CR Bard (BCR)
CR Bard (BCR): Between growth and valueBy Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
from Cabot Wealth Advisory 11/27/13 Sign up for Cabot Wealth Advisory—it's free!
By now, we’ve learned that pigeonholing stocks as either growth or value is a little misleading, because stocks can slip from one category to the other and back again. U.S. stock markets have been in an uptrend for many months, lifting the prices of many stocks to new highs, which is great news for growth investors.
But for value investors, it means that the supply of undervalued stocks has been dwindling, reducing opportunities for safe, low-risk, long-term investing. It’s gotten to the point that Cabot’s value guru, Roy Ward, has reduced his exposure to stocks to just 37.5%, which is well below the 75% equity allocation he recommends when the markets are low and undervalued. And if the markets continue to rise, Roy may get down to a 25% weighting in moderately aggressive stocks, which is his theoretical lowest weight.
For growth investors, price increases can also be a problem, although it’s a nice one to have. When stocks are recommended for Cabot Top Ten Trader, they are assigned a buy range, which is a way of controlling the risk of an initial buy; even growth investors try to buy on reasonable pullbacks.
My first stock is C.R. Bard (BCR), a stock that Cabot Benjamin Graham Value Investor says is well above its Minimum Sell Price and should be sold. The Minimum Sell Price is 127.16, and the stock is actually selling at around 139, which is well above its sell price and way above its Maximum Buy Price of 90.64. So, according to Roy’s value principles, BCR is just too expensive to buy now, and has been since it last traded below 90, which was in January 2012.
But I’d like to point out what happened as BCR made its transition from being a value stock to becoming a growth stock. Here’s a chart that will show what I mean.
BCR broke out of a six-month correction as 2012 began, running from 80 in October 2011 to as high as 107 in June 2012. But at that point, the stock began a consolidation that had it trading increasingly tight at around 100 in March and April 2013. The jumpy rally that began in April pushed the stock to 120 in September.
Then came the late-September breakout that blew the stock past 120 to 136 on giant volume. That’s the rally that qualified BCR for inclusion in Cabot Top Ten Trader, because it added price momentum to the stock’s already attractive combination of story (C.R. Bard is a medical device maker with solid offerings in vascular, oncology, urology and surgical specialties) and numbers (steady growth in revenue and earnings and a 0.6% forward annual dividend yield).
Great growth stocks must have it all, story, number and chart. BCR has continued to push higher since its October 23 gap up on spiking volume.
But the interesting thing to me is that the stock will not be included on page 12 of Cabot Top Ten Trader. That’s because the stock was given a suggested buy range of 133 to 136 when it appeared in the November 4 issue. And the stock never traded in that range. BCR closed at 138 on the day the new Top Ten came out, and in the next two weeks, it just kept rising. So BCR, which continues to do well, has fallen into the crack between value and growth, too expensive to qualify as value and too fast-moving to pull back to its growth buy range. So it goes. Markets do funny things.
|CR Bard (BDR)
730 Central Avenue
Murray Hill, New Jersay 07974
Index Membership: N/A
Industry: Medical Instruments & Supplies
Full Time Employees: 12,200