Wednesday, December 30, 2009

New Purchase

This has been a fairly boring market as we see low volume near the end of the year.  I'm curious as to how 2010 starts off, as January's trading is usually anything but boring. 

I went ahead and bought some Carefusion (CFN) today after a slight pullback.  It is a name I have been following for a bit.  They were spun off earlier this year from Cardinal Health, and I like the prospects for this company.  You can read the profile of the company here.  The bottom line is now that we have a clearer view on how health care reform will affect these companies, its a little easier to make decisions on their stock. 

I'm a fan of spin-offs, as they often create opportunities for companies to realize value.  Management is often motivated to get off on the right foot during their first few quarters on their own.  I did a piece on spin-offs earlier this year, which you can read here.

The company is in a good industry that is growing.  Their earnings are estimated to grow at a solid rate, and shares trade at 1.24x book value.  David Einhorn's Greenlight Capital, one of my favorite investors, owns 8.7 million shares.

The stock isn't far from its high, but I think there will be some value unlocked in the coming quarters that the stock hasn't had a chance to show yet.  I started with about a 1/3 position.

For most other names, I'm just sitting on my hands waiting to see if volume and/or volitility picks up when the new decade starts.

Disclosure: Long CFN.

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