Below are the valuation targets for Dentsply Sirona (XRAY) for the next 10 years. Continue reading
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Category Archives: XRAY
Dentsply Sirona: Dodging Bullets
Review
On February 6, 2017, we took a position in Dentsply Sirona (XRAY). Dentsply Sirona is a leading manufacturer of dental products provided to dentists throughout the world. By February 8, 2018, we said the following of XRAY:
“At the time of the purchase of XRAY on February 6, 2017, we sold our shares of UNM Group (UNM) which had increased exceptionally from the February 5, 2016 purchase. XRAY did not meet our goal [gaining +1.14%] and while UNM has gained +5.19% in the same period of time.”
On February 8, 2018, we sold our holdings of XRAY and the stock has subsequently declined –31.30%, a staggering loss in such a short period of time.
Downside Targets
According to Charles H. Dow, co-founder of the Wall Street Journal, a stock should be viewed from the context of when it last performed the worst. Dow has the following to say (emphasis ours):
"The point of importance for those who deal in industrial stocks is whether the capitalization of the companies into which they propose to buy is moderate or excessive, when compared with the aggregate earnings of the various concerns forming the combination in a period of depression. It is probable that consolidated companies will be able to earn as much in the next period of low prices as the companies forming the combine were able to earn in the last one; hence the very foundation of investments in industrials should be knowledge of what these companies earned, say in 1893 to 1896, making, perhaps, reasonable allowances for economies under consolidation. Where the earnings so shown would have provided dividends for industrials now active, the fact must be regarded as a very strong point in favor of those stocks (George W. Bishop Jr., Charles H. Dow: Economist, Dow-Jones & Company,Princeton, 1967, page 11.)"
Without seeing the reported earnings, dividends, debt and shares outstanding, the price of the stock is the best quick take on the downside risk. In theory, the price reflects some or all of the news and fundamental data on a given stock. Looking at the price and applying the work of Edson Gould, we have estimates for the downside target.
Nasdaq 100 Watch List
Below are the Nasdaq 100 companies that are within 10% of the 52-week low. This list is strictly for the purpose of researching whether or not the companies have viable business models. These companies are deemed highly speculative unless otherwise noted.
| Sym. | Name | Price | P/E | EPS | Yield | P/B | % to Low |
| GILD | Gilead Sciences | $31.94 | 10.24 | $3.12 | 0.00% | 4.29 | 0.35% |
| NVDA | NVIDIA | $10.05 | 20.85 | $0.48 | 0.00% | 2.14 | 1.52% |
| XRAY | DENTSPLY | $29.25 | 15.99 | $1.83 | 0.70% | 2.46 | 1.77% |
| FISV | Fiserv, Inc. | $45.60 | 14.29 | $3.19 | 0.00% | 2.31 | 1.79% |
| SPLS | Staples, Inc. | $19.31 | 17.86 | $1.08 | 1.80% | 2.18 | 2.60% |
| PAYX | Paychex, Inc. | $25.67 | 19.46 | $1.32 | 4.70% | 6.83 | 3.13% |
| AMGN | Amgen Inc. | $52.17 | 11.07 | $4.71 | 0.00% | 2.29 | 3.68% |
| VRTX | Vertex Pharma. | $32.47 | 0 | -$3.50 | 0.00% | 6.89 | 3.90% |
| ERTS | Electronic Arts Inc. | $14.79 | 0 | -$2.08 | 0.00% | 1.87 | 5.19% |
| ADBE | Adobe Systems | $27.39 | 38.47 | $0.71 | 0.00% | 2.86 | 5.31% |
| FWLT | Foster Wheeler | $21.52 | 7.85 | $2.74 | 0.00% | 3.28 | 5.85% |
| AMAT | Applied Materials | $12.19 | 38.09 | $0.32 | 2.20% | 2.29 | 6.18% |
| HOLX | Hologic, Inc. | $14.12 | 25.67 | $0.55 | 0.00% | 1.35 | 6.49% |
| CA | CA Inc. | $19.00 | 12.9 | $1.47 | 0.80% | 1.99 | 6.74% |
| SHLD | Sears Holding | $63.23 | 32.69 | $1.93 | 0.00% | 0.87 | 6.79% |
| SYMC | Symantec | $14.59 | 16.73 | $0.87 | 0.00% | 2.62 | 7.44% |
| YHOO | Yahoo! Inc. | $14.90 | 26.75 | $0.56 | 0.00% | 1.67 | 8.36% |
| GOOG | Google Inc. | $459.61 | 20.92 | $21.97 | 0.00% | 4.11 | 8.53% |
| LOGI | Logitech Intl | $14.33 | 0 | $0.00 | 0.00% | 0 | 8.81% |
| MSFT | Microsoft | $24.89 | 12.9 | $1.93 | 2.00% | 4.89 | 9.50% |
| KLAC | KLA-Tencor | $29.23 | 68.45 | $0.43 | 2.00% | 2.34 | 9.52% |
| EBAY | eBay Inc. | $20.09 | 10.87 | $1.85 | 0.00% | 1.95 | 9.72% |
| APOL | Apollo Group | $45.57 | 11.68 | $3.90 | 0.00% | 4.77 | 9.94% |
Watch List Notes
Two stocks of particular interest on this week's list are Dentsply International (XRAY) and Paychex (PAYX). Both companies are former Dividend Achievers with Dentsply raising their dividend 14 out of the last 15 years and Paychex raising their dividend 20 out the last 21 years. Both companies have above average compounded annual growth rates of their dividends. Of the two companies, Paychex (PAYX) appears to be the best value.
Currently, Paychex is selling slightly below the year 2000 price while Dentsply (XRAY) is selling around the 2005 price. This means that the value component of PAYX is 5 years ahead of XRAY. If the shares of PAYX don't rise soon then they are a likely candidate for buyout. Maybe because the shares of Intuit (INTU) and PAYX have been on divergent paths since October 2008, Intuit (INTU) might be a great acquirer of PAYX. In either case, XRAY and PAYX would be quality acquisitions for short-term or long term portfolios after considerable research. These stocks will be profiled in upcoming Investment Observations.
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Odds and Ends
Question:
Do you think Richard Russell has been overrated regarding his abilities to forecast the directions of the markets? It seems like one good call (1975) allows one in his position to reap benefits for years despite demonstrating no skill when one goes back and, with the benefit of hindsight, takes a critical look at the entire record.
Our Thoughts:
Anyone, including NLO team, who attempts to predict the stock market is under extraordinary pressure. The challenge that Russell presents is that he often ignores that he has a bias towards the market falling rather than rising. This becomes a problem when, against his experience and better judgment, Dow Theory might be indicating that the direction is up despite all the negative market fundamentals.
Again, Dow Theory is supposed to include all the current and foreseeable hopes and fears as it relates money. I think that if Russell would follow Dow Theory or even his PTI indicator more often he would get a more accurate readings on the market.
It should be noted that within the content of his Dow Theory Letters from 1958 to the present, there are many great calls. As I post more reviews of Russell’s letters, I will be able to point out too many instances of where Russell was spot on.
Unfortunately, Russell often didn’t stick to his guns or he forgot his earlier good advice or information. As an example, Russell talks about the importance of compounding. This cannot be accomplished if you’re buying and selling based on Dow Theory. Another example is Russell’s commentary on values. You can’t speak of values if you’re primarily focused on ETFs, index funds or stocks that don’t increase their dividends when plenty of them exist.
The pace and excitement of the markets become challenging for anyone to remain focused on the fundamentals. Russell has fallen astray of the basic principals of Dow Theory and value investing. Although the two seem mutually incompatible, there is a middle ground which Russell hasn’t attempted to address in all the years of his work.
Question:
I'm curious that you write "In my observations, market volume has increasingly become an addendum to Dow Theory." Meaning, only as a sidelight, or as an increasingly important variable? It does seem harder to judge given increased manipulation on light volume. Looks like lots of stick saves last week.
Answer:
It may be a function of the markets being driven by various large institutions (mutual funds, hedge funds, index funds, ETFs etc...) but volume seems to be less reliable when trying to determine sentiment and trends on the NYSE. I suspect that the diminished impact of smaller participants and derivative markets have had a lot to do with my concerns about volume not being a strong indicator. However, I will continue track volume just in case.
Question:
What did you do with the proceeds from the sale of WTR?
Answer:
After investing in WTR we recommended CEPH and SVU which generated 13% and 11% gains respectively. Both stocks were on our Watch Lists and in each case we accomplished our targets and made subsequent sell recommendations. In addition to our posted recommendations, we also participated in CWT and GENZ. Both positions accomplished our short-term after tax goals which allowed for the purchases of new stocks on our dividend Watch List.
Our article titled “Meridian Biosciences and Other Profitable Market Lessons” provides a framework for the strategy we’d like to employ when investing in Dividend Achievers. Another article that weighs heavily on our investment decisions is titled “It Isn’t Easy Being Green.” That article outlined Hetty Green’s approach to handling her funds when not invested in stocks. We’ve simply applied a similar strategy to Dividend Achievers and Nasdaq 100 stocks at a new low (after careful analysis).
Question:
Would you venture to provide a top pick from your current dividend achievers list?
Answer:
As you can tell, the current list has too many companies that are candidates for investment. Without providing any detailed analysis, I would say that my top four choices for additional research would be Ritchie Bros Auctioneers (RBA), Northern Trust (NTRS), Dentsply (XRAY), and Meridian Biosciences (VIVO). We expect, and hope, that the price of these stocks will fall further while we get more research in. We're using the March 2009 low as our benchmark for all investment analysis going forward and we hope that you do the same.
Russell Blurb:
For what it is worth Richard Russell’s commentary today (July 12, 2010) seems to fly in the face of the commentary that he gave on Friday July 9, 2010. Go figure:
“The recent non-confirmation by the Transports may have served as an entry spot for bold speculators, but I doubt if the 2007 highs in the Averages will be approached or bettered. Nevertheless, we may see a brief period of better markets, a "breather" in the long life of the bear. I believe this primary bear market will extend into 2016.
A near-term marker or target is to see whether the Dow and the Transports can better their recent June highs. Those highs were 10450.64 for Industrials and 4467.25 for Transports. Write those figures down. I'm betting that the two D-J Averages will not be able to better the June highs. Let's wait and see.”
All I can say is, at least he indicated an upside target that matches the one we came up with yesterday. Can't understand how he was so bullish on Friday and is now sounding so skeptical today.
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