McKesson Corp (MCK-N)

Earnings today impressed the market. Trades around 16-17x forward PE, 11-12% EPS growth rate. PEG ratio is 1.4x, pretty good. Great, long-term secular growth name. Few competitors plus 33% market share means substantial pricing leverage.

It was getting pricey, so he took profits around $616. He's holding, because of a strong long-term outlook. Are fueled by the weight-loss drugs and other pharmaceuticals, of which they are the largest U.S. distributors.

Drug distribution is a really low-margin business, which gives you less tolerance throughout your whole business. In US healthcare, they're always looking for ways to squeeze out value for consumers. Not a lot of avenues for growth.

Healthcare space provides nice combination of growth with stability, in case we get into latter stage of economic cycle. 

Got stopped out when it gapped lower. You need only 20 positions to be diversified; you don't want to look like the index. If something isn't behaving as you expect, based on what you know, step aside and let things develop.

Broken down technically. Well below 200-day MA, which has rolled over. Has work to do, wouldn't put money here today. Others in the sector are doing better.

Frustrating backslide, but continues to believe in it. #1 player in a 3-player oligopoly. A need, not a want. Demographics of aging and morbidity trends are tailwinds. #9 position on the Fortune 500 is very secure. Pullback due to short-term headwinds of lower revenue in one small unit plus drug going off-patent. Rexall sale is a blessing, as it was a drag on performance.

Dividend has grown at 10% compound rate over 10 years, will continue. Trades at 14x earnings, likely to grow at 11-12% over next 3 years. Opportune entry point.

Just below 200-day MA. One of 3 members of an oligopoly, which together control 90% of the business out there. Steady earnings, decent valuation. 15-16x forward PE, steady 11-12% growth rate. Value here, even though it's a growth name. As people age, volume of drugs required can only increase, benefiting a name like this.

He also owns CAH.

Very good franchise. Earnings growth about 17%, probably about the same next year. Dividend growth in the teens, attractive. Cautious on healthcare because of the US election cycle; it's an easy target. Very predictable business.

In US healthcare he owns LLY, REGN, and MCK.

Owns shares in company. Pharmaceutical distribution - very profitable. Recent share price dip, a good time to buy. Earnings expected to grow. Ability to generate strong margins within the sector. Will continue to hold. 

Great growth stalwart and compounder. Leader in what's essentially an oligopoly. Earnings miss last quarter, margin pressure. Sales headwinds, partly due to plateauing demand for GLP-1 obesity drugs. Revenue pressure in pharmacy technology solutions.

None of that derails long-run growth thesis. Healthcare addresses a need, not a want. Demographic play. Compelling entry point. Will be higher 1 and 5 years from now, secular backdrop is just that good.

The GLP-1 weight loss companies are really in the sweet spot. For example for LLY, a very large holding for him, the opportunity for them is a very large marketplace. Getting approval for a broader range of uses. 

He also owns ISRG, which will help with the cost of healthcare, a very big growth opportunity. He owns MCK too.

Those 3 names together make up a 5% weight for him, which is underweight the market.

XLV gives you a basket of names, with some winners and some losers. LLY is the top holding, that's a winner. Also holds JNJ and PFE, which haven't done particularly well. 

He owns NVO, MCK and CAH. He likes those companies where the only serious competition comes from 1 or 2 others, as they can control pricing power. Diabetes and weight loss are definite growth areas. See his Top Picks.

In pharma space, prefers growthy areas such as distributors like CAH and MCK.

Leader, controls 1/3 of the industry. Virtual triopoly gives them leverage and predictable cashflow. Population is aging. At least 60% of Americans use at least 1 drug, and this will increase over time. High-demand segments such as weight loss and diabetes are rising, which will increase demand for its logistics and distribution. Yield is 0.5%.

Increased share buybacks last summer. Beat top and bottom on last results. Upped guidance for 2024. Share price trending higher, above 200-day and 200-week MAs. Has beat S&P since early 2019. About 12% earnings growth rate. Classic, steady healthcare name to own.

Still likes it. Room to grow. Sees about 10% earnings growth. Prescription drug usage in US continues to rise. Only 3 players, with 90% market share. See his Top Picks.