Top Investor Scott Black’s Favorite Stocks
Some of the steadiest growth stocks lie in pharmaceuticals and agricultural plays, one noted investor said Thursday.
“We know there are patent cliffs on the branded side, and if you look at the expectations, generics are going to grow at about 7.4 percent compounded over the next five years,” Delphi Management founder Scott Black said on “Fast Money.”
Black, whose company manages $1.6 billion in assets, shared his top picks:
Mylan: “Roughly 91 percent of the revenue comes from generics. It’s selling at a 10 P/E,” he said.
Watson: “Roughly three-quarters of the book is generic. One-quarter is branded,” Black said. Additionally, he expected double-digit growth and prices at 10 times P/E.
Teva: Generics account for 56 percent of its product line. “This stock is a joke. They generate over $3 billion a year in free cash and 20 percent on book and it’s selling at 7.8 times this year’s earnings, which is ludicrous,” he said.
Also with large growth potential ahead were the agricultural and fertilizer sectors.
“If you look at the forecast for population growth, we’re going to go from roughly 7 billion people to 9½ billion people by the middle of this century,” Black said.
Deere: “They’re a worldwide leader. They actually have great penetration in Europe, which is unusual for an American company,” Black said. Other factors in its favor: A stock price at 10 times earnings and a 40 percent return on equity.
Potash: “The earnings estimates this year are fairly wide, $3.40 to $4, based on price and volume,” he said.
Agrium: “It’s a 9 P/E, but they do about 25 percent return on equity, generate cash and have a low debt-equity ratio.”
“I think these are all decent plays on the ag cycle,” he said.
Brian Kelly liked the ferts better on the demographics
“We’re looking at 7 billion people on the Earth, and we’re looking at corn stocks that are at 30-year lows,” he said. “It’s simple math.”
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Trader disclosure: On March 8, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Adami owns Citigroup; Adami owns (GS); Adami owns (INTC); Adami owns (AGU); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Kelly is long (TLT); Kelly is long (SMH); Kelly is long (IWM); Kelly is long (USG); Kelly is long (EWY); Kelly is short (EWY); Kelly is short (EWA); Kelly is short (EWH); Seymour is long (AAPL); Seymour is long (BAC); Seymour is long (INTC); Seymour is long (CSCO); Seymour is long (SBUX); Seymour is long (FCX); Nations is long (BAC); Nations is long (DE); Nations is long Citigroup; Black’s fund owns (TEVA); Black’s fund owns (MYL); Black’s fund owns (MCK); Black’s fund owns (AGU); Black’s fund owns (DE); Black’s fund owns (POT);
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