He'll probably be happy to read that post because the only fucking thing he seems to care about is Knight Therapeutics.
First thing, I'm a little bored about GUD. The stock is by far my highest PE/Lowest ROE stock. And with GUD, I have 21 stocks in my portfolio, 1 stock beyond my psychological limit of 20 stocks.
The temptation to sell is there. But, what about the stock, exactly?
Knight Therapeutics is the new creature of Jonathan Goodman. Some say the stock was/is dead money. I’m not sure. But it’s surely a speculative stock given the low income it gets from some investment and the massive cash on hand. Selling at about 55 times earnings, the stock is pretty expensive, but may have a lot of potential if the money is used wisely.
What you should ask yourself right now is the question: I chose the horse or the jockey? Which is, by the way, another expression like "brick and mortar" so abundant in the Sequoia Fund's reports.
If you invest in GUD, you clearly invest on the jockey, because there's not really a horse there. It's more a poney. Or a donkey. The jockey should definitely pimp his donkey.
Enough of these fucking metaphores. What about GUD's numbers?
Market cap: 1,5B$
Cash on hand (last march): 764M$
So, if you're buying GUD shares, you pay a little less than 2$ for 1$ on hand. Well, they have some assets and some income, but that's not the main reason you're buying the stock.
OK, you pay for the potential. For the name « Goodman », because that guy did something great with Paladin. I made a lot of money with that stock and I admit that the guy has been one of our best entrepreneurs in Canada. But nothing proves that he will do something great two times in a row.
What could GUD do with all that cash? They could buy another company. But which company? Which size of company? And we shouldn't forget that they could borrow money and go for something bigger than a 764M$ acquisition. What about a 2B$ acquisition with some debt or some dilution?
Man, I’m on total speculative ground here. Because GUD could buy great or bad assets. It’s not because they buy a 2B$ company that this company makes money. Many pharma stocks have products in the pipeline but not any on the market.
But, for the sake of writing something substantial, let's continue with United Therapeutics, a 6B$ stock. They have about 2,5B$ assets and they should generate earnings of about 750M$ this year.
If GUD doesn’t issue shares and buy one third of United Therapeutics (note that this stock has a very high ROE in the 30’s), they'd get one third of UTHR income (750M$ divided by 3 = 250M$). Then, 250M$ divided by 144M shares equals 1,74$ EPS.
That’s crazy. That fucking analysis makes no sense. If it makes sense, just buy GUD right now because it’s selling at about 6 times earnings with the acquisition of 33% of UTHR.
Well, GUD will probably never buy 33% of UTHR. So, you've just read something that has no value at all. The value of cash is what you do with it and GUD has done nothing yet. I really don't know what to say because it's so speculative.
With something like 3 or 4% of my portfolio on that stock, I'm willing to wait even if I'd like to own only 20 stocks. You know, round numbers is something very important to become a successful investor. You'll agree with me, every clever investor has read "The round numbers investor".
Those who haven't suck cocks.
And every single of these fuckers will fail.