We're posting up notes from the 2013 Value Investing Congress in New York. Next up is Michael Castor of Sio Capital. He gave a presentation called "The Accounting Game" and touched on a number of stocks and then recommended shares of Genomma Labs (LABB) traded in Mexico.
Michael Castor's Value Investing Congress Presentation
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11% CAGR net of fees over
last 7 years.
Worst year down 6%
Doctor. Healthcare fund.
Stretched valuations:
MWI Veterinary Supply (MWIV), Stericycle (SRCL)
Attractive: Cardinal Health (CAH), Select Medical Holdings (SEM)
Unknown substance: Intrexon (XON)
Hidden gem: Aratana Therapeutics (PETX) ~ "The income statement
is an estimate...made by management." Over the counter
pharmaceutical.
Bearish on Genomma Labs (LABB)
Trades in Mexico (LABB) or OTC (GNMLF)
$2.3B USD market cap.
Cash flow less than
reported income. $1.3B cash flow vs. $5.2B net income. Where is the money
going?
If you believe their
accounting on their nail fungus product, 1 in 15 adults would have to be buying
a unit to believe it.
Very erratic sales by
brand. When asked about it by investors, they quit disclosing sales by line.
AR and WC increasing. Cogs
increasing. Cash decreasing. Questionable penetration of products. Erratic
sales numbers.
Usually resolved through
either acquisitions or restatements. They did try to do an acquisition. If you
adjust the accounting, you get much lower EPS.
No cash generation.
Limited disclosure.
Valuation? Use 70cents
eps, with 10 P/E, $7 peso pt.
Q&A: Herbalife (HLF) opinion? Leans on Ackman
view that MLM is not a great business model.
Be sure to check out the other presentations from the New York VIC here.
