I was going to post a long article about Lexmark (LXK) today. A long dissertation on why the 20% drop in Lexmark shares is absurd given the news. A $20 million revenue "miss" equals an $800 million loss of market value?
Or is it the retirement of long-time CEO Paul Curlander that spooked investors? Did anyone realize that the new CEO has been with Lexmark since its founding? Longer than Curlander? The new guy even has the same first name! It's Paul (Rooke).
My article was going to point out that LXK has $13.75 a share in cash and securities vs. a $38 stock price. Perhaps it would have even mentioned the company has $6 a share in net cash. Should I point out that the current market value (of just $3 billion), gives me all that cash plus a company that will earn over $4 in GAAP earnings this calendar year? Cash earnings are even higher.
But I don't need to mention any of this.
Analyst Ananda Baruah of Brean Murray, Carret beat me to it. Read about his note to investors HERE. Baruah says that the recent sell-off was overblown. He continues to rate Lexmark a BUY with a price target of $50 a share.
I don't often find myself in agreement with sell side analysts, but this is an exception. My price target is exactly the same. A pie in the sky? That's what people told me last year.
My Lexmark position was built between May and July of 2009 for an average price of $15 a share. Even after yesterday's plunge, the stock is still up 45% year-to-date. And up over 150% from my average cost.
One thing that Ananda Baruah may not have covered is that Lexmark has reduced shares outstanding by 45% in the last 15 years. At quarter-end, the company had $491 million of share repurchase authority outstanding. They didn't buy any shares in the Q3, but I bet they will now!
So you can listen to me (and Ananda Baruah) OR Mr. Market!
Today, my Lexmark position got a little larger.
Disclosure: Long LXK