Becton Dickinson - BDX - Monthly - Deteriorating Fundamentals
After publishing a chart on KSS for its favorable fundamental situation with the stock oversold and expectations low, I decided to find another stock where the valuation looked high with it technically overbought and running into a wall of overhead resistance.
I found this condition in BDX, a manufacturer of medical devices, many of them disposable.
Notice how the Return on Equity (ROE) has dropped to its lowest level in 15 years and the free cash flow generation is also the lowest since 2003. Notice that the stock has more than QUADRUPLED from 2003, but free cash flow is flat.
140 is a "breakeven" level where anyone who has purchased BDX shares in the last 10 months is "underwater" or losing money. 140 is the price where sellers may just reconsider their purchases given that the fundamentals have deteriorated over the past year from ROE over 20% to ROE near 10%.
Technically and fundamentally this is a short candidate: Risk to 145 (only 3% up) and downside to $110-$120 or lower (down 15%-20%). If BDX goes above 145, then I would re-consider holding short, but it if drops back under $140, then I would consider the shares to be safe to be sold short.
Tim
October 27, 2015 2:18PM EST 140.47 +0.57 last
I found this condition in BDX, a manufacturer of medical devices, many of them disposable.
Notice how the Return on Equity (ROE) has dropped to its lowest level in 15 years and the free cash flow generation is also the lowest since 2003. Notice that the stock has more than QUADRUPLED from 2003, but free cash flow is flat.
140 is a "breakeven" level where anyone who has purchased BDX shares in the last 10 months is "underwater" or losing money. 140 is the price where sellers may just reconsider their purchases given that the fundamentals have deteriorated over the past year from ROE over 20% to ROE near 10%.
Technically and fundamentally this is a short candidate: Risk to 145 (only 3% up) and downside to $110-$120 or lower (down 15%-20%). If BDX goes above 145, then I would re-consider holding short, but it if drops back under $140, then I would consider the shares to be safe to be sold short.
Tim
October 27, 2015 2:18PM EST 140.47 +0.57 last
Trade closed: stop reached:
BDX went over $145 which should have capped any advances in shares. If you look at the rally in KSS that occurred over the same time period, this trading "pair" (long Kohl's versus sell short BDX) worked out neutral.
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