My Watchlist – November 29, 2010

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.

Watchlist – Part 1

Watchlist – Part 2

Stocks from issue 1 (see Watchlist – Part 1), Inc.

eBay Inc.

Dionex Corporation

Mettler-Toledo International Inc.

Waters Corporation

Alcon, Inc.

Baxter International Inc.

Becton, Dickinson and Co.

C.R. Bard, Inc.

Cardinal Health, Inc.

IDEXX Laboratories, Inc.

Johnson & Johnson

Medtronic, Inc.

Meridian Bioscience, Inc.

Stryker Corporation

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.

The author of this blog is NOT an investment, trading, legal, or tax advisor, and none of the information available through this blog is intended to provide tax, legal, investment or trading advice. Nothing provided through these posts constitutes a solicitation of the purchase or sale of securities/futures. The data and information presented in this blog entry is believed to be accurate but should not be relied upon by the user for any purpose. Any and all liability for the content or any omissions, including any inaccuracies, errors or misstatements in such data is expressly disclaimed.


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