McKesson Corp (MCK)

MCK-N vs. ABC-N. He likes them both, but prefers Cardinal Health (CAH-N). Those running for election are talking limits of drug prices. He likes all but CAH-N is the best.

The largest pharmaceutical distributor in the US and Canada, as well as the largest healthcare IT provider. They are basically in 50% of all US hospitals. Trading at 15X forward PE with an 11% long-term growth rate, so it is a pretty good valuation. They will do well with what is happening with Obama care. If you own, he would put a stop loss on it.

Healthcare is the biggest industry in the US, and is highly domestically focused. About 80% of this company’s sales are US based. The US has an improving consumer, an aging consumer and things like Obama care which are not hurting the spending on healthcare. This is a distributor and they also have a PBM (pharmacy benefits management) unit. They continue to grow and beat the most recent estimate by about 7%.

In drug distribution, mostly generic, and has done a wonderful job. A lot of their growth has happened and the price ($234) reflects a great deal of optimism in the future. Growth is slowing somewhat, and is coming from different places as opposed to being organic growth, such as stock buybacks, reduced floats.

Likes it a lot, but doesn’t own it because he has a lot of healthcare. Really benefited from a pickup in volumes. Well poised to benefit from the US healthcare act.

Management team seems to be exceptionally strong. Bought a number of companies over the last couple of years and just completed a big acquisition in Germany which makes them a big, significant, generics distributor in Europe which will be accretive to earnings. Looking out a couple of years, he could see $11-$12 in earnings. Very, very good at execution. Yield of 0.54%.