Bausch & Lomb opportunity

Posted By on May 16, 2006

BOL 1 year chartMy daily interest in stock trading and investing occasionally turns up ‘timing’ opportunity (beware this is risky). I often trade for daily moves but have a philosophy of building long term positions in companies that are leaders in their industry. This strategy short term often looks ugly, but long term generally outpaces the market and allows one to sleep at night since purchases of solid companies are made when the share prices have been beaten down. One stock in particular has been taken down by investors because of product liability: Bausch & Lomb (BOL).


This past month the news has all been negative and confidence in both the company and management has been low. Management does deserve a couple black eyes in how they handled the news that ‘one’ of their products ‘might’ have contributed to a fungus that appeared in contact lens wearers. The frightening news in a country of lawsuits is that this product could cause infection and in sever cases blindness. According to a report just released yesterday, a number of outside items needed to come together to cause this to happen. I is believed that subtropical conditions grow a fungus found in some sink drains and this in combination with the use of Bausch & Lomb’s ReNu “with MoistureLoc” which is not the same as their more widely used Multiplus brand of contact lense cleaner is associated with the infections. “The company stressed that the recall is limited to MoistureLoc and does not involve other solutions in its ReNu line, including the older and more widely used MultiPlus brand that some victims reported using.”

My point is that Bausch & Lomb’s stock has been beaten heavily and may have found a bottom and is beginning to understand the extent and causes of the infections. Considering they are the leading eyecare company and have ownership through all aspects of eyecare, and that only 122 cases are reported of the more than 30 million Americans who wear contact lenses …. this might be right to purchase a well pummeled BOL. Consider that about about 2.3 million users use MoistureLoc (with 122 reporting problems tied to this infections), and 11 million using the MultiPlus ReNu products … the impact fiscally is not that heavy. The company has sales over 100 million dollar and the stock dipped last week to about half the price it was earlier this year. ($87.89 in July 2005)

I’m a buyer of the stock under $50 and believe there is short term money for those wanting out in a short period of time. The long term investment prospects look even better is you compare this ‘blip’ on a company that has been around since the 1800s. I see a slow recovery and continued grow in eye care from Bausch & Lomb and believe it is a great stock to add to a long term portfolio. An analyst at Piper Jaffray commented that investors who were originally worried about this problems spreading to other BOL products were heartened “by the strength and conviction of the FDA statements in saying that they too thought the problem was limited to MoistureLoc.”

Comments

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.