Category Archives: Seeking Alpha article

This Growth Stock is Priced at a Tremendous Discount

Summary

  • Brookfield Business Partners has +30 years of proven track record in investing and managing businesses on a global basis.
  • It aims for returns of 15-20%.
  • Buying the stock on big corrections can lead to even higher returns for you.
  • The risks lie in the strong reliance on management competency and the limited partnership having volatile earnings/cash flows from buying and selling businesses. This makes it very difficult to value the stock.

What Does BBU Do?

Brookfield Business Partners LP (TSX:BBU.UN)(NYSE:BBU) acquires high-quality businesses that are either market leaders or are businesses that it can improve on by applying its global investing and operational expertise.

Ultimately, BBU believes that the businesses that it acquires will generate strong cash flow — if not now, then in the future (after it improves the operations). When a business has maximized its value, BBU would sell it and redeploy the proceeds in better opportunities for higher returns.

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What Should Celgene Shareholders Do In Light Of The Bristol-Myers Squibb Deal?

Celgene (NASDAQ:CELG) stock appreciated about 21% as of writing, as there was news that Bristol-Myers Squibb (NYSE:BMY) was acquiring Celgene for about $74 billion.

What Should Celgene Shareholders Do?

The news actually pushed Celgene stock meaningfully closer to its fair value, according to Thomson Reuters‘ mean 12-month target of $105. As of writing, Celgene is trading at $80.84. So, it doesn’t make sense to sell at the current levels, as there’s still about $14 (nearly 17%) of upside according to BMY’s current stock price.

At the same time, there’s a risk that if the deal breaks down, Celgene stock could come tumbling down.

If you bought Celgene in the $60s in December, you’re now sitting on some nice gains, and no one will blame you for securing and booking the profit.

For those who have a longer-term investment horizon, it may be worthwhile to wait it out. If BMY combines with Celgene, it could be a good thing, as it merges the quality biotech and pharma companies to make a more diversified firm. Moreover, BMY also offers a stable dividend to give immediate returns.

Investor Takeaway

BMY is getting a good deal here. It’s paying a low multiple for Celgene, which has a higher margin and higher growth rate – BMY’s recent net margin and consensus estimated growth rate are 6.5% and 11-12.8%, respectively, while Celgene’s are 19.6% and 19.5-19.8%. BMY also has a stronger balance sheet than Celgene. Assuming the deal goes through, I think BMY is a better buy here.

The above is an excerpt. Read the full article here: What Should Celgene Shareholders Do In Light Of The Bristol-Myers Squibb Deal?

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Disclosure: At the time of writing, the author owns CELG.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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Why Scotiabank May Not Be As Great As You Think

Summary
  • Bank of Nova Scotia is Canada’s most international bank with a focus on the Pacific Alliance countries.
  • In the past 10 years, the bank’s earnings-per-share growth versus its share count growth was pretty poor compared to its peers.
  • The stock has underperformed its peers but has outperformed the market.
  • Scotiabank’s dividend yield of 4.7% is safe, and you can expect stable dividend growth from the bank.

As the third-largest Canadian bank by market cap, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Scotiabank is often viewed as a blue-chip dividend growth stock. However, it may not be as great an investment as you think.

First, here’s an overview of the bank.

Business Overview of Bank of Nova Scotia

Scotiabank is Canada’s most international bank, but it still generates about half of its earnings from Canada. Its Canadian Banking segment is secure and generated the highest return on equity (“ROE”) of 22.7% in fiscal 2018 compared to the ROE of 14.4% and 16%, respectively, for its International Banking segment and its Global Banking and Markets segment. The overall ROE was decent at 14.9%.

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