Baxter International: Promises to Keep [View article]
From the standpoint of prospective Revenue, Earnings and Cash Flow I see no catalyst. However:
1) the recent push toward $60 looks to me like the Opening Act of what eventually will be plainly in view as a Head and Shoulder top;
2) $48-50 would also deliver the price into its 200 Day Moving Average storage bin;
3) it would also offer the Company at less than 12 Times the 2011 Earnings Consensus. A business that has disappointed as often as has Baxter, and whose share price as grown at less than 7% compounded annually over the last two decades should be acquired, if at all, only at some discount to a peer group or the market.
Molson Coors: Better Days May Be on TAP [View article]
Thank you for your comments. For purposes of constructing a 2011-2012 model I assumed:
- Revenue Growth Up 3% --- 1% Price; 1.5-2% Volume - Gross Margins at up to 45% --- improved Operating Efficiency - Equity In Miller up 6.5-7% --- the key assumption, not widely shared - effective Tax Rate: 25% --- higher than previous years - no share repurchase --- Company may in fact start one - Cash Dividend up 16.5-17% each year - Cp Ex up $50 mil this year --- Canada - Assets and Net Fixed Assets up 3-3.5% - DD&A at 16% NFA --- N.B. not the way it is viewed internally - Net Free Cash Flow at $440-450 Million each year.
At 88% of an assumed Market P/E of 16 I come to target prices for this and next year of $59 and $65, respectively.
A (Non-Serious) Retreat Is on the Way [View article]
Dear Devilfishline,
I have no idea, and no especial interest, in what happens to stock prices between now and this Friday. I am merely arguing that an 8-10% pullbakc is likely between now and one of these fine Fridays.
Any Sum-of-the-Parts analysis of an integrated energy company entails numerous heroic assumptions on hydrocarbon prices and retail margins. These must then be massaged by a stab at Investors collective required rate of return. Too intricate and complex for my skills and time availability.
Accordingly, and although it was a tooth pulling exercise between me and Senior Management, at my urging we did cash out our position in MRO a few hours after the Company's split-up announcement. Will the future prove us to have left a bundle of chips on the table? Very possible. Here is a certainty: I will go to my grave believing that one is best advised to ring the cash register on a 44% capital gain score, plus the 3% entry yield, on a 1.33 Beta stock of a suddenly malleable business model.
Your instincts on keeping MRO intact strike me as sound. Often it is best to leave well enough alone. Thank you for reading, and I hope it helped you with something. Happy New Year. Roger
Another reader has raised the same possibility, namely a split up on the Sum of the Parts theory. Should by no means be ruled out. The thought had not occurred to me, so I am grateful that you set it in front of me. It warrants serious consideration.
An intriguing possibility, one that I had not thought of, thus you have my gratitude for its suggestion. Guess is MRO's investment bankers would busy themselves with Discounted Cash Flow analyses --- valuing the Downstream along the lines of Valero or Sunoco; the Upstream something like Anadarko? Rough guess: the pieces would sum to $48-50. If anywhere closoe, what stays management's hand in going ahead?
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Sir,
There is no compelling reason not to follow your Put Option tactic. It and similar approaches were not raised in the ABT essay out of space and length cosiderations. Your arithmetic is correct and your advice is sound.
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Sir:
My understanding is that ABT's lead position in the entire stent field was brought in via the Guidant acquisition. In any event ABT management has been adrioit in assimilating that Company, one of the reasons underlying my favorable estimate of its longer future.
Please accept my appreciation for your kind and thoughtful comments.
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Skang2,
I'll stand by my comments in the ABT essay that now is a reasonable entry point. You and I and others can discuss what next to do when the stock is changing hands in the low-mid 60's.
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Rich Joy, Tom,
You are each knoweldgeable in ways shared by ABT's senior managers --- which is one of the motivations underlying the Company's strategy to "buy" its way into existing and approved therapies.
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Andruomail,
I believe you have a point that prescription drugs have seen their best days in America, i.e., health care and treatment will continue to veer in directions of nutrition and what may be more generally thought of as life style changes. One attraction to ABT is, for me, its 60% (and shrinking) reliance upon drugs for Total Revenue.
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Dear Howard:
Joe Paterno is not Penn State's only asset --- my understanding is that its Business School is first rate, and I am certain that your Son has and will continue to derive lasting benefits from studying there.
Thank you for your comments and, as much as I am rooting for ABT I hope your need for Humira is short lived.
Baxter International: Promises to Keep [View article]
1) the recent push toward $60 looks to me like the Opening Act of what eventually will be plainly in view as a Head and Shoulder top;
2) $48-50 would also deliver the price into its 200 Day Moving Average storage bin;
3) it would also offer the Company at less than 12 Times the 2011 Earnings Consensus. A business that has disappointed as often as has Baxter, and whose share price as grown at less than 7% compounded annually over the last two decades should be acquired, if at all, only at some discount to a peer group or the market.
Thank you for commenting.
Molson Coors: Better Days May Be on TAP [View article]
- Revenue Growth Up 3% --- 1% Price; 1.5-2% Volume
- Gross Margins at up to 45% --- improved Operating Efficiency
- Equity In Miller up 6.5-7% --- the key assumption, not widely shared
- effective Tax Rate: 25% --- higher than previous years
- no share repurchase --- Company may in fact start one
- Cash Dividend up 16.5-17% each year
- Cp Ex up $50 mil this year --- Canada
- Assets and Net Fixed Assets up 3-3.5%
- DD&A at 16% NFA --- N.B. not the way it is viewed internally
- Net Free Cash Flow at $440-450 Million each year.
At 88% of an assumed Market P/E of 16 I come to target prices for this and next year of $59 and $65, respectively.
Here's hoping. Roger
A (Non-Serious) Retreat Is on the Way [View article]
I have no idea, and no especial interest, in what happens to stock prices between now and this Friday. I am merely arguing that an 8-10% pullbakc is likely between now and one of these fine Fridays.
Roger
Marathon Oil: Positive Signs Ahead [View article]
Any Sum-of-the-Parts analysis of an integrated energy company entails numerous heroic assumptions on hydrocarbon prices and retail margins. These must then be massaged by a stab at Investors collective required rate of return. Too intricate and complex for my skills and time availability.
Accordingly, and although it was a tooth pulling exercise between me and Senior Management, at my urging we did cash out our position in MRO a few hours after the Company's split-up announcement. Will the future prove us to have left a bundle of chips on the table? Very possible. Here is a certainty: I will go to my grave believing that one is best advised to ring the cash register on a 44% capital gain score, plus the 3% entry yield, on a 1.33 Beta stock of a suddenly malleable business model.
Thank you, again, for your comments and insights.
Marathon Oil: Positive Signs Ahead [View article]
Your instincts on keeping MRO intact strike me as sound. Often it is best to leave well enough alone. Thank you for reading, and I hope it helped you with something. Happy New Year. Roger
Marathon Oil: Positive Signs Ahead [View article]
Another reader has raised the same possibility, namely a split up on the Sum of the Parts theory. Should by no means be ruled out. The thought had not occurred to me, so I am grateful that you set it in front of me. It warrants serious consideration.
Kind regards, Roger
Marathon Oil: Positive Signs Ahead [View article]
An intriguing possibility, one that I had not thought of, thus you have my gratitude for its suggestion. Guess is MRO's investment bankers would busy themselves with Discounted Cash Flow analyses --- valuing the Downstream along the lines of Valero or Sunoco; the Upstream something like Anadarko? Rough guess: the pieces would sum to $48-50. If anywhere closoe, what stays management's hand in going ahead?
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
There is no compelling reason not to follow your Put Option tactic. It and similar approaches were not raised in the ABT essay out of space and length cosiderations. Your arithmetic is correct and your advice is sound.
Sincerely, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
My understanding is that ABT's lead position in the entire stent field was brought in via the Guidant acquisition. In any event ABT management has been adrioit in assimilating that Company, one of the reasons underlying my favorable estimate of its longer future.
Please accept my appreciation for your kind and thoughtful comments.
Sincerely, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
May I assume your 15% return expecation is average annual compounded, opposed to cumulative over a three year period?
Sincerely, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
I'll stand by my comments in the ABT essay that now is a reasonable entry point. You and I and others can discuss what next to do when the stock is changing hands in the low-mid 60's.
Sincerely, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
You are each knoweldgeable in ways shared by ABT's senior managers --- which is one of the motivations underlying the Company's strategy to "buy" its way into existing and approved therapies.
Thank each of you for your insights. Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
I believe you have a point that prescription drugs have seen their best days in America, i.e., health care and treatment will continue to veer in directions of nutrition and what may be more generally thought of as life style changes. One attraction to ABT is, for me, its 60% (and shrinking) reliance upon drugs for Total Revenue.
Sincerely, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Joe Paterno is not Penn State's only asset --- my understanding is that its Business School is first rate, and I am certain that your Son has and will continue to derive lasting benefits from studying there.
Thank you for your comments and, as much as I am rooting for ABT I hope your need for Humira is short lived.
Best wishes, Roger
Abbott Laboratories Shares 'Marked Down' - Good Time to Buy? [View article]
Thank you for taking the time to comment, as you bring useful insights of your own. I hope the essay will be helpful to you.
Sincerely, Roger