I have reviewed issue 1 of Value Line looking for companies that have exceptional returns on equity, strong book value growth or strong “guru investor” sponsorship.
The idea here is to have a dashboard of substantially all the larger-cap high quality businesses in the U.S. in one place that you can review at least weekly to see what Mr. Market is making available to you.
Because of a limit on the number of functions that Google allows in a single spreadsheet, I had to split the spreadsheet into two parts.
This week’s update is in part 1.
Stocks from issue 1 (see Watchlist – Part 1)
Mettler-Toledo International Inc.
Baxter International Inc.
Becton, Dickinson and Co.
C.R. Bard, Inc.
Cardinal Health, Inc.
IDEXX Laboratories, Inc.
Johnson & Johnson
Meridian Bioscience, Inc.
Varian Medical Systems, Inc.
A few thoughts…
Nothing in this group appears to be a screaming buy with many of the stocks near a 52-week high.
Johnson & Johnson appears to fit Buffett’s saying that, “I would sooner buy a great business at a fair price than a fair business at a great price.”
According to data at Dataroma, the stock has been widely purchased by several prominent value investors over the past year.
Here is a quick DCF on JNJ that assumes that free cash flow grows at 8% and a discount factor of 10%. I assume a terminal multiple of 15x on the free cash flow in year 9. Based on Value Line, I estimate free cash flow in 2011 to be $5.30 a share. You should plug in your own assumptions and look at multiple scenarios.
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