This week, however, we saw two of the top three US indices – the S&P 500 and Composite Nasdaq – reach new unprecedented heights. But even these incredible gatherings pale in comparison to the leadership observed by the Nasdaq 100.
The Nasdaq 100 is a market-weighted basket of 100 of the largest domestic and international companies listed on the Nasdaq Stock Exchange. It includes a variety of industries and emphasizes technology, but does not include financials. Given that the Nasdaq 100 includes a number of high growth companies in the tech and healthcare sectors, it is up more than 33% since the start of the year.
There is no doubt that the FAANG shares and Tesla played an important role in this outperformance. After all, FAANG plus Tesla stocks represent 50.92% of the Nasdaq 100 weighting. But among that lost outperformance, there are still huge bargains among those 100 stocks.
Better yet, you don’t need Warren Buffett’s portfolio to make money with those valuable stocks in the Nasdaq 100. If you have, say, $ 3,000 that you can set aside for investment purposes. investment, then you have more than enough money to buy those Nasdaq 100 shares cheaply.
Walgreens Boots Alliance
In terms of value, you probably won’t find cheaper stock on the Nasdaq 100 than the drugstore chain. Walgreens Boots Alliance (NASDAQ: WBA). After losing a third of its value in 2020 and seeing its estimates for the full year reduced due to COVID-19, a share of Walgreens can be earned about 7.5 times the earnings per share expected next year.
While most health care stocks have avoided coronavirus-related weakness, Walgreens’ consumer activity has not been so lucky. Closures in March and April dampened foot traffic in its stores, hampering front-end sales.
But the important thing to realize here is that front-end sales usually generate low margins. Last quarter, US drugstore sales actually rose 3%, which is notable given that drugstore margins are where Walgreens will generate most of its profits. Between COVID-19, vaccinations and an aging population, Walgreens’ pharmacy segment will only see demand increase over time.
Walgreens is also making serious strides in modernizing and improving customer engagement. Big investments designed to grow omnichannel sales are starting to pay off, and the company’s digital Find Care Marketplace is helping connect people with chronic conditions to medical specialists. In other words, Walgreens aims to add its twist to the precision medicine process and retain long-standing potential customers.
With Walgreens Boots Alliance paying a whopping 4.7% return and over a 44-year streak of dividend increases, this looks like an obvious buy for patient investors.
On the surface, a satellite radio company Sirius XM (NASDAQ: SIRI) That probably doesn’t sound like a good deal, especially after looking at Walgreens’ microscopic price / earnings ratio. With a forward P / E of 25, Sirius XM is more or less on par with what it has been for the past five years.
However, there are several ways to assess value. With Sirius XM diligently working on paying down its debt over the past decade, I find the company’s price / cash flow ratio much more intriguing. Based on Wall Street’s expected 2021 operating cash flow of $ 0.48 per share, the company’s 12 times cash flow multiple would be the lowest in a decade as its earnings return peaked of a decade.
One of the most obvious things that makes Sirius XM such an attractive investment opportunity is the fact that it is a monopoly. There are no other satellite radio operators in the U.S. While this doesn’t mean the company is free from competition, it does mean that Sirius XM has strong pricing power over its radio services. subscription and that its transmission costs remain relatively fixed, regardless of the number of new ones. subscribers sign up.
Sirius XM is also uniquely positioned to navigate the inevitable difficulties of the US economy. While terrestrial and online radio is built on an advertising model, Sirius XM’s business model revolves around subscriptions. Even with Pandora’s advertising activities under its umbrella (Sirius XM acquired Pandora in 2019), advertising revenue only represented 13.6% of sales in the first half of 2020, with its traditional satellite subscriptions generating 82.7% of sales. total sales. Businesses are much more likely to cut ad spending during times of economic downturn than people to cancel their subscriptions. Example: the turnover of subscribers is up 5.6% since the start of the year.
Sirius XM might not look like a traditional value stock, but it’s a good deal lurking in plain sight of the Nasdaq 100.
Investors can also grab a hell of a deal if they take their $ 3,000 and implement it Alexion Pharmaceuticals (NASDAQ: ALXN). Alexion is currently trading at around nine times its cash flow and just over nine times expected earnings per share for next year. For context, Alexion’s average price-to-cash flow ratio over the past five years is 32, and its current forecast P / E is half its five-year average.
What separates Alexion from a veritable sea of drug developers is the fact that he focuses on ultra-rare indications. Targeting a very small pool of patients can be inherently risky if clinical trials do not produce the desired results. However, if these studies prove to be successful, it can lead to incredible cash flow and virtually no competition. This lack of competition (with a huge list price) is what allowed Alexion to turn his successful Soliris therapy into a $ 4 billion a year drug.
Innovation and acquisitions also play a role. In terms of innovation, Alexion has developed Ultomiris, which is a new generation therapy designed to replace Soliris. Ultomiris is only given once every eight weeks, as opposed to every two weeks with Soliris. There was once some concern that Soliris’ revenue stream would be threatened by generics at some point in the future, but Ultomiris ensured that Alexion’s cash flow was well protected for many years to come. years.
On the acquisition side, Alexion bought Portola Pharmaceuticals earlier this year for $ 1.41 billion in cash, getting his hands on Andexxa, the first and only drug approved by the US Food and Drug Administration to reverse anticoagulant effects of factor Xa inhibitors.
With Wall Street looking for Alexion to increase its earnings per share by 40%, in total, between 2019 and 2023, that seems like a solid bet for bargain hunters.