It is hard to say anything about McKesson that we have not said before — it is a high-quality business with extremely cheap shares.
The pharmaceutical distributor should earn around $15 in 2020 and will IPO its technology business, which will unlock another $20-30 of value. McKesson stock is not just cheap — it’s incredibly cheap. If we take the current $127 price and take out $25 for the technology business, we are paying about $100 for $15 of earnings — less than 7 times.
Wall Street glorifies companies that beat quarterly estimates by arguing that the long term comprises a lot of short terms. But beating earnings estimates for a few consecutive quarters doesn’t necessarily lead to long-term greatness. It assumes that significant changes to the business are visible in the reported numbers.
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “Time discovers truth,” but he could have been. In the long run a stock price will reflect a company’s (true) intrinsic value. In the short run the pricing is basically random. Here are two real-life examples.
Today I am going to share with you an article I wrote after the January 2018 stock market volatility. It’s as relevant today as it was then. However, this time around you don’t have to strain your eyes; you can use your ears. Optimal Living Daily has turned my article into a podcast. Turn off your TV, shut down your brokerage website, relax.
I am 14 months into working on my new book, The Intellectual Investor, which is far from being finished. I have written fifty thousand words but have yet to find answers I am looking for, and thus the journey continues. Working on this book has been one of the most fulfilling experiences of my life. Because of it I am:
11 months into not eating dessert (read my “I Don’t Eat Desserts” article here)
6 months into working out twice a week with a trainer
When I write about VALUEx Vail I always catch myself sounding just like Tim Cook: “This is the best iPhone ever!” As the iPhone incrementally improves every year, so does VALUEx Vail. We don’t put any incremental R&D into our private value investment conference, but it gets better for one simple reason: We all become closer and closer friends (we had only five new attendees out of 40 this year). We heard 30 presentations over three days.