Peter Mycroft Psaras'  Instablog

The Following shows the year end prices for the last 24 years (except 2009) for one of my favorite stocks, C.R. Bard (BCR). A $10,000 investment in BCR in 1985 would be worth $573,037 today for a total return on your investment of 5,630%.  BCR has also returned an average annual return of 18.37% for the last quarter of a century.  As you can see from the numbers below, that it has definitely not been a straight line up and there were years when no money was made, but what I are looking for as an investor is to build a portfolio full of amazing companies like C.R. Bard that are consistently profitable and generate huge amounts of free cash flow in relation to their total capital invested.  Had you bought your house as an example for $100,000 in 1985 and let's say today it is worth $700,000, you would have had a return of 8.09% annualized. Had you put that same $100,000 in C.R. Bard instead, you would now have $5,730,370. 

My sell price on C.R. Bard is $184.50 and at that price it would be trading at 30 times its free cash flow per share or about what Apple (AAPL) is trading for now.  So we still have a very long way to go on this jewel. This stuff is not rocket science, once you figure out what to look for, and over the last 35 years I have figured out that price to free cash flow and free cash flow return on invested capital is what works.

My client’s portfolios are full of such multi-decade growth stories and they are all trading at very attractive prices based on their price to free cash flow numbers.  BCR for example is trading at 12.51 times its 2010 free cash flow estimate and is so well managed that it has a free cash flow return on invested capital of 25%. The medical device makers like St. Jude Medical (STJ) may be complaining of slowdown in hospital spending these days, but that maybe just that STJ can’t cut it.  BCR has one of the best managements in the world and the following numbers will show that they can really produce results for shareholders.

1985 = $   1.35

1986 = $   2.77

1987 = $   4.93

1988 = $   5.06

1989 = $   6.43

1990 = $   6.42

1991 = $   5.19

1992 = $ 10.99

1993 = $ 10.86

1994 = $   8.84

1995 = $   9.79

1996 = $ 11.81

1997 = $ 11.03

1998 = $ 12.72

1999 = $ 20.91

2000 = $ 22.77

2001 = $ 20.91

2002 = $ 29.02

2003 = $ 28.03

2004 = $ 39.01

2005 = $ 62.64

2006 = $ 65.11

2007 = $ 81.31

2008 = $ 91.12

Today = $ 76.95


Disclosure = Long BCR ,  No position AAPL, STJ

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