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How long does DD take you?



March 21, 2011 – Comments (3) | RELATED TICKERS: MHS.DL

On average?  Lets say you already understand how the industry operates, how long?

For me, I always have the problem that I feel I didn't spend enough time.  But usually after like 2 hours I feel that I understand if it is a buy or not.  The little details do nothing but confuse my original thought, because no company is going to be perfect.

For instance, if 1) I like the industry and how it relates to the macro environment 2) Earnings never miss estimates 3)EPS  Growth rate is good 4) ROE/ROA is improving 5) The company has confident management and buys back shares 6) Is very well covered, so that there are plenty of news articles so I dont ever have to worry about missing a vital piece of info 7) The company is the best in its field 8) The chart is not ugly  9) The balance sheet is clean enough 10) They have enough cash to meet their bills

Is there really a need to still do like another 5 hours of research? 

For instance, I just picked up shares of MHS on the drop, and did this quick analysis

1) Good industry

2) Was fine during the recession
3) Market leader
4) Insane growth (25% projected 5 years)
5) Never misses earnings
6) Buying back shares like crazy
7) Patent cliff is a huge catalyst
8) Baby boomers getting older
9) Increased healthcare spending
10) High retention rate of contracts

11) Stock is cheap in terms of PEG
12) No dividends + lots of debt = leveraging their returns (and since they were fine during recession im not worried about hard times hampering this)
13) Increasing ROA and ROE a lot every year
14) Confident management

15) The recent sell-off only impacts their earnings by 3-7 cents per big deal

In all honestly, is there a big need for a lot more DD?  I read the last earnings call transcript, and will continue to read every Income statement and earnings call they have...tell me what else I should be doing, I am not such a fundamental guy, more of a momentum guy

My main problem with MHS is an ugly chart...but I have no problem buying more on dips

3 Comments – Post Your Own

#1) On March 21, 2011 at 1:50 AM, ikkyu2 (98.36) wrote:

As long as it takes.

I happen to own an EHR that was purchased by a company that was then purchased by MDRX, MHS's rival.  They broke compatibility of their e-prescriber with MHS's mail-order pharmacy as nearly the first thing they did.  Works with every other pharmacy on Earth, but not Medco's.  Makes me leery of the whole business model. 

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#2) On March 21, 2011 at 2:31 AM, goalie37 (87.63) wrote:

I'm in the same position you are.  So much information can be accessed so easily, making the process shorter than it would have been a couple decades ago.  The result is that I feel I haven't worked hard enough.  

Where I do take my time is to think things over for a few days before making the actual buy.  If the idea still sounds good, I feel much more confident. 

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#3) On March 21, 2011 at 10:06 AM, lemoneater (56.97) wrote:

I would say that it depends on the company how long I take. When I got HNZ I took hardly any time at all on DD the ketchup consumption in my home alone made me think I couldn't lose, but I took a lot longer to deliberate over BSI, a foreign grocery chain with a high dividend, but located in a volatile political region.





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