Cardinal Health Inc (CAH)

Recently sold at slight loss, EPS won't have the growth trajectory he thought. Announcement out of left field that they lost a contract and revenue would decline substantially. Reasonably stable business. Over time, will probably be an OK holding. But now market won't have the same confidence in management to execute, stock will be hobbled. He'd look again on further decline.

Does not own shares in business. Healthcare sector has tailwinds, but unsure on direction of this particular business. Expecting growth in pharma portion of business. Overall, healthcare has strong fundamentals. 

Third largest pharma distributor in USA. Very high performing company. Stock price and margins improving. Stock is fully valued at current price, but is watching closely. Would buy on weakness. 

It is a great business and he likes the business model. The tailwind is volume since it has picked up especially with the weight loss drugs.

Distributes pharma and medical products. Largest customer is CVS. Operates in a triopoly, controlling 90% of the US wholesale industry. Pricing power leads to predictable cashflow. Aging population, weight-loss drugs, diabetes treatments will result in higher spending and volume. Shares trending steadily higher, good technical strength. 15% earnings growth going forward. Yield is 1.9%.

They just reported a revenue and earnings beat, and raised their full-year forecast, but missed operating profit and lowered their full-year forecast for the smaller medical segment. Shares tumbled yesterday and today but is still close to its all-time high. Doesn't understand the sell-off.

Though drug companies are a target of politicians citing high drug prices, it keeps printing cash. For now, it's a cheap stock that won't be hurt by higher interest rates.

Likes it after restructuring. Buy on this dip.

It has had a nice pullback here and he would buy more at $56.50. His model value is just above $66 right now.

(A Top Pick Jan 17/17. 0% return.) There are really 3 players that dominate the entire space, and she switched to the leading player, Amerisourcebergen (ABC-N).

(A Top Pick Jan 17/17. Down 18%.) A big Pharma distributor. There have a lot of things coming at them. It is so ingrained in the healthcare space in the US, and there are really 3 companies that control the whole thing. The issue has been around generics price deflation, and the cycle was much more severe than anything they had seen previously. There is also the Amazon factor. Had a spotty performance on the medical device side, and now they are going through a CEO transition. The company has about an 8% free cash flow yield. For that type of a business, when you start seeing easier comps, stabilization and deflation trends which really just started this quarter, the discount to the market is pretty significant, and she is expecting the whole group to trade higher.

The healthcare space has been really beaten up since the election started. They have exposure to drug inflation and the pricing side of things. They are really only one of three distributors of pharma in the US. They have 8-9% of free cash flow. (Analysts target: $81.88).

MCK-N vs. CAH-N. They have done very much the same thing, so she has no preference. MCK-N is certainly the leader in the group. The peak was last summer at $15. If MCK-N moves lower she would buy a lot more of it.