Larry Robbins' Stock Picks With Potential Upside Of 15% Or More

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Includes: BMC, FLS, SEE, TMO, TYC
by: The Ethical Investor

In this installment of my analysis of recent purchases made by renowne-d investors, I will look at stocks bought by Larry Robbins' Glenview Capital Management using the latest available SEC filings of the fund. By performing relative valuation, I have calculated my preliminary price targets for the stocks to judge the attractiveness of these companies at current prices. Based on my preliminary analysis, I have short listed 5 stocks that offer a minimum return of 15% from current levels.

Sectors represented on the list include healthcare, technology, basic materials, capital goods, and conglomerates.

Thermo Fisher Scientific Inc. (NYSE:TMO)

Thermo Fisher is a $21.29 billion company by market capitalization and provides analytical instruments, equipment, reagents and consumables, software, and services for manufacture, analysis, discovery and diagnostics. The stock has barely changed in value during the last year, lagging the 2.6% increase in the S&P500 (NYSEARCA:SPY) index. During the last five years, earnings increased at an annual rate of 13%. Analysts expect the company to maintain this growth rate over the next five years.

Glenview Capital increased its position in TMO by 6%, acquiring approximately 250,000 shares. The stock traded in a range of $50 to $64 during these three months. TMO currently trades at $56 a share. Applying my estimated P/E of 14 to 2012 EPS of $4.76, my initial 12-month price target for TMO is $67 a share. A return of 18% is possible from current levels.

BMC Software, Inc. (NASDAQ:BMC)

BMC software is a Houston, Texas, based technology company offering solutions to large enterprises for automating the management of IT processes, mainframe, and cloud computing environments. The stock has declined by 22% during the last year. After growing at a respectable rate of 17% during the previous five years, the company is now projected to increase its earnings at an annual rate of 9% over the medium to long term.

Glenview Capital increased its position in BMC by 78% by acquiring approximately 2.46 million shares during the 3rd quarter and now owns a total of 5.6 million shares of BMC stock. Applying a P/E of 12.5 to the 2012 average analyst EPS estimate of $3.51, my 12-month price target of $44 a share is obtained. A return of 15% is possible from current levels of $38 a share.

Sealed Air Corporation (NYSE:SEE)

SEE manufactures a range of packaging and performance-based materials for the food, industrial and medical industries. The company showed zero growth in earnings during the last five years. The stock declined by 37% during this time period. Going forward, the company is expected to grow at a 9% clip for the next five years. Applying a multiple of 14 to 2012 EPS estimate of $1.79, my 12-month price target of $25 a share is obtained. It would imply a return of 17% (including a dividend yield of 2.5%) from current levels.

Glenview Capital initiated a position in SEE by purchasing approximately 4.32 million shares during the 3rd quarter. The stock traded in range of $17 and $23 during this time period and it currently trades at approximately $21 a share.

Flowserve Corporation (NYSE:FLS)

Flowserve is a manufacturer of flow control systems. This Irving, Texas, based company has a market cap of $6.36 billion and is projected to increase its earnings at an annual rate of 20% slightly higher than the projected 18% growth rate of the industry. Glenview Capital increased its position in FLS by 53% by buying approximately 970,000 shares. My target of $135 implies a return of 18% (including dividends) from current levels.

Tyco International Ltd. (NYSE:TYC)

Glenview Capital acquired 1.16 million shares of TYC during Q3 of last year taking its total position in TYC to 5.9 million shares. The $23 billion company by market capitalization provides security products and services, fire protection and detection products and services, valves and controls and other industrial products. The company's earnings contracted at an annual rate of 10% during the last five years. However, analysts expect the company to now increase earnings at an annual rate of 13% compared with the projected 16% growth rate of the industry. Applying my P/E estimate of 16 to 2012 EPS estimate of $3.64, my 12-month price target of $58 is obtained. A return of 17% (including dividends) is possible from current levels of $51.

As always, please do not consider this a "buy" list, rather use this list as a starting point for your research. Of the companies listed above, I find TMO and FLS particularly attractive based on fundamentals and long-term growth prospects.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.