Invest your own money, let compound interest be your leverage, and avoid debt like the plague.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 3
I've always wanted to own shares in West Pharma. But never liked the price.
Looks like it is catching a ~35% haircut today on weaker than expected guidance. I might go read a 10K or two to catch up where I left off...
No. of Recommendations: 5
Sorry. Should have mentioned that WST is more like a pickaxe provider to the pharma miners. Their business focuses on parts for the delivery of drugs. Think labels on vials, containers, injectors. That kind of thing.
That FDA approvals need to detail these types of things and are, apparently, difficult to change, this provides WST with a fairly good economic moat. Of course that moat could get filled in if there are major changes (disruptions?) to the drug approval process. That seems a bit more likely today than it did yesterday...
No. of Recommendations: 7
At first glance it looks like a fine firm, and like many fine firms it never seems to get cheap. They have traded at an average of about 41 times trailing earnings in the last decade, give or take. But the recent significant price drop still seems to leave them pretty expensive on conventional measures, no? To be justified, wouldn't one normally want to see more than just good business economics, i.e. a higher rate of growth?
As an unrelated anecdote, I was once quite attracted to Becton Dickenson (BDX), a vaguely similar firm. They had amazingly steady growth through thick and thin throughout their history--up to that time. Then things changed. Cash flow per share has been flat for the last 8 years. I'm not precisely sure what the lesson is, but it *might* be that when you pay a rich price for a bright future, you have to be pretty darned sure that the bright future will arrive. If it does (which it does for the best firms), you're golden.
Jim
No. of Recommendations: 5
Hi Jim.
Thanks for the reply, observations, and amusing anecdote! ;)
Well observed about the value. WST has never been cheap. If memory serves, it only got to a P/E of ~20 during the great financial crisis.
The value has been one of the big reasons I've never pulled the trigger. I've also never had the confluence of some "mad money" and a willingness to brave the chilly waters of WST's value proposition. And as I've watched WST's stock price outpace the S&P over the years, this unwillingness has been a consistent explanation for why I can't have nice things (where nice things means stocks that handily beat the S&P).
Other reasons I've never bought WST:
(i) I don't have insight into how their moat might change due to whims in federal policy.
(ii) While the lock-in related to being listed on a drug approval represents an economic moat, it is not clear how much of a barrier to entry the industry has. Could a Taiwanese firm make the same thing for 1/8th the cost and they just need to get their foot in the door? It always gave me pause.
Full disclosure: I'm not buying any WST now. And I generally shy away from direct investments in pharma and biomed firms as much of our household's lifetime financial success is strongly correlated with that sector already. As we draw closer to retirement that shyness may blossom into whatever the opposite of shyness is...impropriety?
No. of Recommendations: 4
“ I generally shy away from direct investments in pharma and biomed firms…”
Despite the fact my career was in health care, I’ve just found them to be in the “too hard” pile. Was burned early awaiting safety & efficacy & approval in clinical trials for FDA approval only to watch a couple names tailspin after disappointing results.
Enjoyed modest conservative Allergan & Alcon holdings many years ago, but not interested in the sector much anymore, from an investment standpoint.
