking as low as $1.83 in mid-July, the stock has jumped 31.9% to be trading at $2.42, just 5% below its 52-week high of $2.55. Although the stock is no longer as cheap as it was two months ago, I am now even more confident that it is a solid investment prospect.
As a shareholder, I was very impressed by Veda's first set of full-year results as a public company. For the year ending 30 June 2014, Veda grew revenue by 12.4% while net profit after tax (NPAT) jumped by a startling 141.5%. While it was a strong 12 months for the company it is Veda Group's future prospects that have me most excited.
The Global Financial Crisis taught businesses around the world the importance of only lending to customers capable of repaying their debts. As a result, credit reporting standards are becoming stricter and demand is growing for Veda Group's products and services. The introduction of the Comprehensive Credit Reporting regime earlier this year, which allows more aspects of a customer's credit history to be analysed, should provide extra drive to this trend.
Although the stock is not a bargain at its current price, Veda Group is a high quality corporation set for fantastic growth in the coming years, making its valuation more than justifiable. It is my belief that investors who choose to ignore this stock as a result of its recent rally could be forfeiting the opportunity to make some impressive profits over the coming years.
