Bull Run or Bulloney

[adios]

Lot of skepticism about this rally. Anyway I like SCOR as a new pick. It's being acquired by CAH except some minor accounting problems are holding it up. I think CAH is trying to ring out some concessions. If the deal goes through at current prices, SCOR will be worth over $30 most likely as it is now $25 and change. FDP got hit yesterday on some possibly bogus bad news. I think it's worth a look see as the it's a growth at reasonable price type stock. I wouldn't jump in their right away on FDP. In tech land cellular and wireless related stocks seem to be hot, at least for now.

[Ray Zee]

the market has to be way overvalued at this point. not to say it wont continue as the new mentality of buying everytime the market goes down some is still with us.

how about everybody naming the stocks they talk about, rather than just giving symbols, as its too hard to figure or folow the names.

[mikelow]

They really don't know what they're talking about. Ignore it.

[adios]

"how about everybody naming the stocks they talk about, rather than just giving symbols, as its too hard to figure or folow the names."

Ok I want to get your opinion of the following (anyone else who wants to chime in feel free). The symbols CAH and SCOR stand for Cardinal Health and Syncor. You're probably familiar with what both do but if not:

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Cardinal Health, Inc. is a provider of products and services to healthcare providers and manufacturers, helping them improve the efficiency and quality of healthcare. The Company has four segments: Pharmaceutical Distribution and Provider Services, which offers pharmaceutical and other healthcare products, as well as pharmacy management services; Medical-Surgical Products and Services, which includes medical products and services; Pharmaceutical Technologies and Services, which provides a broad range of technologies and services, and Automation and Information Services, which focuses on meeting customer needs through proprietary automation and information products and services.

Syncor International Corporation is a provider of specialty services and products used in the diagnosis, treatment and management of heart disease, cancer and other disorders. The Company is a provider of radiopharmacy services and of outpatient medical imaging services. As of December 31, 2001, the Company had 130 domestic radiopharmacies in 48 states, and operated 19 radiopharmacies in 13 foreign countries and Puerto Rico.

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Cardinal Health and Syncor agreed to a buyout of Syncor by Cardinal back in June in a stock swap where .52 shares of Cardinal Health would be exchanged for each share of Syncor. Early this month Cardinal Health in their due dillegence process of examining Syncor's books found some possibly illegal payments made to individuals in Syncor operations in Taiwan I believe. The amount of the payments in question is $500,000. Their is a US law prohibiting such payments to solicit business. Syncor has sales in the hundreds of millions of dollars. After Syncor was informed of the this by Cardinal they, Syncor, did the following:

1-Appointed a board of 3 outside indivuals and a forensic accounting group to conduct an investigation.

2-Suspended the parties involved. Two brothers one of which is the chairman and one of the company founders I believe.

3-Informed the SEC and the Justice departments about the possible illegal payments and began immediately working with them to resolve the issue.

Ok when this news came out in early November SCOR stock plummeted like a stone and went into the teens from the mid 30's. As the investigation has proceeded the stock has recovered to a value of around $26. There have been several shareholder lawsuits filed at this juncture. However, the deal itself has not been scuttled and the companies came out with a joint statement on Friday saying that they agreed to extend the merger termination date to January 15, 2003 from December 31, 2002. Syncor released the following in an ammended 10Q recently regarding this situation:
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Special Committee Investigation

The special committee, working together with outside counsel and an independent forensic accounting firm, believes it has substantially completed its gathering of facts in connection with the investigation of all of Syncor's foreign operations (other than Israel where Syncor has only a licensing arrangement and no operations). The special committee also is investigating certain limited aspects of Syncor's domestic U.S. operations. The investigation has included on-site reviews by representatives of the special committee in every foreign country in which Syncor has operations. The special committee is also investigating the knowledge and/or involvement of certain employees of Syncor and its subsidiaries, including Monty Fu and Moses Fu, in the matters subject to the investigation. Analysis of the information gathered is continuing.

The following is a summary of the findings of the special committee to date based on the information it has gathered at this time. The investigation is continuing and there can be no assurance that additional issues will not be found or that the findings below will be confirmed.

o The special committee has found that questionable payments have been made over a substantial period of time to customers, including state-owned and private healthcare facilities and certain of their employees, in Taiwan. Based on information gathered to date, some or all of the payments appear to have violated U.S. law, including various provisions of the Foreign Corrupt Practices Act of 1977 (the "FCPA"). In addition, some or all of the payments appear to have violated local Taiwan law. Over the past five years, these payments to state-owned facilities and certain of their employees appear to have totaled an estimated approximately $500,000.

o The special committee has also found questionable payments and other transactions at Syncor operations in at least six other countries in Asia, Latin America and Europe that also may have violated U.S. law, including the payment, record-keeping and controls provisions of the FCPA. In addition, some or all of these payments appear to have violated local laws in the relevant jurisdiction.

o During the course of its investigation of Syncor's foreign operations, the special committee identified a number of additional instances where activities of Syncor or of its subsidiaries or representatives may have constituted violations of local laws and regulations relating to, among other things, tax, competition and regulatory matters.

While the special committee and its advisors are continuing the investigation, based on the information available at this time, Syncor does not expect that any of these payments, transactions or other matters will be material to the financial results of Syncor or will result in an adjustment or restatement of Syncor's historical financial statements. The special committee intends to complete the investigation as promptly as practicable. A final determination as to the full impact of the investigation on Syncor and Syncor's financial statements is subject to the completion of the investigation."

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First of these foreign operations constitute a very small portion of Syncor's business. Cardinal plans to divest these business in acquiring Syncor (these plans were in the works before the news came out). Second of all the company in their own words:

"based on the information available at this time, Syncor does not expect that any of these payments, transactions or other matters will be material to the financial results of Syncor or will result in an adjustment or restatement of Syncor's historical financial statements."

My take is that the amounts of money involved almost certainly do not materially affect the financial results. In accounting, one principle is conservatism, and in this situation I would think that Syncor would be bending over backwards to rectify this situation so if there was any doubt about materiality, they'd restate the appropriate results. In addition Syncor has set aside $2.5 million dollar amount to cover fines and re-imbursements for payments. Cardinal Health made the following statement regarding this issue:

"While we continue to believe that the strategic rationale for the acquisition of Syncor and its nuclear pharmacy business has validity, any decision with respect to this transaction must be made in the context of adhering to our core values and protecting Cardinal Health's reputation,"

The analysts have chimed in with many comments. The current thinking among the analysts and investors seem to be estimating the probability of the deal going through. If the deal goes through Syncor will rise, if not it will fall precipitously. Many have said that Syncor will have to accept less money to complete the deal. However I believe the following data is relevant. I calculated some numbers regarding Syncor fundamentals over the last 5 years. Here's what I came up with (data used to calculate from Syncor 10K's and 10Q's on file at the SEC):

Syncor sales have grown at the rate of 18% compounded over the last 5 years. In absolute terms they've more than doubled over this period.

Syncor gross profits have grown at the rate of 32% compounded over the past 5 years.

Syncor earnings per share from continuing operations have grown at the rate of 30% compounded over the last 5 years.

Syncor stockholders equity has grown at the compounded rate of 23% over the last 5 years. This last number is important IMO because it shows a high rate of appreciation of share holder value.

To me these are really good growth numbers for a company. Right now based on analyst estimates, Syncor has a 2003 PE of 13. There is a group of short sellers, investors, and analysts who opine that Syncor stock price will return to the mid teens if the deal falls through, giving Syncor a 2003 PE of 7. Now in my way of thinking the growth of Syncor's business is quite good and it certainly has an intrinsic value of more than $15 a share (quicken.com says $81 a share). I plugged in some conservative numbers to a very simple DCF model and came up with $41.00 a share going forward. I went long Syncor at around $25 a share. After going over the numbers on Syncor I'm almost hoping the deal falls through because I'm fairly certain that Cardinal is getting a real bargain for Syncor between $30-35 a share. Cardinal is currently at $62 a share which is near the bottom of their recent trading range I believe. Long post what do you all think.

[Wildbill]

Market psychology is obviously important and I think it will be positive for sometime as the rally seemed to be fueled by a lot of former bears turned into bulls, both analysts and just commonfolk. Add to that a surprising and maybe not even needed double barrel drop in rates by the Fed and its hard to do anything right now other than maybe slow down your buying, but just a bit. So many of these stocks are running right now it might lead to even more fundamental buying as charts will drive some more action. Valuations are tough to gauge and there is a good reason for it. There are estimates of economic growth that are all over the map for the next year or two and also in regards to how even the growth will be. If the economy hits some of those higher expectations (4-4.5% by the end of next year) then the valuations are a bit low. Productivity is going gangbusters right now and if you could thrown in that type of growth on top of it, then the value of stocks is going to have a huge run. Hiring will be slow for a little longer so productivity would be the driver there and profits are going to soar for most companies. If its middle of the road (3-3.5%) then valuations are probably around right to possibly a bit rich, but nothing to get excited about because interest rates are so low. At this growth level, interest rates would still have to head upward and the people parked in bonds right now would start fleeing. While profits won't go through the roof, they will definitely grow at a healthy pace and the longer-term investor will see fair enough returns to justify many of the high valuations. The only losing scenario is continued sluggish growth, but the Fed move might have put that worry to rest. Barring some real catastrophe and of course the risk is there, there is no way the economy is weaker next year than it is right now. Despite what the media has people believing, the economy is in decent shape and the sky isn't falling. I am still trying to figure out how the powers that be got so many to buy into this terrible economy story. The media doesn't even remind people how bad a real recession is. Still they have done a good job of it, but I think going forward a lot of the growth will be driven just in improved confidence from all sectors as people start realizing that 2.5% annual growth and sub 6% unemployment isn't exactly devastating.

[adios]

Cardinal Health and Syncor have apparently agreed to change the deal so that Cardinal is paying .47 shares per Syncor share rather than .52. Since the deal looks solid now Syncor shot up today to just under $30 a share as I speak. I decided to sell and book the profit as the premium is really small now between the two prices. I think Cardinal is getting a really good deal but I'm not that interested in holding the stock thus I took the profit. Not gloating just letting anyone know that may have played it as well that I dumped it.