All good points. I layer on top of these metrics reversion to the 5 year mean price. Paul Senior has been quite successful using this strategy. However, if I used this on all my investments would have missed AMAT, ORCL & GOOGL. IBM was the exception and now trading at an All Time High. All 4 of these stocks in the portfolio and have grown into my top 10 holdings.
If the reversion to the 5 year mean price is >35% (higher the better), then I tend to get an up size price move if I am patient and plan to wait 18-24 months.
I started a tracking position in Clorox Company (CLX) last week w/ only a 0.29% portfolio position (5 buys for avg price $117/share) as I plan to scale into this name over the next few weeks/months. I plan to build this to a 1% portfolio position. My CLX target price $168/share in 18-24 month holding period for a +44% potential gain.
CLX's value proposition includes:
(analysis by me and help from my AI)
- The company has focused on pricing power, cost-saving initiatives, and margin expansion, notably with nine consecutive quarters of gross margin growth and an expected full margin restoration by end of fiscal 2025.
- DCF analysis - the stock is substantially undervalued by approximately 44%, trading at about a 42-45% discount to intrinsic value of around $214 per share
- Clorox's IGNITE strategy aims to drive innovation, operational excellence, and broaden international growth.
- It has implemented digital transformation and operational efficiencies that could accelerate profitable growth.
- The company maintains a resilient portfolio of trusted consumer brands and plans sustained dividend growth.
- Despite a modest sales decline due to macroeconomic factors and divestitures, earnings-per-share growth is projected around 4% annually, with ongoing brand investments anticipated to support long-term value.
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FWIW, I try to find at least 5 new portfolio adds every year and beginning to scale out of positions at a 30% CAGR or more. Avg positions held 2-4 years. At this point in the cycle I am leaning towards consumer cyclicals (started CAG), Healthcare Drug/Pharm (started BMY) and building position in NVO. |
