Q: Although I'm generally a fairly conservative retired investor, I do have a small portion allotted to small caps. I'd like to pick up some LMN. However I wondered about the potential negative impact on share price in a challenging economic environment.
Not sure if this is a good reference / comparison, but I noticed CSU had four significant drawdowns of between 24-29% between the GFC and COVID time periods. I actually thought it would have been worse than that. Considering LMN is already down 15%, and assuming possible similar stock price action, I'm getting a bit more comfortable pulling the trigger even now.
I don't want to make this a predictive question, but do you think this stock price action is a reasonable comparison? Perhaps this is oversimplifying? Do we know if the valuation of LMN today lines up with the valuation of CSU back in 2008 prior to its drop?
Not sure if this is a good reference / comparison, but I noticed CSU had four significant drawdowns of between 24-29% between the GFC and COVID time periods. I actually thought it would have been worse than that. Considering LMN is already down 15%, and assuming possible similar stock price action, I'm getting a bit more comfortable pulling the trigger even now.
I don't want to make this a predictive question, but do you think this stock price action is a reasonable comparison? Perhaps this is oversimplifying? Do we know if the valuation of LMN today lines up with the valuation of CSU back in 2008 prior to its drop?
5i Research Answer:
CSU went public in 2006, and in 2007 its average P/E was 17X. In 2008 and 2009 with the financial crisis its valuation jumped to 60X and 37X, respectively and has stayed largely on the high side since. LMN is about $10B market cap, so a bit larger than most small cap market cap ranges. The stock is still not 'cheap' but the decline certainly makes things more interesting. It does not really have a long enough public history to make good valuation comparisons, and wasn't even around during the pandemic to view its 'panic' price. But we think long term investors can start accumulating. It 'should be' a very steady, lower volatilty grower over time, assuming it does not drastically alter its MO of acquiring cash flow generating companies.