YCG Investments
“If you buy above average businesses at below average prices, on average, we believe you should come out ahead.” — Brian Yacktman

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Earlier this year, we decided to take a position in Abbott (ABT). Recently, we have decided to move out of our investment in Abbott and rotate into something we are currently finding more attractive – CR Bard (BCR).

The company’s name may not be a common household term, but it certainly produces products that are used every day. Bard is most known for producing catheters. They also produce a variety of other disposable medical products through their four core divisions: Urology, Oncology, Vascular, and Surgical Specialties.

Their major source of profits stems from catheters, most of which are sold through its Urology division (26% of revenues) and also specialized access versions through its Oncology division (27% of revenues). Bard also has diversified products in its Vascular division (28% of revenues) such as stents, grafts, angioplasty, etc. and its Surgical Specialties division (16% of revenues).

The management team at Bard has also proven to be adept at increasing shareholder value over the years. Not only have they done a decent job generating double-digit returns on invested capital, but they have also worked hard to return cash flow to shareholders. Although the dividend isn’t anything to shout about, Bard’s management has aggressively bought back shares when prices were attractive to increase intrinsic shareholder value, paying out nearly all of their free cash flow.

Overall, an investment in CR Bard means getting a high quality company that sells disposable medical products in addition to a competent management that is dedicated to raising shareholder value. At its current valuation, we believe Bard is an attractive investment.

Disclaimer: The specific securities identified and discussed should not be considered a recommendation to purchase or sell any particular security. Rather, this commentary is presented solely for the purpose of illustrating YCG’s investment approach. These commentaries contain our views and opinions at the time such commentaries were written and are subject to change thereafter. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. These commentaries may include “forward looking statements” which may or may not be accurate in the long-term. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable. Past performance is no guarantee of future results.

Posted by: Mike Yacktman | December 15, 2011 | Permalink

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