Not finding a lot of value in the U.S. market, Oscar Schafer mostly looks overseas for his picks at this year's Barron's Roundtable, but still offers a domestic recommendation. Taking advantage of a major stumble in BioScrip (BIOS) as the company struggled integrating four large acquisitions, Schafer has built up a large stake.
Seventy percent of infusion pharmacies are independent, and BioScrip - along with Option Care (now WAG), and Coram (now CVS) - is one of three major consolidators. After a tough year, management is focused on completing the integration, cutting expenses, and boosting margins in the infusion business. "Current margins dramatically understate the earnings power of the franchise," says Schafer, and the company could see $120M of EBITDA and $0.85 of free cash flow in 2015. CVS paid 16x EBITDA for Coram, and Schafer wouldn't be surprised to see it, Walgreen, or another strategic acquirer pay the same for BioScrip.
BioScrip was trading at $5.90 prior to the late-November Coram deal. It closed at $7.54 yesterday. Schafer values the stock at $13.