I've been talking about these healthcare contract research organizations (CROs) for a long time, but aside from WuXi PharmaTech (WX) have not taken the plunge - to my chagrin. With the lack of market leadership ex-healthcare, this is one sector where I can at least believe in sustained growth over the long run unlike most of the groups being run up the past 5 weeks which are nothing more than a rotational trade, which will be abandoned once the hedge funds are done with it. So for our time line which is longer than that, we want to be focusing on items we can actually hold for the longer term, unlike say auto companies which are a current flavor of the day.

I'm adding 3 names to WuXi and considering this as "1 position" (4 stock basket) - since these stocks have had a huge run, I am not going in large to begin with and hoping for pullbacks - I'm cognizant of "chasing" here so don't want to overdo it to begin. I have a 8 names watch list (I forgot to add Charles River Labs (CLB) to the chart below; it is one of the larger players) and here is a simplistic chart of their stock prices, 08 estimates, 09 estimates, 08 forward PE ratio, 09 forward PE ratio and 1 year growth rate (09 vs 08)


So in green shade are the 3 names I am adding today. Please note we are starting small and hoping for pullbacks in all these names. These are not identical companies - they all specialize in different parts of the clinical trials, and have different strengths and weaknesses - but I'm a generalist (expert in nothing) so hence I take a basket approach. Some of these names I have followed for years - others are newer to me.

ICON (ICLR) - simply the best company operationally; I've owned this on and off over the past half decade. Irish firm. Highest valuation but they deserve it. $2.5B market cap.

"Can't Touch This" - every fall to the 50 day moving average is a buy on this chart

Kendle International (KNDL) - really surprised me last quarter with a heck of an earnings report - surprised the Street as well judging by the stock reaction. Bought on valuation since I can get similar growth rates for far lower prices. $700M market cap.

"Surprise Surprise" - I'd like to be a buyer on a pullback to the mini gap at $42 if plausible


Life Science Research (LSR) - this is my "reach"; a newer name for me and I am still doing work on this name as I am not as familiar with it as the rest, only on my radar for the past month but it's dirt cheap compared to peers.