Summary
- Earnings were impressive, but with a caveat to watch going forward.
- KR shares remain undervalued, despite huge gains in 2013 and 2014.
- Kroger is much, much more than just a traditional supermarket chain.
- Yes, I’m actually describing a retail grocer as a technology company.
Company Overview
Founded in 1883 when Bernard Kroger invested his $372 life savings to open a grocery store in Cincinnati, the company that was incorporated in 1902 as The Kroger Grocer & Baking Company is now The Kroger Company (NYSE:KR).
The recent Harris Teeter Supermarkets acquisition [pdf] is a hot topic now, but mergers and acquisitions have always been an integral part of Kroger's growth strategy. In 1955 Kroger bought Henke & Pillot, as well as Childs Food Stores, thereby establishing a large presence in Texas. In 1956, Kroger purchased Big Chain Stores in Shreveport, Louisiana and, in 1983, Kroger merged with Dillon Companies, which was founded by the great grandfather of former Kroger CEODavid Dillon. Ironically, Dillon Companies had acquired much of its own growth when Kroger sold sixteen Kansas stores to J. S. Dillon & Sons Stores in 1957.
The biggest merger in Kroger history was the $13 billion deal in 1998 to mergewith Fred Meyer. That merger created a supermarket chain with the broadest geographic coverage, and enabled Kroger to establish unrivaled economies of scale in purchasing, manufacturing, information systems and logistics.
In fact, its 38 food processing facilities make Kroger one of the nation's largestfood manufacturing operations, and the company also owns one of the nation's largest private truck fleets to serve its 36 distribution centers throughout the U.S. Of the 13,000 private-label products sold in Kroger stores, 40% are made at the company's own manufacturing plants. These corporate brands, such asPrivate Selection and Simple Truth, now account for over 25% of Kroger total sales dollars. This provides the company with competitive advantages both in terms of margins and speed to market, thus a relative economic moat.
According to the Global Powers of Retailing 2014 report from the research firmDeloitte Touche Tohmatsu Limited, Kroger is the world's fifth-largest retailer of any type (not just food retailers). Kroger is one of three U.S.-based companies among the top-five global retailers, along with Costco (NASDAQ:COST) and Wal-Mart (NYSE:WMT), but is the only company in the top five that operates in just one country (all others operate in 9-31 countries). Similarly, Kroger is also the fifth-largest food retailer in the world, with the same three U.S. companies making the top five, according to the Supermarket News industry group.
Kroger operates 2,640 supermarkets of various formats under two dozen local banners, including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry's,Harris Teeter, JayC, King Soopers, QFC, Ralphs and Smith's. The Food 4 Less and Ralphs divisions operate a one-of-a-kind anaerobic digestion facility that converts unsold organics into renewable energy. In 2013, the system offset an estimated 93 million pounds of food waste by generating renewable energy.
With that all duly noted, Kroger is also much more than just a supermarket chain. Kroger is the fifth-largest pharmacy operator in the U.S., by number of locations, operating over 2,100 retail pharmacies in its various food stores, as well as specialty pharmacies, clinics and a mail-order service. Collectively, the businesses fill over 160 million prescriptions per year. That is very significant, as the IMS Institute for Healthcare Informatics forecasts global spending on medicines will grow at 3-6% compound annual rate, over a period of just five years, to reach $1.2 trillion by 2017. So, pharmacy is clearly a growth market.
Through its Kroger Convenience Stores subsidiary and with franchises, Kroger also operates 786 convenience stores in nineteen states, under a half dozen banners that include Kwik Shop, Tom Thumb, Turkey Hill and Quik Stop. This is notable because convenience stores are among the Kroger businesses with high margins to help balance the grocery industry's notoriously thin margins.
Nearly half of Kroger supermarkets have gas stations and, combined with the gas stations at the company's convenience stores, Kroger is the third-largest owner-operator of fuel centers in the U.S. As a trend-setter, the company alsoadded electric car charging stations to many locations, now totaling about 300.
Kroger's Littman Jewelers and Fred Meyer Jewelers brands have both in-store and standalone locations in shopping malls, which collectively make Kroger the third largest fine jewelry retailer in the United States. Similarly, Kroger's floral shops collectively make the company the single largest florist in the world.
As part of its Kroger Personal Finance program, the company offers customers credit cards and debit cards, as well as no-contract wireless service via its own I-Wireless brand shops located in most of the company's stores.
The company even has its own real estate division, Kroger Real Estate, which owns much of the real estate on which its various businesses are located.
Finally, as a bonus for investors who like a component of social responsibility in their investment choices, Kroger also employs the seventh largest number of people in the U.S. I was initially shocked to learn that Kroger employs more people than General Electric (NYSE:GE), until I realized that's only in the U.S.
For more information about The Kroger Company, see the corporate website.
sources: various company filings, presentations, and Kroger 2013 Fact BookOpinion Context
From my October 2013 article with brief overviews of several companies, here is the bottom line of my initial published opinion of The Kroger Company:
My opinion is to consider buying KR in the $38-39 range; and I expect KR to continue making new all-time highs and hit $46 within twelve months (20% return). Tack on the modest 1.6% dividend, which can grow more, and the result is very good return potential.
From my December 2013 full-thesis article (while KR was about $40), here are my concluding opinions:
When I first started buying KR at $22 a few years ago, many people said I was insane because they thought Whole Foods (NASDAQ:WFM) and/or Wal-Mart would "eat Kroger's lunch." Well, Kroger still has its lunch. In this article, I'll cover the Kroger earnings results and the reasons I think the dip in KR shares is great for investors. The reality is that there was not anything negative in the earnings results. In fact, as discussed in the "Earnings Review" section, the numbers were actually great.
It's been almost exactly year since I wrote about KR for three distinct reasons that I want to explain, since I know that some readers follow SA contributors only for coverage of one particular stock that they own.
First, to my amazement, there was a bit of backlash from some readers when I wrote that previous article (about 51% ago). Some were so contentious that I wrote a follow-up to clarify points that the article already stated. Even with my opinions clearly stated within the article, it somehow became an issue that the article title referred to KR as a "buying opportunity." I consider it a goal to write about stocks before they reach my buy zone, and always suggest staged buys, but I've still tried to get better at stating the related details more clearly.
Second, one part of my thesis is that integrating an acquisition takes time, and the Harris Teeter deal didn't even close until February 2014. I opined that the late-2013 dip was from "short-term momentum chasers" running for the exitsbecause the deal accretion didn't show before then, and that KR "will maintain strong growth as Harris Teeter accretion starts hitting earnings in the coming year." That is happening now, so it seems time to take another look forward.
Third, I consider owning KR practically a no-brainer that doesn't require many updates, since the company is best-in-class in a defensive industry and is very well-run. In fact, among the thirty companies I cover, KR is not only a top-five largest holding in my own portfolio, but also one of only five that are in every portfolio I manage. Even so, I don't plan to wait so long for a next KR update.
In any case, because my investment theses are always long-term, my earliest articles on each company generally have the most detail on my thesis and the risk factors, regardless of publish dates. So, this article primarily updates my valuation calculations and price target. I'll also recap earnings, offer additional information about the company to supplement the parts of my thesis that I've already detailed, and I'll also include my usual plethora of links to more info.
(click to enlarge)
source: Yahoo Finance
source: Yahoo FinanceEarnings Recap
Kroger reported 2014Q3 earnings results before the December 4 opening bell, and held a corresponding conference call later that morning. From the $58.66 pre-release price, the shares rallied 3.96% over the next two sessions, closing at $60.98 on Friday afternoon. That is despite the fact that the overall market seemed uncertain about the direction it wanted to take during those same two sessions. In any case, KR shares have now reached a new all-time high.
Note that this is only the third quarter to include Harris Teeter in KR results, so year-over-year [y/y] percentage comparables are affected as a result.
KR reported EPS of $0.69 for 2014Q3, which is $0.08 ahead of the consensus estimate. The earnings were driven primarily by strong core operating results, including Harris Teeter accretion, and a fuel-margin increase also contributed.
A fuel-margin increase is obviously helpful, though investors might also recall that a downside to any temporary benefit is that it creates tough comparables going forward. We're already one third into the current quarter for KR, so this issue may not come into play until y/y comparables for 2015Q3 and 2015FY, as investors are unlikely to recall these details. Comparables for 2015FY are also a consideration in terms of the estimated 13-15% EPS boost for 2014FY from Harris Teeter. While the increased EPS remains, the 13-15% growth rate from the acquisition is unlikely to repeat (8-11% is the norm for KR).
At the same time, I don't want to overstate anything, so this comment from CFO Mike Schlotman during the conference call should help balance the point:
Fundamentally, this has been a very strong year across the board for us. With the ID sales that we've had so far this year, and positive ID sales in every department and positive ID sales in every geography, our core business is performing extremely well. It's not just incremental accretion from Harris Teeter. It's strong results from all of our core operations.
KR reported 2014Q3 revenue of $25 billion, which is in-line with the consensus estimate, and represents 11.2% growth over the prior-year period. When fuel sales are excluded, revenue grew 13.7% over the prior-year period. With fuel sales excluded, same-store revenue grew 5.6%, which is well above the 3.5% of the prior-year period, and represents 44 quarters of same-store growth. A shortvideo clip from during the quarter might be interesting to KR investors.
KR also raised and narrowed its EPS guidance for 2014FY to a range of $3.32 to $3.36, versus the old guidance of $3.22 to $3.28. For 2014Q4, KR expects same-store sales growth of 4-5%, excluding fuel. The long-term EPS growth guidance is 8-11% and, if fuel margins return to historical levels, KR expects 2015FY results closer to the low end of that range. Said another way, if fuel margins remain atypically high longer than expected, EPS growth may also.
Valuation Updates (Upside Potential, Downside Risk)
KR shares are now at a new all-time high, but I only mention that to share the information. An all-time high actually means little to me, since I'm an investor, not a historian. In other words, I don't subscribe to rearview-mirror analysis to claim a stock price can't go higher than in the past. KR 2015 earnings won't be the same as 2010, so there's no reason the share price should be. Comparing a company at two completely different time periods based only on share price is, at best, apples-to-oranges. The multiples of past share prices are useful for estimating future prices, but past share prices alone have no predictive value.
My price target is based on numerous Discounted Cash Flow [DCF] calculations to estimate how KR would fare in different earnings scenarios, in combination with various calculations of trailing and forward Price-To-Earnings ratios [P/E].
DCF Valuations
As the chart below shows, KR earnings are expected to grow at an average annual rate of 11.78% over the next five years, which is a little higher than the company's evergreen 8-11% guidance that it very consistently meets or exceeds. To keep my DCF calculations conservative, I reduced the 11.78% projected growth rate to 10% and used a terminal growth rate of only 5%.
I started with the $3.34 midpoint of the company's $3.32 to $3.36 guidance for 2014FY, which I believe is reasonable, considering that the guidance was just updated last week and with only one quarter remaining in the fiscal year. If fuel margins stay high a bit longer than expected, 2015FY results could end up higher, but I used the historical-levels assumption to keep my calculations conservative. The result is a $3.61 EPS for 2015FY, which is well below the $3.69 current consensus estimate, and adds another layer of conservatism.
With the data just detailed, all of my DCF calculations return share prices in a $66-68 range. These calculations don't represent fair value today, since they focus on the twelve-month timeline of my price target, which I'll detail shortly.
It's also worth noting that, for both previous two fiscal years (2012 and 2013), when Kroger updated its guidance with only one quarter remaining in the fiscal year, the company still outpaced that guidance by wide margins. For example, the final EPS guidance for 2012FY was $2.44 to $2.46, yet the actual EPS for 2012FY ended up at $2.77. Similarly, the final EPS guidance for 2013FY was $2.73 to $2.80, yet the actual EPS for 2013FY ended up at $2.90. I don't want to encourage unrealistic expectations, so I'll leave it to each reader to consider the impact on all of the calculations, if 2014FY earnings exceed the guidance.
P/E Ratio Valuations
The last four quarters of EPS for KR were $0.78, $1.09, $0.70 and $0.69, for a $3.26 total. With the $60.98 current share price, and the $3.26 trailing-twelve EPS, the trailing-twelve P/E is 18.71x. With the current consensus estimate of $3.69 for EPS in 2015FY, the forward P/E ratio for KR is 16.53x.
By the way, I caution readers against accepting valuation ratios from various websites without any verification. For example, several popular websites are currently showing a trailing-twelve P/E ratio for KR in the 20x range, which is just flat wrong. If you doubt that, feel free to check the numbers I've offered for yourself. That's exactly the whole reason I get data directly from company filings, calculate my own ratios and spell out those details in articles -- so that readers can check, if they choose, and be sure the information is accurate. I'm not saying I never make mistakes, but something seems to be fundamentally flawed about the way some websites source (or update) some of their data.
According to S&P Capital IQ historical data, over the past ten years, the P/E ratio for KR has been in a 10-19x range, when the two most extreme outliers on the high and low end are discarded, and the most typical P/E ratios for KR are in a 14-16x range. The P/E has also gone as low as 8x and as high as 26x.
When using the $3.26 trailing-twelve EPS, a 15x P/E multiple makes the share price $48.90. Similarly, the share price result is only $50.10 when a 15x ratio is applied to the $3.34 midpoint of the guidance that's likely a low estimate of where the trailing-twelve EPS will be upon the next earnings report.
However, I'm more interested in the future and, specifically, the twelve-month timeline for my price target. So, I first applied a very conservative 15x ratio to the $3.69 consensus estimate for EPS in 2015FY, which results in a share price of $55.35. All of the examples thus far are with a very low 15x multiple that I don't believe KR will sink to on such strong earnings, so notice the correlation between these initial outcomes and the Downside-Risk Estimate section.
Moving on to what I consider the most telling estimates, the market currently values KR with an 18.71x multiple, which is well within the historical range for KR, and much lower than the 26x where the shares have topped out in recent years. Furthermore, recent financial performance has been better than at most points when KR has reached even higher multiples. Thus, if the market merely continues valuing KR with its current 18.71x P/E ratio, all aforementioned EPS estimates for 2015FY return share prices in a $66-69 range. For example, with an 18.71x multiple and my extremely conservative and below-consensus EPS estimate of $3.61, the share price is $67.54. These examples don't represent fair value today, as they look to the twelve-month timeline of my price target.
Valuation Conclusions
The fact that my conservative DCF and P/E calculations return almost identical share price ranges makes me comfortable that my valuations are reasonably accurate, if not modest. So, I'm raising my twelve-month price target to $67, and hope to re-evaluate at perhaps about midway through the twelve-month timeline to consider whether I might need to adjust my price target.
My new $67 KR price target is 10% above the $60.98 current price, and 76% above the $38 price from my initial KR opinion. Both the upside-potential and downside-risk estimates just mentioned exclude the additional returns from the1.08% dividend yield, which I believe is likely to be raised again in 2015.
Downside-Risk Estimate
I refer to the 200-day moving average to convey downside-risk estimates, but I recently realized that my methodology may have been unclear, so I'll restate it. My downside-risk opinions aren't based on 200-day moving averages, and in fact, just the opposite: they're based primarily on very pessimistic versions of the same valuation calculations used to develop my price targets, and I just use the 200-day moving average to reference my estimates. It's impractical to include dozens of calculations in articles, so I calculate downside-risk opinions, but state them as percentages from the 200-day moving average. I do that to give readers an idea of what my downside-risk opinions will be well after each article is published, since the 200-day moving average is updated indefinitely.
The 200-day Exponential Moving Average [EMA] for KR is currently $50.16. KR has only traded below its 200-EMA once in the past two years (mid-January to mid-February of 2014), and I don't believe it will happen again anytime soon, especially in absence of some extreme negative event that is always possible, but obviously unforeseeable. Based on my valuation calculations, I believe it's unlikely that KR shares will dip below, or even to, the $47-49 range at which I would consider adding to my holdings again ($48 was the last time I added).
Even if that does happen, I don't believe KR would go any lower than perhaps about 7% below whatever its 200-EMA has adjusted to at that point. With the current 200-EMA of $50.16, that would put the share price around $47. That's rounded off to emphasize the fact that it's an estimate. Again, I don't believe KR will trade down to these levels anytime soon, if at all, so I'm only offering information to consider. Also keep in mind that the 200-EMA won't remain at $50.16, so the source link below leads to a chart with the updated 200-EMA.
source: Yahoo FinanceInvestment Thesis
Rather than repeat too much of my prior article, I've listed the components of my investment thesis and focus primarily on the last one, since that's where most of the new developments are with the company.
The main components of my investment thesis: [1] direct and indirect benefitsfrom the Harris Teeter acquisition bolster earnings in 2014FY and beyond, [2] organic growth continues due to customer loyalty efforts, expansion initiativesand industry consolidation, [3] natural and organic products transition into agrowth driver, rather than a challenge, due to early entry, private brands andscale advantages, [4] dividend growth and share repurchases attract and help retain investors, [5] innovations, early adoption and acquisitions in technology lead to continuous service improvements to help retain and gain market share.
[5] Technology Innovations + Early Adoption + Acquisitions = Market Share
To help me articulate my thoughts about this aspect of my thesis, I'm going to borrow a term coined by Jim Cramer. I may lose some readers by saying that, since many investment professionals dislike Mr. Cramer because they consider him a danger to retail investors, due to what they see as oversimplifications of the complex stock market business. However, the problems of individuals with no real knowledge of the stock market gambling in it based on single sources of information are not at all new and certainly weren't created by Jim Cramer.
There's no denying that Jim Cramer has been in the business a long time, has had great success and is very knowledgeable, but that doesn't even matter to me that much, since I don't invest based on TV programs. I sometimes listen to Mr. Cramer's program for the same reasons I keep CNBC or Bloomberg on in the background most every day -- to hear the thoughts of CEOs and other experts who I otherwise wouldn't hear from, either as directly or as regularly.
In any case, although he wasn't talking about KR, I liked the idea behind what Mr. Cramer called "stealth technology stocks," and I believe that KR fits the bill pretty well. Mr. Cramer defined a "stealth technology stock" as a company that uses proprietary technologies to make products that are better than competing products, thereby leveraging technologies to create competitive advantages in businesses that are not literally technology companies. What I'm suggesting is that the same can apply to services, such as the grocery shopping experience.
In other words, even though the company is in an industry that's far removed from technology, KR is particularly adept at pursuing technological innovations and implementing them early enough and aggressively enough to make real differences, especially relative to competitors. So, an aspect of my long-term thesis is the idea that the company's penchant for being an innovator creates new competitive advantages that help drive growth. I'll offer a few examples.
In 1972, KR was the first grocery retailer in the United States to test electronic barcode scanners in its stores. Nowadays, we all have more technology in our pocket than throughout the entirety of most corporations of 1972, so we take simple things like barcode scanners for granted, but their introduction was a huge step in speeding up and improving the accuracy of the checkout process in grocery stores. Why does that matter? Perhaps ask yourself -- if there were only one grocer in your area with barcode scanners and, instead of checking out in five minutes there, you'd wait an hour while employees searched the store to check prices, then typed in inventory information … and that's just for the person in front of you, before it's even your turn -- where would you shop?
Even if you're not sure about your answer yet, KR knows the answer, which is why the company established its own research and development [R&D] teams and laboratory back in 2008. The purpose is to develop hardware and software technologies needed for KR stores, but that no vendors offer. One result is that KR now holds fourteen U.S. patents, with numerous other patents pending.
Of course, KR competitors will eventually get technologies similar to those that KR already has. In fact, KR has already stated that it will sell the technologies it develops to competitors. However, when various service enhancements that KR initially offers exclusively are factored together, by the time a competitor catches up with a KR technology, KR is very likely to have already pulled more of that competitor's customers. Furthermore, by the time a Kroger-developed technology reaches competitors, KR has not only already had it for years and retains all of the proprietary information from its development and usage, but KR has also moved on at least several steps to additional innovations. With the foundation set, I'll touch on a few of the more modern technologies that have impacts similar to the first barcode scanners, then I'll touch on market share.
The first major innovation from the R&D team at KR was the first 360-degree barcode scanning system in the world. It's called Advantage Checkout, and it's an optical system that scans barcodes as products move through a tunnel atop a conveyor belt. The system scans UPC codes at twice the speed of a regular scanner. Here is a short video demonstrating the Advantage Checkout system.
Another significant innovation from KR is QueVision, which is an in-store traffic flow prediction system that has reduced the time that customers wait in line to check out, from four minutes in 2010 to about 26 seconds today, on average. QueVision is a combination of proprietary software and infrared cameras that are strategically placed throughout the stores. The systems predict the flow of customer traffic through the store and automatically indicate when additional checkout registers need to be opened in order to maintain checkout times at optimal levels. Here is a short video that explains the QueVision system.
Even with lots of R&D horsepower, KR is also acquiring additional competitive advantages, as evidenced by two recent acquisitions that are often overlooked in the shadow of a much larger and immediately accretive Harris Teeter deal.
In February of 2014, KR acquired YOU Technology Brand Services, the Silicon Valley-based largest provider of cloud-based digital coupons and promotions.
In August of 2014, KR announced that it had also acquired Vitacost, a leading online retailer of healthy living products. During the conference call last week, Kroger COO Mike Ellis commented:
It's only been a couple of months since we merged with Vitacost. And there's a lot of work going on. But we have big plans for Vitacost and we're excited about the merger. I've been to the facilities, down to their offices, to their warehouses, and it's a great business that we have and we're excited about where we're going to go in the next year.
I'll offer one last example that KR leads its industry with technologies. Among the 38 food processing facilities mentioned in the Company Overview, KR owns seventeen dairies, including a Denver, Colorado dairy that recently became thefirst dairy in the U.S. with the robotics technologies to pack orders entirely by automation. This dairy is KR's first new ground-up manufacturing plant of any kind in twenty years. It opened in May and reached full production in August.
Again, the underlying premise for this subset of my investment thesis is that, collectively, these and other technology moves give KR significant competitive advantages that lead to market share gains, since most of us want to shop at the store that has the only barcode scanner in town and save a precious hour.
Because the fluctuations in this first chart can easily be misinterpreted, I'll first point out that the chart illustrates y/y market share growth, not total market share. So, fluctuations don't indicate market share loss, but rather things such as shifts in strategy in response to changes in the competitive environment over time. For example, it's obviously not bad to temporarily shift focus from (or to) organic growth (which happens more slowly) versus acquisition growth based on when attractive acquisition targets become available. Such shifts are among many factors that cause fluctuations in the y/y growth rate. Thus, the takeaway from the chart is significant and consistent market share growth for an entire decade, despite the fact that growing market share obviously slows as any company increasingly has a larger and larger share of a finite market.
(click to enlarge)
source: company presentation
source: company presentation
In fact, this next chart also indirectly implies that KR is indeed growing market share, since same-store sales growth otherwise wouldn't be increasing during the same time periods when same-store sales growth is on the decline or flat for most competitors. Even so, this chart mostly illustrates how the very wide range of KR competitors stack up. As an investor who is primarily interested in stability from KR, I notice that most competitors that have had sharp increases in same-store sales at some point were really only getting back to the starting line after even more extreme declines. Conversely, KR same-store growth has much less erratic than any of the competitors, and mostly right in-line with the 4-5% y/y that management has guided. This illustrates that the competition isn't nearly as much a threat to KR as the "eat Kroger's lunch" crowd claims.
(click to enlarge)
source: company presentation
source: company presentationAnalyst Opinions
Eleven research firms currently rate KR a Buy, seven rate it a Hold, and zero rate it a Sell. The consensus rating is Buy, and the consensus price target is $61.67. Of the analyst actions that I could confirm over the last two months, which I believe is all of them, all have been to raise price targets for KR and there were not any rating changes in either direction (just reiterations).
Final Thoughts
To be clear, the fact that I'm writing an article about KR at this time is not an unconditional recommendation to buy KR regardless of price. My opinions are stated within the article, and are not implied just by the fact, or the date, that I happened to write an article. I primarily write articles for long-term investors who, like me, build positions over time, may own KR from much lower prices, and are looking for information and opinions to help with their due diligence.
Personally, I'm unlikely to add to my KR holdings anytime soon for a couple of interrelated reasons. First, since KR was so insanely cheap when I bought the bulk of my holdings (low $20s), I averaged into my position much faster than I normally would, and KR is already one of my top-five largest holdings. Second, I added not that long ago and, as a long-term investor, I'm not in a huge rush.
My opinion is that KR still has good upside left, but no stock ever goes up in a straight line. So, I believe investors considering buying KR now might wait for a dip, or be prepared for potential temporary downside. With either approach, I believe it's best to always stage into every stock with multiple buys, in order to make each buy price less critical, and mitigate downside potential. As noted earlier, any stock with such tremendous gains attracts very many momentum traders who might buy at $60 or $61, only to dump it at a point or two higher for no reason other than to take profits. I obviously don't know when that may happen, so the point is that I don't expect a straight-up trajectory to my price target, and the timeline of any price target is just as important as the price.
Finally, it's only a tiny part of a KR thesis, so those interested in the long-term theme of healthcare industry growth might be interested in more direct access to the theme. HealthSouth (NYSE:HLS) is a mid-cap I wrote about recently, so thearticle is available free for two more weeks. HLS is one of only three new positions I've opened in 2014, and it already has a nice gain. Another option is Aceto Corporation (NASDAQ:ACET), a small-cap that I've written about a few times, though only one of the articles is still free. If you take interest in either, consider also reading an article of mine about small-cap and mid-cap investing in general, since it can involve more risk than large-cap investing.
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