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Strategies & Market Trends : Value Investing
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To: deeno who wrote (53289)2/1/2014 2:55:37 AM
From: Shane M  Read Replies (2) of 78486
 
hi deeno,

I've been thinking about DGX and LH. I've seen commentary by some that it's a low moat business, but I've not convinced myself of that, and I have seen some analysis saying there are enough barriers to entry. The market structure of it seems to be one of consolidation that when it gets there (is it near enought to consolidation now?) it should be able to have some pricing stability / maybe some power if there are benefits to scale. This conjecture is all dependent on ease of entry which I have difficulty gauging.

Valuations on both seem about the same to me - but my inclination is to think LH is better company, but DGX might have more room for improvement. I passed on buying, but was leaning toward splitting the position and buying shares of both. The key wildcard to me is how consolidation helps margins, if it helps at all. The consolidation aspect is what makes these interesting, along with medical advances which could bring more tests online. They both rank well on Greenblatt/Magic Formula metrics.

They don't look like pure commodity returns/margins to me, but if you've formed views on them, I'd be interested in your view on competitive position/threats and how consolidation plays into the overall picture. appreciated.
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