Growing Concerned About 2005
My favorite name in the group now is Pulte (PHM). The company has one of the best organic revenue growth stories in the sector with its demographically driven play in active adult communities. The company has strong growth in new community openings, around 20%, for 2005. At 6.5 times profits, the shares could reacquire a sector-leading P/E like Toll Brothers (TOL) or NVR (NVR) and trade up to multiples of 9 or 10.
Depressed Drug Names
After avoiding the debacle in the drug sector, I've initiated positions in a few beaten-down large-cap names (the big uglies) with very low valuations as well as some small companies.
A favorite here is Impax Labs (IPXL), an emerging generic company specializing in difficult-to-formulate products. The company maintains a rich pipeline entering 2005, and I forecast 100% revenue growth and a tripling in profits to $1 per share. At $15, the stock is cheap on my forecast. Just think where this would be if it was a tech stock. Who says value investing needs to be boring?
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