Buy/Sell reasons:
Reasons to buy:
1. Valuation. Let's assume the company makes 1.20$/share in 2000. That's realistic, not the 1.30 consensus estimate, given what the CEO just said. At a price of 18, the stock has a forward PE of 15. That is rock-bottom low, compared to its own past record, compared to its industry peers (gdt, mdt), even compared to the market PE of 21. There is now what old-fashioned investors call a "margin of safety".
2. Growth. I've been following this company for 3 years, and the consensus estimates for long-term earnings growth are always in the 20-25% area. Over the past 5 years, it has averaged 20%/Y EPS growth.
3. sentiment on the company is at a nadir.
Reasons not to buy:
1. Regulatory problems. Hopefully in the past, haven't read anything about this recently.
2. high debt load
3. near-term uncertainty re. market share and market growth.
4. a history of restating earnings. Again, hopefully a one-time event.
5. tax-loss selling. Anyone who has bought the stock, anytime in the last 4 years, and held till today, is underwater. Hopefully, most of this has been done.
6. the overall market: long bond at 2-year highs, fed raising, inflation coming, Y2K.
Overall, the valuation argument wins, with the stock at 18. And, since I'm committed to being in the market, I think a value play in the medical field will be a safe haven. I bought some WBXAE today (BSX calls, Jan 2002 exp. date, 25 strike price). At 4 3/8, they are cheap. Given the volatility of the stock, any improvement in sentiment will make them in the money. Their length makes them a proxy for the stock.
I've also been buying WPI, and CMH. Also QQQ puts. |
