Price The Market Part 34
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hi, my name is Glen Bradford and after writing 34 of these introductions, I'm running out of good material. This is a story of my journey of me following through with my decision to price the S&P500. Welcome aboard.
237. Davita (NYSE: DVA) reminds me a lot of my CAPS Netflix call. In a few months earlier this year, Davita got destroyed. Once the price dropped into the less-than-sensible value bin for a growing company, enthusiastic investors put in a floor and it's only been up from there. The question is, what should you do now? Target: $80-$90. With the momentum heading in the right direction and management guiding for more growth than their present multiple suggests, I think that there is some value to be had here. I would have liked to have found this a few months ago and $10 cheaper.
238. Dentsply International (NASDAQ: XRAY) has a token dividend. A token dividend is one of those things that it's nice to have but it's not going to attract any additional investors. The company itself is fairly priced. For 20% earnings growth in the forecast for the upcoming year after a few years of slower growth, a multiple around 17.5x this years and 15x next years earnings sounds about right. Target: $32-$38.
239. Express Scripts (NASDAQ: ESRX) put in a floor after the recent price drop. I think that the next year will have more buyers than sellers at this price given the present multiple and growth rate. Target: $50-$55. I think that the valuation got ahead of the fundamentals at $60 and when that happens, you tend to get snapbacks like this that bring in the bargain hunters who put in price floors. This was a steal at $40 and I'd find it tough to argue owning at $55, but I think that we'll still see it in the next 12 months. Is 10% enough for you?
240. Edwards Lifesciences (NYSE: EW) is really expensive. It is out of my price range for sure. Target: $60-$70. I'd be willing to bet that we don't see the $80s for a few years until the fundamentals catch up. Their share repuchase program is not the best use of cash that I've seen. I'd prefer to see them hold the cash and wait for truly bargain bin prices, if they ever come. Then again, I like to see management act more like astute investors as opposed to people afraid to hold cash.
Extra: Pat wanted me to take a look at Amcon Distributing Co. (NYSEMKT: DIT). My initial thoughts are that sure, this is undervalued. In so far as trying to justify owning it, I couldn't. My target is of course $75-$80. Do I think that it will trade higher? Probably not. I like to think that this is a situation that is attractive from an acquisition standpoint. There's very high insider ownership and the company could safely kick off a larger dividend. A larger dividend would make this more attractive to me. This is a case that, even though the company is obviously worth more, I am not going to own it. The goal of investing is not to own undervalued companies but to own companies that will increase in price from the time you buy them.
In this case, I think that being undervalued and undiscovered will likely be the 'new normal' because it is too small to attract those big, dumb, ugly mutual fund and other institutional investors who like to pay full price for their constituents who don't know any better.
If you want me to price your company, send it to me at globalspeculation at gmail.com.
Glen has no positions in any of the companies mentioned above.
