Horizon Kinetics LLC, a New York-based investment advisory firm founded in 1994, released its Q1 2020 Commentary – a copy of which is available for download here. It has over 70 employees and is led by Murray Stahl. Its investment strategy is long-term and contrarian oriented, and the fund usually holds a concentrated portfolio with original stock picks.
In the said letter, Horizon Kinetics highlighted a few stocks and Charles River Laboratories International Inc. (NYSE:CRL) is one of them. Charles River Laboratories engages in a number of preclinical and clinical laboratory services for the medical device, pharmaceutical, and biotechnology industries. Year-to-date, CRL stock lost 5.3% and on April 28th it had a closing price of $139.95. Its market cap is of $7.16 billion. Here is what Horizon Kinetics said:
“We lately added a small position in Charles River Laboratories. It is not a particularly cheap company; it trades at about 19x estimated earnings for this year. But it is a high-quality business. It provides a service that is much in demand by a very large population of well-funded entities, a service that is not easily replicable and is very value added. Its revenue growth, exclusive of acquisitions, is about 8% per year. The per-share earnings growth rate in the past 4 years has been over 12%.
Charles River Labs is a so-called contract research organization. It is the world’s largest provider of outsourced early-stage drug discovery, non-clinical development and safety assessment studies, including FDA-mandated testing for sterile biopharmaceutical products. This is not just for the pharmaceutical companies, but also for academic institutions and government agencies. The company serves customers that either have their own research capabilities but are operating at capacity and don’t wish to expand their fixed costs, or that can use the company’s specialized capabilities. No customer accounts for as much as 3% of revenues.
And behind all of this is that it takes up to $2 billion and a decade or longer – excluding the time and cost of exploring thousands of different molecules – to produce a single FDA approved drug. The COVID-19 pandemic cannot but help but engender continued efforts at microbial disease identification and treatment. The company’s manufacturing segment, which accounts for 18% of revenue, includes diagnostic products used to manufacture vaccines.”
In Q4 2019, the number of bullish hedge fund positions on CRL stock decreased by about 3% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.