David Sharek
David Sharek is stock portfolio manager at Shareks Stock Portfolios and the founder of The School of Hard Stocks.
Sharek's Growth Stock Portfolio has delivered its investors an average return of 18% per year since inception vs. the S&P 500's 10% during that time (2003-2020).
David's delivered five years of +40% returns in his 18 year career, including 106% during 2020.
David Sharek's book The School of Hard Stocks can be found on Amazon.com.
Catalyst’s business has never been better. Earlier this year, CHSI purchased FutureScripts, another pharmacy benefit manager (PBM), which will make CHSI bigger and more profitable. Even though this deal should have sent the stock higher, CHSI fell on concerns the company could lose its largest customer. Last quarter, Catalyst Health Solutions renewed its largest contract, signing Wellmark Blue Cross Blue Shield for another seven years. So now the company is keeping its largest customer, keeps signing up new customers like Ford Motor Company, and has a slew of new customers coming from FutureScripts — business has never been better.
Profits are growing around 30%-33% right now and CHSI only has a P/E of 20. The stock has gone from $37 to $47 since my article a quarter ago — and the P/E has fallen slightly from 21 to 20. So even after the move higher, the stock is cheaper. This is mainly because I’m now looking at 2011 profits instead of 2010’s. Still, its impressive. I think this stock has good upside.
Revenues rose 29% last quarter, translating into a 30% rise in profits. In Sharek’s Take said the company expects 30% revenue growth in 2011, so CHSI could have 30% profit growth next year too. Sales growth accelerated BTW, revenues rose 25% two quarters ago.CHSI beat by a penny, this company comes in “around the number” so I don’t track this stat much.
I’m taking my Fair Value P/E way up on this stock — from 22 to 27. You could say CHSI is worth 30 times earnings, but that’s high for the PBM industry.
When I look at the ten-year chart, I see a stock that makes runs then digests its gains. I think this run that started in 2009 will continue in 2011 — it should with the great expectations.The worst annual profit this company was 2008 when CHSI grew by 20%. 2007, 2009 and 2010 show 29%, 28% and 29% growth. During the decade, profits have compounded at 29% a year.
