A Reader’s Question on BDX

BDX was first mentioned here:http://wp.me/p1PgpH-1c6

Reader: “Should I buy BDX?”

Reply: The penalty for asking this question-the gauntlet: http://www.youtube.com/watch?v=j1BoNgCR8NU

You would be insulted if I told you whom to marry. Why should investing be any different? You have to think for yourself and apply principles through your own skills, interests and the opportunities in front of you today and (perhaps better) tomorrow.

Don’t end up like this (click on 4o second mark): http://www.youtube.com/watch?v=fPV2L2CGWdQ.


The lesson with BDX is that sometimes the stable, slow growth franchises with management that has the proper capital allocation plan might be able to generate above market returns for those with weak stomachs.

This is not an earth shattering insight. Look below at BDX compared to the S&P 500. Note the much lower price movement down in 2009 and up in 2009-2012. the company’s results are much more stable and better than the average company.

Look at page 3 in the BDX annual report, BD_2011ar. BDX’s stock price returned 3.66% compounded annually over a five-year period from 2006 compared to the S&P 500.  Will that condition continue? No one can know with 100% certainty, but I am betting my largest risk is boredom.

Note this Morningstar Video on market expectations: http://www.morningstar.com/cover/videoCenter.aspx?id=566021

Don’t fear nor expect too much. But if you can find an investment with a larger discount to your estimate of intrinsic value or, more likely, you require higher returns, then avoid BDX.

Asking ME whether YOU should buy is absurd. What YOU need to do is develop an investment process that will help you search, find, value and size the best portfolio for yourself. No one can do it for you. It’s a lonely but interesting road.  Embrace it.

Have a Great Weekend!

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