Price The Market Part 16
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hi, I'm Glen Bradford and this is my story about a man that decided to price the S&P500.
85. Dean Foods (NYSE: DF) is trading up from from their most recent low of around $8. I don't usually call bottoms, but I think that Dean Foods just put in the floor price for a while. As far as the stock is concerned, it's like the incredible hulk showed up around early 2007. It's clobbering time! Fortunately for those who are patient, I think that clobbering time is over for Dean Foods. Target: $10-$15. As the global economy slows down and the fraud of overvaluing commodities that have recently become an asset class themselves, I think that Dean Foods will outperform the rest of the market.
86. CVS Caremark (NYSE: CVS) in the last few years has transitioned from a growth company to a stalwart and looks to be trying to shift back into overdrive. I'm relatively skeptical here. I'm not particularly sure that additional corner pharmacy / retail stores are necessary these days, but my perception is that they are in relative abundance and I could be wrong. Combine that with the perception that insurance allows the medicine industry to charge above-market-clearing prices and you begin to see how this sets a case for having more than we really need. Target: $40-$45.
87. Estee Lauder (NYSE: EL) has been killing it since the recession. That said, I think the stock has gotten ahead of the company. Target: $75-$90. This is dangerous because it has run up far past where I think that the fair value is. Generally when things like this start falling, they fall through their targets and as such I'd recommend staying away for now. The company has a history of choppy revenues and their sales growth over the past 5 years is less than 7%. Tagging a multiple of over 20 is a little far fetched, but I understand how this stuff happens because their margins have been growing. Danger.
88. Avon (NYSE: AVP) is hitting new lows while Estee is hitting new highs. That's what happens when you have bad management -- the CEO was #1 on Jim Cramer's Wall of Shame. What's funny to me is that anyone who makes this wall can keep their job past the next payday. I don't particularly know how someone so terrible can be put in charge of an organization of this size and stay there after perpetual poor performance. Frankly this amazes me. That said, I'm willing to bet that a different person can't mess it up more. Target: $20-$25. If the new person is good enough, they might turn this back into a company that deserves a growth multiple. If you compared this to Estee, the price of Avon would be over $40. Price is what you pay. Value is what you get.
89. Archer-Daniels-Midland (NYSE: ADM) is not as gool as it used to be with the higher commodity prices of early 2008. Those were exciting times. At these prices, ADM looks fairly valued. Target: $27-$37. I think that there is upside here and it is my belief that agricultural commodities don't have as much downside as industrial commodities. People have to eat. People do not, however, need to build large buildings of vacancy as they have done in various empty cities around the world and cities with high vacancy rates and unemployment to match.
90. Brown-Forman (NYSE: BF-B) is making more progress than usual recently. I'm a fan of Jack Daniels and Southern Comfort. Their price is a bit steeper than I'd like it to be. Target: $64-$75. I think that this is overvalued. I'd go with Beam Inc (NYSE: BEAM) over Brown-Foreman at present. This is a decision completely based on price. I like to pay less than things are worth. I strongly urge you to consider thinking from the same perspective.
Stay tuned!
Glen Bradford has no positions in any of the companies mentioned.
